Two House Republicans have asked the General Accounting Office to investigate their allegations that the Department of Education has operated a “slush fund” since 1993 and may have misspent hundreds of millions of dollars.
Secretary of Education Richard W. Riley was quick to dispute the charges, saying in an Oct. 29 letter to the lawmakers that the allegations “reflect a fundamental misunderstanding” of the use of so-called “clearing accounts,” which temporarily hold money that accrues because of unreconciled differences in other department accounts. In some cases, a college, for example, might return student-financial-aid funding it did not use to the department, and it would reside in a clearing account until sufficient documentation was available to place it in the correct account.
Ultimately, the funds are reclassified to the appropriate account or, in some cases, returned to the Department of the Treasury, the Education Department said. The department estimates that in fiscal 1999, which ended Sept. 30, the accounts held $228 million.
In an Oct. 29 letter, Rep. Peter Hoekstra, R-Mich., who chairs the Oversight and Investigations Subcommittee of the House Education and the Workforce Committee, and Rep. Charlie Norwood, R-Ga., asked the GAO to examine the matter, pointing out that in a 1996 report from the department’s inspector general, the agency had more than $700 million in unidentified funds. GAO officials were expected to meet with Mr. Hoekstra this week.
In a letter sent to the department a day earlier, Mr. Hoekstra noted that the Education Department was the only federal agency that has not received an audit opinion for fiscal 1998. This means that auditors could not certify the department had accurately reported its finances.
The letter came after department officials attacked a Republican plan to cut the budgets of all federal discretionary programs by 1 percent. Reps. Hoekstra and Bob Schaffer, R-Colo., responded with the “slush fund” allegations, suggesting that such unaccounted-for funds might be used to offset the 1 percent cut. They met with Mr. Riley on Oct. 29. Dissatisfied with the department’s response, Mr. Hoekstra asked the GAO, the nonpartisan investigative arm of Congress, to look into the matter.
In a fact sheet issued Oct. 29, department officials countered that they were legally barred from transferring clearing-account funds to other programs. They also said the fiscal 1998 audit was not completed because the department was in the process of changing to a new financial-management system. The department and independent auditors agreed to stop work on the audit without issuing an opinion.
