The Education Department's failure to properly account for billions of dollars in federal grant money constitutes gross mismanagement at the agency, according to a new report from the Office of Special Counsel. The report, the result of an investigation of allegations by a whistleblower, determined that Education's grant management system--known as the Grants Administration and Payment System (GAPS)--lacks adequate security controls and does not properly track accounting information. The Office of Special Counsel (OSC) investigates whistleblower allegations of waste, fraud and abuse. The OSC requires agencies to investigate such allegations and report back on their findings and any actions they have taken to fix the problem. The OSC then reviews the agency's report and transmits the report to the President and Congress for further action. Although Education acknowledged weaknesses in its financial system, it said the allegations did not constitute "gross mismanagement" because the agency has addressed and tried to remedy accounting problems. John Gard, a systems accountant at Education, originally blew the whistle on the agency, claiming that Education made improper payments to federal grant recipients, wasting and mismanaging billions of taxpayers' dollars as a result of deficiencies in GAPS. Gard said the agency moved ahead with GAPS' implementation in 1998, despite his warnings about the flaws in the system. In the report, Special Counsel Elaine Kaplan substantiated Gard's allegation of gross mismanagement at the agency, disputing the Education Department's definition of the term. "The agency is incorrect that a finding of 'gross mismanagement' requires a conclusion that it acted in deliberate disregard of known deficiencies," said Kaplan. Instead, Kaplan concluded that any management action or inaction that put the agency's ability to fulfill its mission at high risk constituted gross mismanagement. Education's report on the investigation said many of Gard's allegations concerning its accounting system had previously been investigated and documented by the department's inspector general and the General Accounting Office. According to Education, it has implemented all of the IG's recommendations for correcting accounting problems with GAPS as of September 2000. In its report, Education said it "has and will continue to commit appropriate resources to correct conditions that challenge internal controls." Education defended the GAPS system, saying there was no evidence that the agency wasted funds implementing it, and that the system will benefit the agency's financial management capabilities. The agency plans to review grantee accounts from May 1998 to the present and identify discrepancies between the old grant management system, GAPS, and the agency's overall financial management system. Education pledged to work with the Treasury Department to correct any errors. Kaplan pointed to the agency's problems in producing reliable financial statements under the 1990 Chief Financial Officers Act as further evidence of weaknesses in its financial management. In fiscal 1998, Education's financial statements were too unreliable to be audited, and in fiscal 1999, the agency failed to receive a clean opinion. "Notwithstanding these pre-existing weaknesses, the agency's decision to update its financial management systems without first ensuring the stability of its current system security or providing for proper retention of data appears to fall within the legal definition of gross mismanagement," said Kaplan.
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