The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“REQUIRING FRAUD AUDIT OF DEPARTMENT OF EDUCATION” mentioning the U.S. Dept of Labor was published in the House of Representatives section on pages H4178-H4181 on June 12, 2000.
The publication is reproduced in full below:
REQUIRING FRAUD AUDIT OF DEPARTMENT OF EDUCATION
Mr. HOEKSTRA. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 4079) to require the Comptroller General of the United States to conduct a comprehensive fraud audit of the Department of Education, as amended.
The Clerk read as follows:
H.R. 4079
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. COMPREHENSIVE FRAUD AUDIT OF DEPARTMENT OF
EDUCATION.
(a) Audit.--Within 6 months after the date of the enactment of this Act, the Comptroller General of the United States shall--
(1) conduct and complete a fraud audit of selected accounts at the Department of Education that the Comptroller General determines to be particularly susceptible to waste, fraud, and abuse; and
(2) submit a report setting forth the results of the audit to the Committee on Education and the Workforce of the House of Representatives and the Committee on Health, Education, Labor and Pensions of the Senate.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from Michigan (Mr. Hoekstra) and the gentleman from Wisconsin (Mr. Kind) each will control 20 minutes.
The Chair recognizes the gentleman from Michigan (Mr. Hoekstra).
General Leave
Mr. HOEKSTRA. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks on H.R. 4079.
The SPEAKER pro tempore. Is there objection to the request of the gentleman from Michigan?
There was no objection.
Mr. HOEKSTRA. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, H.R. 4079 is a bill that in many ways we would probably rather not be dealing with today. We are dealing with this issue because of the Department of Education's inability to receive a clean audit. Each year, the Department of Education, like other Federal agencies, is required to undergo an audit. For fiscal years 1998 and 1999, the Department of Education could not receive a clean audit opinion. In plain English what that means is that the financial analysts who have gone in and taken a look at the books as prepared by the Department of Education do not have a high degree of confidence that the figures and the numbers that are reported in their financial statements are an accurate reflection of the actual conditions at the Department of Education.
Now, there are a number of reasons why this has occurred. There are also a number of instances where this lack of financial control has exhibited itself. One of the reasons why the Department is unable to get a clean audit is that it lacks an accounting system that meets generally accepted standards or complies with Federal financial management standards. That is why it could not get a clean set of books for the last 2 years.
The disappointing thing here, and I think this is why we need to take this step today, is that the Department also does not expect to have an effective account system in place until at least October 2001, more than a year out. Thus, the fiscal year 2000 and 2001 audits will most likely result in the same results as 1998 and 1999, an inability to get a clean audit.
Now, it would be one thing just to say they cannot get a clean set of books. It is another when the General Accounting Office and other groups have identified that because of the weaknesses within the financial control system, this Department has experienced a number of cases of waste, fraud, and abuse.
Let me just highlight a couple of these. The Inspector General and the General Accounting Office have identified a number of examples. One is that the Department over the last 2 years has issued about $175 million in duplicate payments to grantees. These payments continue to occur despite the Department's avowed attempts to crack down on them.
What is a duplicate payment? Well, we have here a list of duplicate payments that occurred in October of 1999.
What a duplicate payment is, is that it means the Department recognizes that it has a liability, that it owes a State, it owes a contractor, or a supplier a certain amount of money, it cuts a check and it pays them. A duplicate payment means that it cuts a check and pays them again.
This is to the tune of over $175 million of duplicate payments, one as large as $71,425,000 that occurred on 10/20/1999. As I said, these payments have continued through 2000. So that is one area that the Inspector General and the GAO have said this is perhaps an area that we need to take an additional look at. Why? We need to identify whether, number one, we have captured all of the duplicate payments and we have identified all the contractors or suppliers who have received a duplicate payment. If not, let us find them.
The second thing we need to do is we need to identify whether for all of the duplicate payments that have been made, whether the American taxpayer and the Federal Government have been reimbursed for this duplicate payment. And then, thirdly, we need the General Accounting Office to go in and identify the problems that the Department of Education has in their system that allows this problem to continue on for 2 years.
So this is not a single occurrence. This is a series of occurrences over a period of 2 years that have resulted in over $175 million in duplicate payments.
{time} 1415
Last month, a contract employee at the Department became the second person to plead guilty in participating in a theft ring. This is, again, disturbing because this builds off of recommendations that were not followed in previous audits. Previous audits, previous work by the Inspector General and by the General Accounting Office had indicated that the Department of Education did not have an effective way of managing its inventory, meaning that it would go out and buy capital assets, but had no way of tracking what assets were purchased and the location of each of those assets.
The result is, that with a lack of a good system in place, we created an environment where employees understood that there was a lack of these controls in place and, actually, created an environment that became inviting for waste, fraud and, in this case, abuse and fraud. Because what happened is that this Department of Education employee, along with outside contractors, and there are still additional people that are being investigated in this process, they put in place, we will use the word that is kind of in vogue today, they used a scheme to defraud the Department of close to a million dollars.
The scheme worked like this: someone within the purchasing department at the Department of Education would issue requisitions for certain kinds of equipment, and, in this case, it included computers. It included telephone equipment. It included a 61-inch TV, that is one big TV, and a whole series of other electronic equipment.
They would issue the requisition, the equipment would be purchased, and it would be delivered somewhere other than the Department of Education, perhaps to the employee's home or other locations ensuring that the equipment never came to the Department of Education. Roughly
$330,000 worth of equipment was defrauded from the Department through this mechanism.
Now, these purchase orders were supplied to an outside contractor. What was then in it for the outside contractor? The benefit to the outside contractor was that this outside contractor would be allowed and the purchasing agent would approve for the billing of hourly work and overtime by this outside contractor.
It is estimated that in this case close to $600,000 in phony overtime was paid to this and other outside contractors. When we combine the fraud of purchasing this equipment and the overtime, we have close to a million dollars in fraud from the Department of Education.
These are just two examples of why I think on a bipartisan basis we have recognized that when we are talking about some of the most important dollars that we spend in Washington today, those dollars that we invest in our young people, that we invest in our educational system, that when those are going into a Department we need to ensure that we have got the highest standards of integrity and accountability to make sure that those dollars are being spent where they will make a difference and that they are not being siphoned off through either waste and, in these cases, fraud and abuse.
Mr. Speaker, I reserve the balance of my time.
Mr. KIND. Mr. Speaker, I yield myself such time as I may consume.
(Mr. KIND asked and was given permission to revise and extend his remarks.)
Mr. KIND. Mr. Speaker, as a member of the Subcommittee on Oversight and Investigations, I, too, support this bill before us today that was voice voted with unanimous support out of the whole Committee on Education and the Workforce just recently, at the end of May.
Just so our colleagues are clear, yes, there are problems at the Department of Education that we need to oversee, and I think this bill will address many of those issues. But the Department of Education is not the only agency that is having problems with audits and getting certified unqualified audits reported. In fact, at last count, we have 10 agencies and probably 11 for fiscal year 1999 alone that have not been able to produce unqualified audit reports.
We are not talking about an anomaly here in the Department of Education; but what I think is a whole scale problem that is affecting many, many different agencies within the Federal Government; and, hopefully, through the leadership of our committee and the oversight work that we have done here, it will encourage even greater oversight with many of these additional agencies, so we can get a clean, healthy book of record for all of the agencies that were responsible to the American taxpayer.
Mr. Speaker, as it relates to the Department of Education, there has been proof that the Department has been defrauded by some employees or contractors as the gentleman from Michigan (Mr. Hoekstra) has indicated. While indictments and a conviction has been secured, in regards to the investigation at the Department, it is important that we, as the oversight body for the Department and its programs, ensure the security and safety of the Department's finances.
The Subcommittee on Oversight and Investigations has held several hearings regarding the state of the Department's financial management systems, and we are very aware that the Department has had significant shortcomings in its audits over the last 5 or 6 years.
While the Department of Education is just one of several Federal agencies that have been unable to obtain unqualified audit reports in recent years, we, as policymakers and the overseers, cannot take a relativistic attitude toward's Department audit shortcomings. We must set high standards for ourselves and the Department just as we do for the educators we are trying to assist through the Department programs.
With that being said, I have been very encouraged by the Department of Education's response to its audit weaknesses in the last year or so especially. New staff at the Inspector General's office and the chief financial officer's office had helped motivate change and a greater degree of responsibility in regards to the books in the Department. The last audit was completed on time and with corrections to previous weaknesses.
We on the subcommittee have been assured by the Department's new IG that the financial records will be produced in a timely and adequate manner for future audits. The electronic nightmare, which the Department has been living through with failing and faulty computer and accounting systems, should finally be corrected in the next 2 years, building more security and reliability in the overall financial system at the Department regarding outright fraud.
At our last subcommittee hearing on the subject, I was told by both the Inspector General and the outside auditor after a specific question to them on this issue that there is no systematic fraud or abuse that they have been able to detect at the Department of Education.
Obviously, again, as the gentleman from Michigan (Mr. Hoekstra) has pointed out, instances of fraud have, nevertheless, occurred at the time of the hearing. We are aware of pending investigations, and it is very distressing that multiple cases of fraud have, in fact, taken place.
Mr. Speaker, I also want to just take a moment and commend the subcommittee Chair in his realization in order to save taxpayer dollars that we are taking a more targeted fraud investigation approach to the audit requests contained in this bill today. I think it is a very reasonable and responsible approach to this.
Accordingly, it is appropriate for us to demand a more probing audit specifically geared towards fraud detection and vulnerability at the Department. Ultimately, it is this committee's jurisdiction to authorize funding for the education programming that we expect will hopefully benefit the neediest of America's schools and children.
We decide programs structure. We set relative priorities, and we are the first to berate the appropriators for underfunding our education authorization levels. Accordingly, we must also be the first to raise the alarm when management issues move from the realm of accounting weaknesses to direct fraud and abuse.
I agree that a narrow, selective fraud investigation is warranted and should allow the Department to proceed with its financial management upgrades and security enhancements. Hopefully with this audit and the regular audits our subcommittee has been reviewing, we soon will see the promises of the Department and the Inspector General come to fruition. Hopefully, we will soon be able to focus on education policy with confidence and undivided attention, be able to move beyond just oversight and get to the bottom of some of the problems that exist at the Department of Education and pass important and meaningful education legislation that many of us were hoping to achieve this year.
We still have yet to reauthorize the Elementary and Secondary Education Act, a vitally important program in order to improve the quality of education, especially for the most vulnerable and needy school children throughout our country. We have an Even Start Family Literacy bill that has passed the committee back in February, I believe, with wide bipartisan support under the leadership of the chairman of the committee, the gentleman from Pennsylvania (Mr. Goodling), and that has yet to see the light of day on the House floor.
We are hoping to be able to move to that work as soon as possible, as well as some of the other unfinished education issues that are still pending before this Congress.
Let's do a responsible job of providing appropriate oversight with the Department of Education but let's not also lose sight on the unfinished job of passing meaningful education legislation that is going to improve the quality of education that our Nation's children deserve.
Mr. Speaker, I reserve the balance of my time.
Mr. HOEKSTRA. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I thank my colleague, the gentleman from Wisconsin (Mr. Kind) for his words and also his highlighting that hopefully some of the work that we have done on the subcommittee can perhaps be a stimulus for the House as a whole. We are currently in the process of drafting a piece of legislation where we apply the same standard to other Federal agencies that we have applied here to the Department of Education that says if, for 2 consecutive years, a Department or an agency cannot get a clean audit that it should be a fundamental requirement that a more in-depth analysis or a quote, unquote, a fraud audit or a targeted fraud audit should take place within these agencies because what we do know is that when an agency cannot deliver a clean audit, the auditors have some concern about their internal controls as to how they are measuring and recording the various expenditures. So the same standard that we apply to the Department of Education should apply to all of the other agencies that we have, whether it is the Department of Defense, the Department of Labor or whatever we are working on, and propose this one because of the work that the subcommittee has done in this area.
Mr. Speaker, I also would like to thank my colleague, the gentleman from Wisconsin (Mr. Kind), because I agree with him the more time that we can spend on exploring educational policy and what is going on at the State and local level as to what works and what does not, the more effective we can be in spending the billions of dollars that we are allocating here at a Federal level so that we can move away from purely the measurement of where the dollars are going, but actually be taking a look at the effectiveness and are we getting the impact for the dollars that we would like to have.
I have to applaud my colleague. I think we have been in 21 different States and had 23 field hearings, and my colleague consistently is there with us. He has been in New Mexico with us. He has been in Colorado with us. Last week he was in Minnesota. He has been in my district in Michigan; and consistently when we are at a State in a local level having a field hearing, he has been there and participating in that process to make sure that we are getting the best bang for our buck.
The other thing that I would like to also say is that we have had a very good working relationship, developing a good working relationship with the new Inspector General and with the General Accounting Office. The General Accounting Office has completed an audit of the Department's grant back fund where there were some questions about how these dollars were being used and what was moving into the account and whether that was appropriate or not; and as a result of the work that they have done with us, I think, again, in a bipartisan way, the Department, I think, has returned over $700 million back to the Treasury.
I think that is a very good, cooperative way of us moving through this process and dealing with this ugly side of the financial management part of the Department of Labor. I also think that as we move through this process in a more targeted approach, one of the ways that the Department or one of the areas that the Inspector General and the General Accounting Office have agreed with us that they will take a look at is the security of the computer data systems that the Department of Education maintains.
These systems contain student loan and grant records for tens of millions of students, and what we want to do is we want to make sure that the safeguards are in place to maintain the integrity of these systems to make sure that no one can get into these files and either steal data or manipulate the data that are in these files.
It is a wide-ranging effort that we have undertaken, and I think we have had good cooperation from both sides of the aisle as well as with the Department, with the Inspector General and also with the General Accounting Office to get to the bottom of these issues.
Mr. Speaker, I reserve the balance of my time.
Mr. KIND. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I thank my chairman of the subcommittee for his remarks and would be happy to be able to work with him and others who are drafting this legislation in order to form a stricter, higher standard of audit accountability in the rest of the agencies. I think that that is long overdue and the gentleman is heading in the right direction in drafting legislation for that very requirement.
Again, I do not want our colleagues who are listening to this discussion today to be under some false impression that everything is wrong and bad and the Department of Education is breaking down and they are not actually accomplishing some very worthwhile goals and objectives over there, because they are. As I indicated, during the previous hearings that we have had on the Subcommittee on Oversight and Investigations, as well as other Education hearings, there is a lot of hope and promise that we are finally starting to turn the corner, as far as the quality of programming, more direction with the resources, emphasizing quality and accountability, rather than just expansion of programs.
{time} 1430
So I think there are a lot of things you can point to and show definite progress and improvement at the Department of Education.
I also feel that when the history books are written on this administration, we are going to be able to look back on the Department of Education and the leadership which has been provided to it by Secretary Riley and realize we have had one of the most effective, brightest, hard-working, and thought-provoking and innovative Secretaries that our Nation has ever seen in Secretary Riley. So I hope people do not view this as a reflection on the work that he has done at the Department of Education. Because under his leadership there have been significant improvements overall at the Department of Education. I just want to highlight a couple of those that we have seen in recent years.
The Education Department today has roughly two-thirds of the number of employees administering its programs since 1980, even though the budget has approximately doubled since then. The Education Department has trimmed its regulations by a third and reduced grant application paperwork and aggressively implemented waiver authority to legal roadblocks to State reform.
The student loan default rate is now at a record low 8.8 percent after declining for 7 consecutive years. It was 22.4 percent when President Clinton took office, and, as a result, the taxpayers in this country have been saved billions of dollars.
Collections on defaulted loans have more than tripled, from $1 billion in fiscal year 1993 to over $3 billion in fiscal year 1999 alone.
The Direct Student Loan Program proposed by President Clinton in 1993 and enacted by Congress in 1994 has saved taxpayers over $4 billion over the last 5 years.
The creation of the National Student Loan Data System has allowed education officials to identify prior defaulters and thereby prevent the disbursement of as much as $1 billion in new grants and loans to ineligible students.
The customer saving rates for ED Pubs, the Education Department's documents and distribution center, exceed those of premier corporations like Federal Express and Nordstrom.
There are also signs that the quality of education is starting to turn the corner as well. We have higher academic standards and assessments being put in place throughout the 50 States, improvement in the Nation's reading scores in the three grades tested, and math scores are starting to show some improvement as well.
Yes, there are some management problems that we are hopefully going to be able to get to the bottom of, and, with this legislation, sooner rather than later, but there are a lot of achievements and progress being made with the Department of Education and the programs they are responsible for that we shouldn't lose sight of even with the need for this legislation today.
Mr. Speaker, I yield back the balance of my time.
Mr. HOEKSTRA. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I thank my colleague for working together on this issue. We have outlined some of the problems within the Department of Education. Hopefully through this effort, by having the General Accounting Office go in and take a more in-depth analysis, hopefully they will go in and they will not find additional fraud or abuse and they will find that the Department is operating appropriately. At this point in time, we just do not know. We have enough cases that indicate on a bipartisan basis that we need to go in for a closer look.
This is a targeted approach. This is an approach that we can work with the General Accounting Office on and make sure that we are dealing with the appropriate issues at the right time and that we then can move on to the other things that my colleague from Wisconsin was alluding to, as to the effectiveness of the spending participating here in Washington, are we getting the maximum effect for the dollars we are spending.
That will be a debate for another day, or hopefully that will be a debate or a process that we can build a bipartisan consensus as to the best way to move forward, empowering local officials and parents to make the decisions for the education of their children because that really is the leverage point, empowering parents and local officials to focus on basic academics, delivered in a safe and drug-free school, so that our children can get the best education of any kids in the world.
I think that is a vision that we share on a bipartisan basis, at least getting the best education for our kids. We may have some disagreements as to what the best process is, but we have the same long-term goals and objectives in mind.
Mr. GOODLING. Mr. Speaker, I rise in strong support of H.R. 4079, which requires the Comptroller General to conduct a fraud audit of selected accounts at the U.S. Department of Education. I want to thank Mr. Hoekstra for his work in bringing this bill to the floor.
I note at the outset that this bill received the support of minority members of the Committee on Education and the Workforce at our full committee mark-up held a couple of weeks ago. Both majority and minority members of the Committee are aware of the serious financial management problems at the Department of Education. This awareness is due to the considerable time and effort the Subcommittee on Oversight and Investigations has spent assessing the agency's practices. Through its hearings, the Subcommittee found the department's operations and practices to be very susceptible to fraud and abuse.
By way of background, I would note that Congress has increased federal education funding in recent years. The Labor-HHS-Education Appropriations bill for Fiscal Year 2001 provides $37.2 billion in discretionary spending for the Department of Education. The agency also currently manages a $100 billion direct student loan portfolio, a new banking function initiated by the Clinton Administration. I am concerned that the direct loan program is becoming a millstone around the neck of an agency struggling to handle its basic responsibilities.
Recent reports of independent auditors have informed us that the Department neither practices sound fiscal management nor possesses an appropriate accounting system. The agency has yet to get its first clean audit opinion and is consistently cited by auditors for failings. These include an inability to reconcile its accounts with Treasury; failure to properly inventory its computers and other equipment; and an inability to safeguard effectively its computer systems from access by unauthorized users.
Federal education dollars that should go to the classroom are instead going to buying television sets, computers and palm pilots for friends and relatives of Department of Education employees. Two individuals recently pleaded guilty to participating in such a scheme, which remains under investigation by the Justice Department. And this is only one in a series of abuses recently examined by the Subcommittee on Oversight and Investigation.
We have tried as a Congress to improve the fiscal stewardship of the Department. When the 105th Congress wrote the Higher Education Amendments of 1998, it turned the Education Department's Office of Student Financial Assistance into the federal govenment's first performance-based organization.
Mr. HOEKSTRA. Mr. Speaker, I have no further requests for time, and I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Miller of Florida). The question is on the motion offered by the gentleman from Michigan (Mr. Hoekstra) that the House suspend the rules and pass the bill, H.R. 4079, as amended.
The question was taken.
Mr. HOEKSTRA. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the Chair's prior announcement, further proceedings on this motion will be postponed.
____________________
