House Panel Grills Education Department on Accounting : LUSENET : TimeBomb 2000 (Y2000) : One Thread

More problems...

-- c (s@deer.mouse), December 06, 1999


Or how to get an $800 mmillion college loan

House Panel Grills Education Dept.

By ANJETTA McQUEEN AP Education Writer

WASHINGTON (AP) - The Education Department was unable to account for parts of its $32 billion program budget and the billions more in student loans it manages, but officials told a congressional hearing Monday the department broke no laws and can overcome its accounting troubles.

``I believe the money the Department of Education is entrusted with by Congress reaches its recipients,'' said Marshall Smith, a deputy to Education Secretary Richard Riley. ``Our auditors identified issues we must address, but they did not report that any funds were lost, misallocated or stolen.''

The department has been unable to audit its 1998 books.

Smith blamed a new accounting system that turned out to be faulty, and new demands to prepare more financial statements. But he disputed allegations that the disputed accounts and the lack of an audit threatens money for federal programs for kindergarten-through-12th grade schoolchildren and college students.

However, Rep. Pete Hoekstra, R-Mich., chairman of the oversight and investigations subcommittee of the House Education and Workforce Committee, said he was unconvinced the department, with its 1998 accounts in disarray, is not wasting millions of taxpayer dollars meant for education programs.

As examples of faulty record keeping, Hokestra read internal department e-mails and other documents that recounted duplicate payments to grant winners and even an $800 million college loan to a single student.

Hoekstra has clashed with the department over proposed budget cuts and accused it of keeping a ``slush fund'' by not sending unclaimed grant money back to the Treasury.

``Some say an audit is like making sure your shoes are tied, so you don't trip,'' he said. ``If the department's shoes are tied, there is less chance of taxpayer dollars being lost to waste, fraud and abuse.''

Witnesses told the panel that the department's ledgers routinely differed from the transaction amounts it reported to the Treasury. Often, the department would make adjustments to its own records without the paperwork to support these changes, said Gloria Jarmon, who handles education and other social issues for the General Accounting Office, the congressional's auditing arm.

But neither the department's internal watchdog nor the independent auditing firm it hired to review the books could confirm any financial mismanagement.

In recent weeks the accounting firm, Ernst & Young, reported that computer breakdowns and missing paperwork left the department unable to account for chunks of money ranging from $500 million in un-awarded grants to up to $6 billion in discrepancies with Treasury's accounting of what the Education Department has spent.

But Michael Lampley, a partner in Ernst & Young, said: ``I have no direct knowledge of any financial mismanagement or violation of law I can report to you.''

Smith told the committee that the department's faulty accounting system cost $5.1 million, but that he could not estimate the cost of manpower and time spent trying to make up for its flaws. He also told the panel that the department had not yet chosen a replacement system. The new system would be the department's third in five years.

Panel Democrats praised the department for lowering the student loan default rate and other financial improvements, but also pledged to get specific answers on the accounting problems. ``We need a coherent response to this,'' said Rep. Bobby Scott, D-Va., ``We can't just have a billion here, a billion there.''

-- c (c@deer.mouse), December 06, 1999.

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