Education Secretary Vows to Rid Agency of ‘Mismanagement, Fraud’

Education Secretary Rod Paige pledged Friday to eliminate what he called “substantial mismanagement and fraud” that have cost his department up to $450 million over the last three years.

“The problems are serious,” Paige said at a news briefing. “The auditors have cited the department for inadequate financial reporting, bad reconciliation of financial records, poor control over information systems and other [shortcomings].”

The largest problem area, he said, involved duplicate payments in federal grants to recipients. Auditors, however, already have recovered those sums.

An eight-member team to be appointed by Paige will focus mainly on recovering funds and correcting auditing errors cited in a report submitted to Congress earlier this month by the department’s chief inspector.

The Education Department, which has a $44.5-billion budget and manages billions more in student loans, exercised poor oversight resulting in money being stolen or improperly spent, the inspector said. It found 21 cases in which grant checks, totaling $250 million, were issued twice to the same recipients.

Funds were lost track of mainly during the last three years of the Clinton administration, officials said. One Republican congressman likened the agency’s financial practices to those of “a Third World republic.”

Paige, however, declined to blame his Democratic predecessor, former Education Secretary Richard W. Riley, saying the department’s problems “are of long standing.”

“We’re not looking backward, we’re just trying to [run] an efficient operation here,” he said, adding that his goal “is to restore the confidence of Congress and the public in the department and to make sure that no money that ought to be spent on improving education in America is wasted here in Washington.”

“Every dollar we waste on fraud or mismanagement is a dollar that could be used for teaching our children,” he said.

With the help of the national accounting firm of Ernst & Young, and with assistance from the independent Council for Excellence in Government, Paige said he would present to Congress within three months “a blueprint for management excellence.”

“Since my first day at the department, I’ve been working to understand the scope and nature of these problems and to put together an action plan for addressing them,” said Paige, a former Houston school superintendent.

“We’ve talked at length with members of Congress, who are keenly interested in these issues, and we’ve worked with the White House to put together our goals and objectives and a comprehensive strategy to reach those goals.”

President Bush has stressed “accountability at every level” in raising education scores--including from students, teachers, superintendents and state officials, Paige said.

“Accountability is just as important at the federal level, and I demand that same kind of accountability for results of myself and of this department as I would of any school,” he said.

Paige pointed out that the Education Department has not had a chief financial officer in two years nor an assistant secretary for management in more than five years. He said he is working with the White House to fill these positions with “experienced leaders with strong financial credentials.”

The audit report to Congress on April 3 showed that 21 employees could write checks of up to $10,000 without supervision and that, from May 1998 to last September, 19,000 of these checks were written, totaling $23 million.

The audit also found that as of October, about 230 employees had government credit cards in their names, with most allowed to charge up to $10,000 per month. Some employees had higher limits, including 36 workers who could charge up to $25,000 monthly.

Rep. Peter Hoekstra (R-Mich.), who has led congressional investigations of the department, urged Paige to suspend such check writing and credit card privileges pending completion of his review.

An investigation by The Times two years ago showed that the department, the smallest of the Cabinet agencies, also was packed with political appointees--1 in every 29 workers--who were drawn from Democratic loyalists and campaign volunteers. Outside consultants with political connections were often receiving as much as $453 a day, The Times study showed.