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Published in Print: November 7, 2001, as Report: Ed. Dept. Financial Steps Will Halt Abuses

Report: Ed. Dept. Financial Steps Will Halt Abuses

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New financial controls will help protect against future misuse of Department of Education resources, agency leaders vowed last week in releasing a final report on efforts to overhaul the department's management system.

The agency has put in place a permanent team to oversee the changes, new internal measures to keep track of funds, and a more aggressive approach to tracking down collections of defaulted student loans, the officials said.

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Such steps are outlined in the report, "Blueprint for Management Excellence," written by a group of career employees assigned to examine long-standing complaints of abuses and inadequacies in financial operations at the department.

While a handful of high-profile cases have involved fraud and theft, the main problem at the agency has been a financial-data system ill- equipped to prevent such abuses, Secretary of Education Rod Paige said.

"The key word here would be controls," Mr. Paige said at a press conference held to unveil the report. "The management here is improving, and at the rate we're witnessing now, we can soon arrive at a point where we can say the management is in pretty good shape."

Of 661 recommendations issued by the team of career employees, independent auditors, and other consultants, the team reported that 383 have been put in place and that 199 have generated corrective-action plans. The department has either adopted or developed action plans for all of the 242 recommendations listed as "high priority," according to the report.

The agency has not yet acted on 79 recommendations listed as either medium or low priority.

Among other actions, the department has moved to exert more control over employees' spending power. Officials have limited employees' use of purchase cards, which are similar to credit cards and are used to buy supplies and equipment. Now, only authorized employees will be allowed to hold the cards, and the maximum purchase amounts will be decreased. But new procedures are also in place to require approval of all purchases, including those made with purchase cards.

Interim Audits

In addition, the agency's auditors will prepare interim financial statements four times a year. Previously, no interim statements were drawn up, and the Education Department has failed its independent audits for the past three years because of missing or incomplete financial data.

Last year, federal investigators uncovered a scheme in which a group of employees had allegedly defrauded the agency of more than $1 million in technological equipment, time, and resources. Eight employees and 10 others have now been indicted in that case, according to the Education Department. ("11 People Indicted in Education Department Fraud Probe," May 30, 2001.)

The department's goals, to be measured annually over the next three years, include producing "clean" financial audits, beginning with the fiscal 2002 document next year; giving employees more resources and training to perform their jobs effectively; and performing more business functions online.

"The last six months have been about turning the ship around," Deputy Secretary of Education William D. Hansen said. "Now, we need to kick into overdrive."

At last week's news conference, Secretary Paige also introduced the nominees for chief financial officer of the department, Jack Martin, and assistant secretary for management, William J. Leidinger. Both men are awaiting confirmation by the Senate before officially starting their jobs.

The management team—led by Mr. Hansen and consisting of the CFO, the assistant secretary for management, the general counsel, the chief information officer, and the directors of the department's budget services and student financial assistance services—will oversee the upcoming changes.

"We're not sure what we don't know yet; that's why we're going to be putting a permanent team in place," Mr. Paige said.

Patricia McGinnis, the president of the Council for Excellence in Government, praised the report and predicted it will ease longtime problems. The independent, nonprofit group, based in Washington and run by former government employees, was brought in by Mr. Paige to advise the career employees who were conducting the review. Those employees are from the offices of the chief information officer, the chief financial officer, and student financial aid.

While the report includes many specifics, some of its goals are more general. For instance, in the section on "expanding strategies for using human capital," a goal states that by fiscal 2004, "employees will possess skills necessary to do their jobs."

Frank S. Holleman III, who was deputy secretary of education for the Clinton administration, said last week he had not read the report, but from what he had heard "many parts of it seem to be a continuation of what the Education Department had been working to accomplish for many years."

Student-Aid Crackdown

Although much of the management-reform effort involves the prevention of future problems, department leaders also reported that they have recovered $135 million since April in student-loan payments by tracking down borrowers who had defaulted.

The loan program for college students is listed by the General Accounting Office, the congressional investigative arm, as being at "high risk" for abuse. The Education Department officials said they were working with the GAO to put in place new procedures and to have the program removed from the list.

In tracking down borrowers, Education Department employees used the Department of Health and Human Services' database of new hires, a national record of people who have recently begun new jobs. The system, usually used to help track down parents who owe child support and other debts, was useful in finding recent college graduates and others who have not made payments on their loans.

According to the new report, the Education Department has also addressed another lingering problem: lack of an inventory of technological equipment, including computers, cellular phones, and related equipment. The management-study group authorized a full inventory and reworked the asset- management system to keep better counts in the future.

Asked if the agency had more or fewer computers than it had previously believed, Mr. Hansen replied with a smile, "About as many as we thought we did."

Vol. 21, Issue 10, Pages 1,40

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