GAO Prepares for Education Department Audit

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Congress' investigative arm has begun planning for an audit of the Department of Education's financial practices, even as new accusations concerning embezzlement of department money came to light last week.

The General Accounting Office recently was asked to audit selected Education Department accounts that the GAO deems particularly susceptible to waste, fraud, and abuse.

To further highlight Congress' concerns, lawmakers have also taken the unusual step of pursuing legislation that would mandate the audit. The Senate Health, Education, Labor, and Pensions Committee unanimously approved an audit bill on Sept. 20 that had passed the House 380-19 in June. At press time, the bill was not scheduled for a floor vote in the Senate.

But Gloria Jarmon, the GAO's education accounting director, said last Thursday in an interview that her office had already begun preparations for conducting the audit regardless of the outcome of the legislation.

Meanwhile, members of Congress reacted last week to an Associated Press report that nearly $2 million had been taken illegally from the departments impact-aid program. The impact- aid program provides funding to school districts where the presence of federal installations reduces the local property-tax base.

In a complaint filed in July, Department of Justice officials alleged that the money was funneled into personal bank accounts, and that some of it was spent on two new luxury automobiles. No criminal charges had been filed in the matter as of last week.

The impact-aid case "underscores the need for this broad audit," Sen. Tim Hutchinson, R-Ark., the audit bill's Senate sponsor, said during the Senate committee meeting last week.

Sen. Edward M. Kennedy of Massachusetts, the panel's ranking Democrat, offered his support for the audit. "I think it is useful to have this kind of review," he said, though he expressed his belief that the department had made important progress in reducing waste and improving its financial practices.

Charges of Incompetence

For the past two years, the Education Department has failed to earn a "clean" audit from an independent accounting firm.

Its problems, according to a GAO overview, include weaknesses in its financial reporting process, inadequate reconciliations of financial-accounting records, and inadequate controls over information systems.

In an interview last week, Secretary of Education Richard W. Riley said the department takes "very seriously" the concerns raised about its financial practices.

"Weve worked hard on improving [financial] management," he said.

One challenge, he said, is working out the kinks in his agency's new computer system.

Rep. Peter Hoekstra

Rep. Peter Hoekstra, R-Mich., the chairman of the House education committee's Subcommittee on Oversight and Investigations, has been a leading critic of the departments financial practices and sponsored the original House audit legislation. He also filed the formal request for a GAO audit. ("House Panel Passes Bill To Probe Ed. Spending," May 31, 2000.)

Last week, he held a subcommittee hearing to assess the extent of the problems at the department and to gauge the chances of future trouble.

"It is not only criminal activity that afflicts this agency," he said at the Sept. 19 hearing. "There is general incompetence."

He pointed to a recent example in which the department hired a contractor that sent notification letters to 39 students in February informing them that they had each won a Jacob Javits graduate-fellowship award worth up to $100,000. It turned out that the students had been selected as alternates, not winners.

"When I take a look at the pattern of behavior ... one of the problems appears to be that there's a lack of internal controls," Rep. Hoekstra said.

Signs of Progress

But the Education Department is not the only federal agency struggling to gain clean audits, said Beth M. Daley, the director of public affairs for the Washington- based Project on Government Oversight, a group that investigates government waste, fraud, and abuse. "I dont think it's considered unusual [among federal agencies]," Ms. Daley added.

During the House hearing, Ms. Jarmon of the GAO noted that, as of August, just 15 of the 24 largest federal agencies had received "clean" or unqualified audits of their fiscal 1999 financial statements.

Ms. Jarmon told subcommittee members that the department had made progress. But "the weaknesses still highlight areas where there is potential for waste, fraud, and abuse," she added.

While the department is working to resolve its financial-management problems, "it's too early to tell whether theyll be successful," Ms. Jarmon said.

The department's inspector general, Lorraine Lewis, also provided the panel with an overview of recent criminal investigations. One example involved individuals who, between 1997 and 1999, used federal dollars to buy equipment for personal use, including computers, printers, software, telephones, and a 61-inch television set. The total cost to the department is estimated at more than $300,000.

Ms. Lewis assured the subcommittee that the department was taking aggressive steps to correct the financial problems and had already begun to implement recommendations from previous audits.

Staff Writer Joetta L. Sack contributed to this report.

Vol. 20, Issue 4, Pages 25, 28

Published in Print: September 27, 2000, as GAO Prepares for Education Department Audit
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