Hoekstra Likens Department Of Education To A Banana Republic

June 5, 2002
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HOLLAND — In recent hearings Congressman Pete Hoekstra, R-Holland, said the management of the U.S. Department of Education reminds him of a Third World nation.

What occasioned the remark was learning that the department had flunked its third consecutive annual audit.

Attempts at an audit revealed the department had experienced at least $450 million in losses due to waste, fraud and abuse.

That was last month’s testimony by Lorraine Lewis, the department’s inspector general, who was addressing the Select Education Subcommittee of the House Education and the Workforce Committee.

Hoekstra was appointed to chair the subcommittee in January.

Lewis said the losses were due to duplicate payments, improper payments and financial reporting problems. She said the department has recovered some of the money, and also that more may be missing.

“No one can say with certainty if there are other problems,” Lewis told the subcommittee. “This is a very serious problem.”

Hoekstra, who also led investigations into the department’s failure to receive clean audits in fiscal 1998 and 1999, said the department’s year 2000 audit failure was troubling, but not surprising.

“Getting a clean audit is a complicated process,” he said, “but it is done every day in the private sector.

“In many ways, it’s beginning to look like we are dealing with a Third World republic.”

The subcommittee also learned from Daniel Murrin of Ernst & Young that his firm’s audit of the department revealed three material weaknesses and two reportable conditions on the department’s internal controls, while making 21 recommendations for improvement.

Another audit of the department’s internal controls by the U.S. government’s General Accounting Office (GAO) identified numerous problems, said Jeffery Steinhoff, managing director of Financial Management and Assurance at the GAO.

Steinhoff related problems with the department’s check-writing system, which allowed 21 department employees to write more than 19,000 checks totaling $23 million without additional approval.

Steinhoff also reported that the department’s purchase card system allowed 141 cardholders to make more than $1 million in purchases without approval.

“These things leave the door wide open to fraud and abuse,” Steinhoff said. “Monitoring is an essential control.”

Hoekstra noted that all the problems occurred under the watch of the Clinton administration and former Education Secretary Richard Riley.

The congressman said he has talked with the new education secretary, Rod Paige, to inform him of his concerns and that the secretary indicated he is eager to work with Congress to correct the department’s financial deficiencies.

Part of what brought attention to the department’s problems were criminal investigations that revealed several employees bought personal cars from suburban Washington dealerships using Department of Education checks.

Another employee made a down payment on a home with a Department of Education check.

The salespeople in those cases notified the FBI.

Some of the funds used in those fraudulent transactions reportedly came from appropriations for Lakota Sioux reservation schools in southwest Nebraska.

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