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Published in Print: February 14, 2001, as Watchdog Agency Faults Ed. Dept. For Financial Mismanagement

Watchdog Agency Faults Ed. Dept. For Financial Mismanagement

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The Department of Education has grossly mismanaged its financial systems and caused a substantial risk of undermining its mission, according to an independent federal watchdog agency.

Elaine Kaplan, who heads the Office of Special Counsel, submitted that finding in a Jan. 31 letter to President Bush and Congress. She cited the failure of the department to produce auditable financial statements or to account for billions of dollars in grant money.

The news comes as the Republican leader of the House education committee has abolished the oversight panel that actively investigated the department's problems during the Clinton administration. Oversight duties will now fall on other subcommittees.

Ms. Kaplan's conclusion repudiated the assessment offered by the department in a Nov. 14 letter to the special counsel from Frank S. Holleman, the former deputy secretary. Mr. Holleman said the agency has improved its accounting practices in recent years and argued that the remaining problems did not meet the legal definition of "gross mismanagement."

"[I]t is clear that a finding of gross mismanagement must establish that the agency consciously refused to remedy known legal deficiencies or, at the very least, pursued a pattern of conscious disregard for the truth," Mr. Holleman said. "The record in this case is very much to the contrary."

Ms. Kaplan said the department's intent was not the issue, but whether officials created a "substantial risk of significant adverse impact upon the agency's ability to accomplish its mission."

Agency Whistleblower

The Office of Special Counsel provides federal employees with a secure channel for reporting violations of law or regulations, gross mismanagement or waste of funds, and other such charges. Jane McFarland, a spokeswoman for the agency, said that there are no immediate repercussions from a finding of "gross mismanagement," and that it is up to Congress and the president to decide what, if any, actions to take.

Meanwhile, the General Accounting Office, Congress' investigative arm, is currently auditing selected Education Department accounts deemed particularly susceptible to improper payments.

Rep. Pete Hoekstra, R-Mich., who has long accused the department of being rife with waste, fraud, and abuse, said the Office of Special Counsel's finding vindicates the charges of whistleblower John Gard.

Mr. Gard, a systems accountant in the Education Department's office of the chief financial officer, has alleged among other charges that the office failed to properly account for billions in grant dollars. He said the grantee-payment arm of the department's financial-management system does not contain proper internal and external security controls, audit trails, or accounting functions.

In response, the department prepared a detailed report, which the OSC sent to the president and Congress along with its own comments.

"What the [OSC finding] does is it clearly establishes that these are serious problems," Mr. Hoekstra, who chaired the Oversight and Investigations Subcommittee from 1995 to 2000, said in an interview.

Lindsey Kozberg, a spokeswoman for Secretary Rod Paige, said Mr. Paige is "currently engaged in a review of the department and all of its programs, policies, and regulations ... and will be reviewing this matter as part of that top-to-bottom review."

The Jan. 31 letter from Ms. Kaplan said the department had taken steps to address many of the concerns that have been raised about the agency's financial practices and the grant system.

"The findings of the [Education Department] head appear to be reasonable, with the exception of the negative finding of gross mismanagement," Ms. Kaplan wrote.

She added that "it is also notable that the agency had difficulty producing auditable financial statements for years prior to conversion" to a new financial-management system in 1997.

Oversight Panel Eliminated

Five realigned subcommittees on the House education panel will now share oversight responsibilities under a plan approved by committee members last week.

"The committee has exactly the same oversight responsibilities, and we'll fulfill those responsibilities just as we have in previous Congresses," said David Schnittger, a spokesman for Rep. John A. Boehner, R-Ohio, the new chairman of the House Education and the Workforce Committee.

But Rep. Tim Roemer, who was the ranking Democrat on the Oversight and Investigations Subcommittee last year, said he hopes the change doesn't mean less vigilance by the Republican majority.

"We will wait to see ... whether or not the five separate committees will continue to be as vigilant and as interested in oversight with a Republican administration as we have been with a Democratic," he said.

Vol. 20, Issue 22, Page 29

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