FROM THE ARCHIVE

Abuses cited at Department of Education

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APRIL 4, 2001

Nearly $2 million earmarked for schools on Indian reservations was among the $450 million the Department of Education mismanaged over the past three years, the agency's top investigator said on Tuesday.

Instead of going to Indian schools in South Dakota, the money was diverted into private bank accounts last July. The funds were used to purchase a Cadillac, a luxury sport-utility vehicle, real estate, and other property.

Yet while the scam was uncovered before all $1.9 million was spent, the incident was just one of many Inspector General Lorraine Lewis and Jeffrey C. Steinhoff of the General Accounting Office (GAO) pointed out as examples of fraud within a department prone to abuse by employees and others.

"No one can say with certainty if there are other problems," Lewis told the members of a subcommittee of the House Committee on Education and the Workforce.

"This is a very serious problem."

As lawmakers look to Secretary of Interior Gale Norton to sort out the trust fund debacle, members of the Select Education Subcommittee are hoping Secretary Rod Paige will clean up his new department. Judging by the many fraud and abuse investigations occurring at the agency, along with other problems, Paige has a heavy task in front of him.

For three consecutive years the department has failed to pass its financial audits. In 1990, the GAO identified a number of programs at high risk for abuse, but the department appears to have done little since then to address the problems.

"These programs remain at high-risk primarily because Education lacks the financial and management information needed to manage these programs effectively and the internal controls needed to maintain the integrity of their operations," Steinhoff said yesterday.

Among the abused cited at the Department of Education:

• Without supervision, employees regularly write checks for amounts as large as $10,000. From May 1998 to September 2000, 19,000 such checks were written totaling $23 million.
• As of October 2000, 23 employees had government-issued credit cards and could charge up $10,000 per month with little supervision. Another 36 could charge up to $25,000 per month, while two others could charge up to $300,000.
• Despite internal policy, workers purchased computers with their credit cards.
• Long-time employees of the department defrauded the government of more than $1 million in a theft ring uncovered last year. Computers, telephones, and a 61-inch television set were among the items purchased with department money.

The Department has a budget of $45 million and manages billions in student loans, one of the high risk areas of the agency. Just last month, 26 people -- parents and college administrators -- were criminally charged with illegally obtaining $2.6 million in grants, work-study, and loans for students.

President George W. Bush is looking to the department to fulfill his education goals. The department is one of the few which has received a boost in his fiscal year 2002 budget blueprint.

Relevant Links:
The Committee on Education and the Workforc - http://edworkforce.house.gov
Office of Inspector General, Department of Education - http://www.ed.gov/offices/OIG