Paige Announces Plan To Address Mismanagement

By Erik W. Robelen — April 25, 2001 5 min read

Secretary of Education Rod Paige outlined a new strategy last week to examine and correct long-standing problems with financial mismanagement and abuse at the Department of Education.

Mr. Paige announced that a team of top Education Department officials would work over the next three months to attack the problems and draw up a blueprint for improving the agency’s financial-management practices.

“The management challenges facing this department are well-known, and President Bush has made me responsible for addressing those challenges swiftly and thoroughly,” Mr. Paige said in a statement last Friday. “Every dollar we waste on fraud or mismanagement is a dollar that could be used for teaching our children, and this department cannot and will not continue wasting those precious resources.”

The department has a long history of problems with its financial management. While the problems received scrutiny from congressional Republicans during the past three years, when the department was led by President Clinton’s appointees, accounting difficulties have plagued the agency far longer. Foreshadowing a recent analysis by the General Accounting Office, a 1988 GAO study, for example, said the department’s accounting system was vulnerable to fraud, waste, and mismanagement.

“We’re very encouraged by the steps Secretary Paige is taking,” said Jon Brandt, a spokesman for a longtime critic of the department’s financial management, Rep. Peter Hoekstra, R-Mich. “They seem to be taking things very seriously.”

Earlier this month, a House subcommittee heard testimony about the most recent troubles in the department. The agency’s inspector general said that the department over the past three years had mismanaged at least $450 million. The department has been unable to obtain a “clean” financial audit for each of the past three years.

Mr. Paige also announced that the Council for Excellence in Government, a nonprofit organization that works to improve the performance of government, would name a panel of experts to advise the department and evaluate its efforts. And Mr. Paige indicated that he had asked President Bush to make it a priority to name an assistant secretary for management and a chief financial officer for the department. Both positions have been vacant for some time.

According to Secretary Paige, the goals of the new management team include: obtaining a clean audit for the department; removing student financial-aid programs from the GAO’s list of programs posing a high risk for waste and abuse; and putting in place effective internal control systems to protect the department’s assets from waste, fraud, and abuse. He also said he planned to continue efforts to modernize student-aid delivery and management and to reduce student-loan- default costs.

A department statement said that the first task of the management team would be to address recommendations provided by auditors that had not yet been acted upon. The department indicated that of 639 existing recommendations, 343 remain unresolved.

“Over the course of the last several years, they have amassed a series of recommendations that have yet to be addressed,” said Lindsey Kozberg, a spokeswoman for Secretary Paige. “This is a significant undertaking.”

A History of Problems

Mr. Paige’s announcement came less than three weeks after the agency’s inspector general told the House Subcommittee on Select Education that at least $450 million in Education Department funds had been misused in recent years through improper payments, fraud, and other instances of financial mismanagement. (“Ed. Dept. Cited for Finance Abuses,” April 11, 2001.)

In late February, the department, for the third year running, was unable to obtain a clean audit. Inspector General Lorraine Lewis said that while the most recent audit represented an improvement over the previous two, much work remained. She said that the department still could not provide adequate documentation to support all its financial conclusions, and that it inconsistently processed certain transactions.

Duplicate payments to grantees and vendors have been one area of concern. Ms. Lewis said that between May 1998 and last September, the department had 21 instances of duplicate payments, totaling $55 million. All those funds have since been recovered.

The GAO, Congress’ investigative arm, has also reported problems with financial management at the department. The GAO was asked last year by Rep. Hoekstra and others to review selected accounts that seemed especially susceptible to improper payments.

At the recent House hearing, a GAO official pointed to a number of problem areas that leave the department vulnerable to further problems.

On top of those problems, several allegations of illegal activity at the department have been made within the past year. For example, between January 1997 and December 1999, several employees and contractors allegedly were involved in a theft ring that stole more than $300,000 in electronic equipment and collected $600,000 in false overtime pay. As of last fall, three individuals had pleaded guilty, and criminal charges had been filed against others.

GOP, Democratic Views

Under the new Bush administration, Republican lawmakers have expressed hope that the problems will receive more attention than those lawmakers believe they received during the Clinton administration. Mr. Paige, a former superintendent of the 210,000-student Houston Independent School District, has a reputation as a tough manager.

The announcement of the secretary’s management initiative won applause last week from House Republicans, including Rep. John A. Boehner of Ohio, who chairs the Education and the Workforce Committee, and Mr. Hoekstra, who chairs the panel’s Subcommittee on Select Education.

“Mr. Boehner supports the steps Mr. Paige will take to get the Education Department back on track and get its house in order,” said Dan Lara, a spokesman for Republicans on the education committee.

Mr. Hoekstra has no doubt that Mr. Paige will put more effort into investigating and correcting the problems than his Democratic predecessor, Richard W. Riley, did, according to Mr. Brandt, the Hoekstra spokesman. “We were very unhappy with what Riley did,” Mr. Brandt said.

But a high-ranking Clinton administration education official disputed the idea that Secretary Riley had failed to aggressively take on the department’s financial problems.

Frank S. Holleman III, who served as deputy secretary under Mr. Riley, said the department last year formed a team to address all of the financial-management issues raised by the poor audits. Departing Republicans from the previous Bush administration left behind problems in 1993 as well, he added.

“When Secretary Riley walked in the door, the student [loan] default rate was at 22.4 percent, the Pell Grant program had a $2 billion deficit, and student financial aid was in disarray,” Mr. Holleman said. “During Secretary Riley’s time, the department made tremendous strides in addressing the serious financial-management problems that were there when he got there.”

A version of this article appeared in the April 25, 2001 edition of Education Week as Paige Announces Plan To Address Mismanagement


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