[House Report 106-666]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 106-666
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TO REQUIRE THE COMPTROLLER GENERAL OF THE UNITED STATES TO CONDUCT A
COMPREHENSIVE FRAUD AUDIT OF THE DEPARTMENT OF EDUCATION
_______
June 12, 2000.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Goodling, from the Committee on Education and the Workforce,
submitted the following
R E P O R T
[To accompany H.R. 4079]
[Including cost estimate of the Congressional Budget Office]
The Committee on Education and the Workforce, to whom was
referred the bill (H.R. 4079) to require the Comptroller
General of the United States to conduct a comprehensive fraud
audit of the Department of Education, having considered the
same, report favorably thereon with an amendment and recommend
that the bill as amended do pass.
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. COMPREHENSIVE FRAUD AUDIT OF DEPARTMENT OF EDUCATION.
(a) Audit.--Within 6 months after the date of the enactment of this
Act, the Comptroller General of the United States shall--
(1) conduct and complete a fraud audit of selected accounts
at the Department of Education that the Comptroller General
determines to be particularly susceptible to waste, fraud, and
abuse; and
(2) submit a report setting forth the results of the audit to
the Committee on Education and the Workforce of the House of
Representatives and the Committee on Health, Education, Labor,
and Pensions of the Senate.
purpose
The purpose of H.R. 4079, which requires the Comptroller
General to conduct a fraud audit of the Department of
Education, is to enhance the detection of waste, fraud and
abuse at the agency.
committee action
On March 23, 2000, Representative Pete Hoekstra (R-MI)
introduced H.R. 4079. This Act requires the Comptroller General
to conduct a fraud audit of the Department of Education.
On May 25, 2000, the Committee on Education and the
Workforce assembled to consider H.R. 4079. The Committee
adopted by voice vote an amendment in the nature of a
substitute offered by Mr. Hoekstra. The bill, as amended, was
favorably reported by the Committee on Education and the
Workforce by voice vote.
The Hoekstra amendment in the nature of a substitute
modified H.R. 4079, as introduced, by specifically limiting the
scope of the fraud audit to selected high-risk areas to be
determined by the Comptroller General.
summary
H.R. 4079 requires the Comptroller General to audit select
high-risk accounts at the Department of Education. The accounts
audited shall be those determined by the Comptroller General to
be most susceptible to waste, fraud and abuse. A report setting
forth the results of this fraud audit is to be submitted within
six months to the Committee on Education and the Workforce of
the U.S. House of Representatives and the Committee on Health,
Education, Labor, and Pensions of the U.S. Senate.
committee views
On March 29, 2000, an amendment with parallel language to
H.R. 4079, as introduced, passed by voice vote when offered on
the House floor by Representative Schaffer (R-CO) as an
amendment to the fiscal year 2000 Supplemental Appropriations
bill.
There is a need to determine the extent of waste, fraud and
abuse occurring at the Department of Education. The agency
failed to receive a clean opinion from auditors on its agency-
wide financial statements for the past two years. The next two
fiscal year audits are likely to produce similar results, since
the Department does not expect to have an effective accounting
system in place until at least October 2001.
The agency-wide audits regularly reveal a host of internal
control weaknesses in the Department's financial management.
These weaknesses imply a susceptibility to waste, fraud and
abuse, according to independent auditors and General Accounting
Office officials who have testified at a series of hearings
held by the Subcommittee on Oversight and Investigations.
Underscoring the need for a fraud audit are recent
disclosures of fraud and abuse at the Department which include:
On May 10, a contract employee pled guilty to
participation in a theft ring in which, over the course
of several years, about $300,000 worth of electronic
equipment was illegally steered to an Education
Department employee overseeing his work. The employee
in return signed off on more than $600,000 in phony
overtime for the contractor and a coworker. The
Inspector General and outside auditors have in the past
cited inventory control weaknesses at the Department as
a problem area.
Also in May, the General Accounting Office completed
an audit of the Department's ``grant back'' account,
concluding that the Department lacks sufficient
documentation to verify that money from this account
was distributed appropriately. The account at one point
contained almost three-quarters of a billion dollars,
only about $13 million of which was genuine grant back
money. The Inspector General and outside auditors have
identified security weaknesses in the Department's
Grants Automated Payment System (GAPS), which dispenses
funds from the grant back account and other agency
accounts.
In February, the Inspector General issued a report
disclosing serious flaws in computer data security in
several of the Department's mission-critical computer
systems. These systems contain student loan and grant
records for tens of millions of individuals. It is not
known whether, or to what extent, unauthorized users
may have altered these records.
Over the past two years, the Department has issued at
least $150 million in duplicate payments to grantees
and contractors. It is not known whether all duplicate
payments issued are eventually identified by the
agency, since payees are the ones who often discover
and report them.
The Committee believes that a fraud audit should be done to
determine whether there are additional problems at the
Department similar to those listed above. Detecting problems at
an early stage can product long-term savings of time and money
because it enables an agency to target areas of weakness before
more costly damage results. The audit findings, then, should
facilitate a more efficient harnessing of the Department's
financial management resources.
section-by-section
Section 1. Directs the Comptroller General to conduct and
complete a fraud audit of selected accounts at the Department
of Education that he deems to be particularly susceptible to
waste, fraud and abuse. Requires the Comptroller General to
submit a report setting forth the results of the audit to the
Committee on Education and the Workforce of the U.S. House of
Representatives and the Committee on Health, Education, Labor,
and Pensions of the U.S. Senate.
explanation of amendments
The amendment in the nature of a substitute is explained in
the body of this report.
application of law to the legislative branch
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch. The purpose of H.R. 4079, which requires the
Comptroller General to conduct a fraud audit of the Department
of Education, is to enhance the detection of waste, fraud and
abuse at the agency. The bill does not prevent legislative
branch employees from receiving the benefits of this
legislation.
unfunded mandate statement
Section 423 of the Congressional Budget and Impoundment
Control Act (as amended by Section 101(a)(2) of the Unfunded
Mandates Reform Act, P.L. 104-4) requires a statement of
whether the provisions of the reported bill include unfunded
mandates. The purpose of H.R. 4079, which requires the
Comptroller General to conduct a fraud audit of the Department
of Education, is to enhance the detection of waste, fraud and
abuse at the agency. As such, the bill does not contain any
unfunded mandates.
rollcall votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include for
each record vote on a motion to report the measure or matter
and on any amendments offered to the measure or matter the
total number of votes for and against and the names of the
Members voting for and against.
No recorded votes were taken on H.R. 4079.
statement of oversight findings and recommendations of the committee
In compliance with clause 3(c)(1) of rule XIII and clause
(2)(b)(1) of rule X of the Rules of the House of
Representatives, the Committee's oversight findings and
recommendations are reflected in the body of this report.
new budget authority and congressional budget office cost estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the House of Representatives and section 308(a) of the
Congressional Budget Act of 1974 and with respect to
requirements of 3(c)(3) of rule XIII of the House of
Representatives and section 402 of the Congressional Budget Act
of 1974, the Committee has received the following cost estimate
for H.R. 4079 from the Director of the Congressional Budget
Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 8, 2000.
Hon. William F. Goodling,
Chairman, Committee on Education and the Workforce, House of
Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4079, a bill to
require the Comptroller General of the United States to conduct
a comprehensive fraud audit of the Department of Education.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Paul
Cullinan.
Sincerely,
Steven M. Lieberman
(For Dan L. Crippen, Director).
Enclosure.
H.R. 4079--A bill to require the Comptroller General of the United
States to conduct a comprehensive fraud audit of the Department
of Education
H.R. 4079 would direct the Comptroller General of the
United States to conduct an audit of certain accounts at the
Department of Education. Assuming appropriation of the
necessary funds, CBO estimates that implementing the bill would
cost about $1 million in 2001. Because enactment of H.R. 4079
would not affect direct spending or receipts, pay-as-you-go
procedures would not apply.
Based on information from the General Accounting Office
(GAO), CBO estimates that the audit would cost between $800,000
and $1 million. Because the audit would have to be completed
within six months of the bill's enactment, it would have a
relatively restricted scope. It would be oriented toward the
department's student financial aid programs and focus on
specific areas that the GAO identifies as highly susceptible to
errors. A preliminary review by GAO staff suggests that the
limited audit would require about three full-time equivalent
positions (for example, six employees working full time for six
months) as well as some work by outside contractors.
H.R. 4079 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would have no effect on the budgets of state, local, or tribal
governments.
The CBO staff contact is Paul Cullinan. This estimate was
approved by Peter H. Fontaine, Deputy Director for Budget
Analysis.
STATEMENT ON OVERSIGHT FINDINGS OF THE COMMITTEE ON GOVERNMENT REFORM
With respect to the requirement of clause 3(c)(4) of rule
XIII of the Rules of the House of Representatives, the
Committee has received no report of oversight findings and
recommendations from the Committee on Government Reform on the
subject of H.R. 4079.
CONSTITUTIONAL AUTHORITY STATEMENT
Under clause 3(d)(1) of rule XIII of the Rules of the House
of Representatives, the Committee must include a statement
citing the specific powers granted to Congress in the
Constitution to enact the law proposed by H.R. 4079. Article I,
section 8, clause 1, which grants Congress the power to lay and
collect taxes, duties, imports and excises, to pay the debts
and provide for the common defense and general welfare of the
United States.
COMMITTEE ESTIMATE
Clause 3(d)(2) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison by the
Committee of the costs that would be incurred in carrying out
H.R. 4079. However, clause 3(d)(3)(B) of that rule provides
that this requirement does not apply when the Committee has
included in its report a timely submitted cost estimate of the
bill prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
No change made to existing law.