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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.
    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.