Senators call for fraud probe of Education Department

Urging a "long, hard look" at financial controls in the Department of Education, a Senate committee on Wednesday approved a bill ordering the General Accounting Office to run a stem-to-stern audit of the agency.

Sponsored by Sen. Tim Hutchinson, R-Ark., the bill (S. 2829) was adopted by voice vote after committee Republicans and Democrats sparred briefly over the merits and demerits of the Education Department's financial management.

Hutchinson said the department flunked its last two financial audits in 1998 and 1999 and failed to correct some chronic weaknesses in its financial controls.

"There've been numerous cases of waste, fraud and abuse at the agency," he said, citing one instance in which a contract employee charged the department more than $600,000 in false overtime payments and gave more than $300,000 in electronic equipment to a department employee charged with supervising the contractor's work.

Hutchinson also recounted a more recent probe by the Justice Department where $1.9 million in federal impact-aid funds for two school districts in South Dakota were diverted into a personal bank account in Maryland. "The money was used, among other things, to buy a house in Maryland and two expensive cars- a Cadillac and a Lincoln SUV," he said.

Sen. Edward Kennedy of Massachusetts, the committee's ranking Democrat, said he would not oppose the bill but insisted that some of the Education Department's achievements also be noted.

"We all know that some federal agencies need to do a much better job of managing their finances," Kennedy said, "but we should also look at what the (Department of Education) has accomplished. It has reduced student-loan default rates from 22.4 percent seven years ago to 8.8 percent today, while increasing loan collections to $3 billion last year from $1 billion in 1993. It is also operating with two-thirds the number of employees that it had in 1990 and has trimmed its regulations by one-third. So let's give credit where progress has been made."

Hutchinson said he was not persuaded by that argument: "I've got a long list of problems there, including $177 million in Pell grants made to ineligible students whose family incomes were over the limit [for assistance]."

His bill is similar to legislation (H.R. 4079) passed by the House in mid-June, by a 380-19 vote, that also calls for a comprehensive audit of the department.