Education: Money loss overblown

The Education Department hasn't lost as much money from mismanagement as previously reported, and it is working "aggressively" to recover the amount that truly is missing, Education Secretary Rod Paige recently informed members of Congress.

In a letter addressed to Rep. Charles Norwood (R-Ga.), a member of the House Education and the Workforce Committee, and sent to other members of Congress, Paige said that Education hasn't lost $450 million between 1998 and 2000 to mismanagement, fraud or theft — a number mentioned by the department's inspector general in congressional testimony and included in news reports.

"I want to clarify at the outset that the $450 million figure does not represent funds lost by the department and is not a proper measure of the department's financial management problems," he wrote.

For instance, $250 million of that figure represents duplicate payments that already have been recovered at no cost to taxpayers, Paige wrote.

Also, the IG office identified $100 million as funds people or organizations obtained illegally or improperly (of which the Justice department has recovered $40 million), and another $100 million as misspent through routine audits of grantees, contractors and other fund recipients (of which a total of $56 million should be recovered), according to Paige.

"None of the $200 million [just described] represents losses due to financial mismanagement by the department," he wrote. "Rather, these amounts reflect wrongdoing by recipients of department funds, failure to adhere to contract or grant terms, or lack of documentation by recipients."

In April, Education Inspector General Lorraine Lewis told a House subcommittee that the department's financial management systems and financial reporting must be strengthened. "The department relies on a variety of workaround procedures to prepare its financial statements, including significant manual adjustments, due to deficiencies in the current ledger system and the lack of a fully integrated financial management system," Lewis said in a prepared statement.

Education provides about $63 billion in payments to government agencies, colleges and universities, nonprofit organizations, students and more each year, through about 500,000 transactions.

In April, Paige launched an initiative to address mismanagement and fraud at the department. Part of the program targets vulnerabilities to Education's financial assets. Education's IG office and the General Accounting Office have identified several weaknesses in the department's management systems, and one of the initiative's goals is to have the department obtain a clean audit opinion. Two members of the Office of the Chief Information Officer have joined an eight-person team developing a plan to improve management under the improvement effort.


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