Archive for Wednesday, April 4, 2001

Education Department lost track of $450 million

April 4, 2001

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— In the final three years of the Clinton administration, the Education Department lost track of $450 million through waste, fraud and errors, the department's chief inspector said. A Republican lawmaker likened the agency's financial practices to those of "a Third World republic."

In one case, $250 million in grants were paid twice before the recipients sent back the extra payments.

The department, which has a $44.5 billion budget and manages billions more in student loans, has reported that poor oversight resulted in several instances in which money was stolen or improperly spent. In others, payments for grants were duplicated, or money was never distributed.

Tuesday, Lorraine Lewis, the agency's inspector general, told the House Education and Workforce investigations subcommittee that, according to her estimates, $450 million was lost or misspent in the past three fiscal years to fraud, disallowed costs and other errors.

"It is a very serious problem," she said.

Lewis said a department audit found 21 cases in which grant payments totaling $250 million were issued twice to the same state boards and school districts. The duplicate payments were recovered, Lewis said.

She estimated an additional $200 million was lost in unauthorized purchases and fraud cases. Some of the money was recovered through court orders of restitution to people outside the department.

Lewis and others who reviewed a department audit said the audit showed that 21 employees could write checks of up to $10,000 without supervision. An audit of department finances from May 1998 to September 2000 found that 19,000 of these checks were written, totaling $23 million.

"This leaves the system open to fraud and abuse," said Jeff Steinhoff of the General Accounting Office.

The audit also found that as of October, about 230 employees had government credit cards in their names, with most allowed to charge up to $10,000 per month. Some employees had higher limits, the audit found, including 36 workers who could charge up to $25,000 per month and two who could charge up to $300,000 per month.

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