Education faces financial heat

Facing congressional scrutiny on its financial management troubles for the first time under President Bush's watch, the Education Department reported July 24 that a new accounting system it is installing will help it earn a clean financial audit opinion.

"Our auditors identified many weaknesses in the current accounting system, and these weaknesses are being addressed in the implementation of a completely new accounting system that will produce fully integrated financial management information," said William Hansen, deputy secretary of Education, testifying before the House Education and the Workforce Committee's Select Education Subcommittee.

The new system, using Oracle Corp. software, should reduce manual accounting practices and be ready for full use next year, Hansen said.

Education Inspector General Lorraine Lewis praised the work of Education's Management Improvement Team, but said that its initial report issued earlier this month shows that "significant challenges" remain.

Major internal control weaknesses revolve around Education's financial management and other information technology systems, she said. In particular, IT security weaknesses threaten financial and other data, she said.

Regarding security, Hansen said that in the past 90 days, the department deployed a new intrusion-detection system, arranged disaster-recovery facilities for its financial management system and its network, updated security policies and developed a security training program for IT staff members and managers.

Linda Calbom, director of financial management and assurance for the General Accounting Office, said problems with edit checks in the department's Grant Administration and Payment System, used to process grant and loan payments, have resulted in money being given to ineligible students or the department being defrauded. For instance, some students obtained loans and grants by using the Social Security numbers of the deceased. Education's Management Improvement Team, established by Secretary Rod Paige in April, is charged with such tasks as shoring up financial accountability, removing Office of Student Financial Assistance programs from the General Accounting Office's high-risk list and implementing more effective internal controls. A final report on is due from the team by Sept. 30.

Subcommittee chairman Pete Hoekstra (R-Mich.) said that cleaning up financial management at Education is more important than ever, given Bush's push for education reform. Four hearings were held to address the issue during the Clinton administration, to no avail, he said.

"This is a continuing saga," Hoekstra said. "We would like nothing better than to make this one of the last hearings."