79–006

106TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 106–666

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.

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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 highrisk 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

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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

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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

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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 fulltime 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.

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