BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

OF THE

COMMITTEE ON EDUCATION AND

THE WORKFORCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

HEARING HELD IN WASHINGTON, DC, SEPTEMBER 19, 2000

Printed for the use of the Committee on Education

and the Workforce

OPENING STATEMENT OF CHAIRMAN PETE HOEKSTRA, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE *

STATEMENT OF RANKING MEMBER TIM ROEMER, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE *

STATEMENT OF GLORIA JARMON, DIRECTOR, HEALTH, EDUCATION, AND HUMAN SERVICES ACCOUNTING AND INFORMATION MANAGEMENT ISSUES, ACCOUNTING AND INFORMATION MANAGEMENT DIVISION, U.S.GENERAL ACCOUNTING OFFICE, WASHINGTON, D.C. *

STATEMENT OF LORRAINE LEWIS, INSPECTOR GENERAL, U.S. DEPARTMENT OF EDUCATION, WASHINGTON, D.C. *

STATEMENT OF DANIEL J. MURRIN, PARTNER, ERNST & YOUNG, LLP, WASHINGTON, D.C. *

APPENDIX A - WRITTEN OPENING STATEMENT OF CHAIRMAN PETE HOEKSTRA, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE *

APPENDIX B - SUBMITTED FOR THE RECORD, LETTER TO CHAIRMAN PETE HOEKSTRA, SUBCOMMITEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE, FROM ROBERT RABEN, ASSISTANT ATTORNEY GENERAL, OFFICE OF LEGISLATIVE AFFAIRS, U.S. DEPARTMENT OF JUSTICE, SEPTEMBER 18, 2000 *

APPENDIX C - WRITTEN STATEMENT OF GLORIA JARMON, DIRECTOR, HEALTH, EDUCATION, AND HUMAN SERVICES ACCOUNTING AND FINANCIAL MANAGEMENT ISSUES, ACCOUNTING AND INFORMATION MANAGEMENT DIVISION, U.S. GENERAL ACCOUNTING OFFICE, WASHINGTON, D.C. *

APPENDIX D - WRITTEN STATEMENT OF LORRAINE LEWIS, INSPECTOR GENERAL, U. S. DEPARTMENT OF EDUCATION, WASHINGTON, D.C. *

APPENDIX E - WRITTEN STATEMENT OF DANIEL J. MURRIN, PARTNER, ERNST & YOUNG, LLP, WASHINGTON, D.C. *

U.S. House of Representatives

Subcommittee on Oversight and Investigations

Committee on Education and the Workforce

Washington, D.C.

The Subcommittee met, pursuant to notice, at 9:30 a.m., in Room 2175, Rayburn House Office Building, Hon. Peter Hoekstra, Chairman of the Subcommittee, presiding.

Present: Representatives Hoekstra, Norwood, Hilleary, Schaffer, Tancredo, Fletcher, Roemer, Kind, and Ford.

Staff present: Peter Warren, Professional Staff Member; Whitney Rhoades, Staff Assistant; Jo-Marie St. Martin, General Counsel; Becky Campoverde, Deputy Chief of Staff for Strategic Planning and Communications; Kent Talbert, Education Policy Counsel; Patrick Lyden, Professional Staff Member; and, Deborah Samantar, Office Manager.

Chairman Hoekstra. Thank you for coming today to hear about continuing financial management concerns at the Department of Education. A quorum being present, the Subcommittee on Oversight and Investigations will come to order.

The Subcommittee is meeting today to hear testimony on financial management issues at the Department of Education. Under Committee Rule 12, the opening statements are limited to the Chairman and the Ranking Minority Member of the Subcommittee. Therefore, if other Members have statements, they may and will be included in the hearing record.

With that, I ask unanimous consent for the hearing record to remain open for 14 days to allow Member statements, witnesses' written testimony and other materials to be submitted for the record.

Mr. Roemer. Without objection.

Chairman Hoekstra. Without objection, so ordered.

The Subcommittee has held two prior hearings on this topic within the past 10 months. I also recently chaired a Budget Task Force hearing on the same issue. Those hearings talked about the failed audit reports that the Education Department received in Fiscal Year 1999 and Fiscal Year 1998. I think that is really what sets the foundation and the framework for the discussions that we have had in the past and the discussions that we will have today.

The Department has failed audit reports for the last two fiscal years. This indicates a lack of controls and internal mechanisms that would assure auditors and independent investigators that the Department accurately reports its expenditures in the financial statements that it is required to prepare. Real money is on the line. In this case, we are talking about Federal education dollars. We are talking about some of the most important Federal dollars that we spend in Washington, because it deals with spending for our children.

Let's talk about the most recent example and one of the reasons that we are back here today. It illustrates what happens when the rubber meets the road. I want to talk about a couple of school districts in South Dakota that received Federal Impact Aid grants from the Department of Education. As many of you know, Impact Aid is a grant program that sends money to school districts serving federally connected children, such as those living on military installations or Indian reservations. This past April, these two South Dakota school districts had not received money that was supposed to be sent to them by the Department of Education. The school district did not notify the Department right away. Why? The Impact Aid program participants are used to waiting around every year for delayed payments from the Department of Education. Sometimes they have to borrow money from a bank and pay interest on the loan while waiting for the Education Department to get their money out the door. This year they had to wait a little bit longer.

So where was the $1.9 million in grant money due to these school districts? According to a Justice Department complaint filed in July, the $1.9 million was electronically wired into bank accounts set up by con men. The thieves submitted a fraudulent direct deposit form to the Department of Education on behalf of one of the South Dakota school districts. They substituted a different bank account number for the correct one used by the school district.

And I think if you go to the complaint it is interesting how that process actually worked. And these are public documents. The properties it talks about, this is the property that was seized or has been seized by the Department of Justice: $791,042.16, one Lincoln Navigator, one 2000 Cadillac Escalade, $844,336.33, and 507 47th Avenue, Riverdale, Maryland. That is a piece of real property.

But the dates are also interesting. "On March 31, 2000, $906,000 of Department of Education grant monies were fraudulently wired into the DANY Enterprises account. The previous day's balance in the DANY Enterprises account was $3.19." Not a bad day for DANY Enterprises. In addition, "On April 4, 2000, $18,000 of Department of Education funds was also wired into the DANY Enterprises account. These monies were Federal Impact Aid funds designated for the Bennett County School District in South Dakota to assist with the provision of educational services to federally connected children."

To go on, "A Department of Education employee entered the false information from the direct deposit sign-up form into an electronic accounting system." How was this fraud discovered? You would like to think that it was discovered by the controls within the Department of Education. Again, reading from the document, "The wire fraud resulting in the electronic deposition of DOE or Department of Education grant monies into the DANY Enterprises account was discovered when Stetson Clarence Francois, also known as Tyrone Wallace, attempted to buy a Chevrolet vehicle with a cashier's check drawn from the DANY Enterprises account. On April 4, 2000, sales personnel at Lustine Chevrolet in Hyattsville, Maryland contacted the FBI special agent regarding a suspicious transaction."

So I am not sure what would have happened if the individuals who had fraudulently taken this money had not gone out and tried to buy two very nice cars that triggered it. They tried using aliases instead of their real names. They then tried to purchase a 2000 Cadillac Escalade with a $46,900 cashier's check and a Lincoln Navigator with a $50,000 cashier's check. Both checks drew on the account on which the Impact Aid funds had been wired. Meanwhile, another individual perpetrated the identical direct deposit wire fraud scheme, stealing Impact Aid funds intended for a different South Dakota school district. In this case, some of the stolen money was used by the thief's son to purchase real property in the State of Maryland worth $135,000.

Real events do have real consequences. I have not talked with Mr. Anderson, who is the Superintendent of the 600 student Bennett County school system in Martin, South Dakota but his quote in an AP story today was, "We didn't have to empty the pop machines to make payroll, but it came very close."

Now, as the Department of Education in earlier testimony indicated as we talked about some of this, it was an isolated case. But the problem is, and I think many of us share the same frustration, that this is now a pattern within the Department of Education. The Justice Department continues to investigate another case in which a theft ring bilked the Department out of more than $300,000 worth of electronic equipment and more than $600,000 in false overtime pay.

According to those who have already pled guilty in court, an Education Department employee coordinated the theft ring. She had a contract employee deliver items to her own home and those of her relatives, including a 61-inch television set and five 8,000-dollar computers. She also had him run errands for her on the government's time, important errands like picking up her granddaughter from school and driving to Baltimore to get her crab cakes to eat for lunch in Washington. As the investigation moves forward, several other Education Department employees remain suspended without pay. Again, all of this comes from public documents.

There is allegedly at least one other major theft ring currently under investigation at the Education Department involving funds. I can't go into more detail because they are not public documents at this time and it is not part of the public record, and the Subcommittee will not do anything to jeopardize the ongoing investigation.

We know that large-scale criminal activity has plagued the agency's student financial aid program for years, causing the General Accounting Office to put these programs each year on what it calls its high-risk list of Federal programs most subject to waste, fraud, and abuse. The Inspector General estimated that improper Pell grant payments amounted to $177 million in one recent year alone. It is not only criminal activity that afflicts this agency. There is in some cases just general incompetence. And, again, I think it is because there is a culture of not doing things right and having the proper internal controls in place. Real actions affect real people.

In February, the Department notified 39 students that they had won the prestigious Jacob Javitz Scholarship. This entitles them up to $100,000 in graduate school scholarships. Being a parent who just went through two days of orientation, I can imagine how excited the kids were, and I can imagine how excited the parents were. It is two-and-a-half days of orientation. It is a half-day learning what the school is about, and the other two days are spent educating parents on how to write numbers with that many zeros behind them on their checks. That was a great day for those kids. It was a great day for their parents. It was a great day for the undergraduate schools that were affiliated and had had these kids as students for the last four years.

There was only one problem. These kids were not the winners. So the Education Department had notified 39 students that they were winners when they actually weren't, and two days later called them and said, "Sorry, we got it wrong. You are not winners." Luckily, because of actions that Congress had put in place earlier, the Department was now required to provide these students with their Jacob Javitz Scholarships as well as the 39 real winners.

About 10 million students each year fill out federal financial aid forms in order to apply for higher education assistance. Last year, the Department printed 3 million of these financial aid forms containing errors. A university administrator found the mistakes. The forms had to be destroyed. The cost of the error was $700,000.

We know the Department of Education is still not producing auditable books. At least I am not sure they are auditable, but what the auditors will tell you is there is not a clean set of books. In fact, I would say they seem to be running in place. None of the material weaknesses cited by auditors in the fiscal 1998 audit reports were corrected during Fiscal Year 1999. We are now approaching the end of Fiscal Year 2000. The audit has just begun and the results are not due until March, but we know that the Department still does not have an appropriate accounting system in place and does not expect to have one in place until some time next year. Without a good accounting system, experts have testified the odds that the Department can receive a clean audit are slim.

We know that the Department has made more than $150 million in duplicate payments to grantees during the current fiscal year alone. We know that the General Accounting Office published a report last month concluding that the Department did not maintain auditable records regarding the transactions it made into and out of a grantback account that at one point contained almost $700 million, less than 5 percent of which belonged in the account in the first place.

We know that there are new concerns being raised about more areas of vulnerability at the Department of Education. This past February, the Education Department's Inspector General released a report concluding that the agency is not in compliance with the Computer Security Act and that its failure to implement appropriate security training and procedures constitutes a significant threat to the security of Education's information technology systems and the data they process. I want to point out that this data includes the student loan information of tens of millions of student borrowers.

Another Inspector General report, which was just released, finds that the Education Department has still not complied with the 1998 Presidential Directive on Critical Infrastructure Protection. This requires agencies to develop a plan for protecting their critical cyber-based infrastructures by November 1998 and to implement those plans by May of 2000. The IG report says that the Department's plan is inadequate. It also has not been fully implemented. It calls for a Department-wide vulnerability assessment of critical assets that was never conducted.

I don't know what, if anything, the White House is planning to do in response. But I know that this Subcommittee is determined not to let an agency off the hook that is the steward of a $40 billion dollar budget of Federal education dollars and the administrator of Federal student loan programs in which there is currently about $175 billion in outstanding debt to be monitored and collected.

I want to get a sense today of what further waste, fraud, and abuse we might expect to see involving the Department of Education and how we can try to prevent it from happening. The House has passed legislation that I sponsored which calls for a fraud audit investigation to take place within the Department of Education, in order to take an in-depth look at these and other problems. I am excited and delighted that on Wednesday the Senate will be taking up that legislation. I hope before we adjourn this fall that the House and Senate will be able to pass that legislation and move it on to the President's desk.

Before we begin, I want to point out that the Justice Department was invited to participate in this hearing. They declined to testify but made it very clear in a letter to the Subcommittee that we are free to question the Inspector General of the Department of Education about public aspects of these investigations, such as the charging documents and guilty pleas that have been publicly filed to date. I am disappointed that the Justice Department did not appear today to comment itself on these public filings. But I assume that the Inspector General will comply with the Justice Department letter and give her full cooperation to the Subcommittee in discussing these public documents.

Mr. Roemer?

Mr. Roemer. Thank you, Mr. Chairman. I would ask unanimous consent that my entire statement be entered in the record.

Chairman Hoekstra. Without objection, so ordered.

Mr. Roemer. Thank you, Mr. Chairman.

Mr. Chairman, there are always two sides to every story. The three issues that I would like to address today deal, first, with the problems that we have seen in the Department of Education, both some auditing problems and some theft problems. Second, that there has been some progress made. And, third, prosecution and how we deal with making sure that when errors are made, that justice is swift and that the rule of law comes down on people that break the law. How do we deal with that issue in a public way when current efforts are going on at the Department of Justice to make sure that we catch the bad guys and do something about it? Let me try to address all three of these issues in my opening statement: the problems, the progress, and the prosecution.

Mr. Chairman, like you, I am very interested in ensuring that our tax dollars are being used wisely and that the Department of Education's financial management practices are sound. As a Member who has worked hard to return over a million dollars out of my personal office account, I think that oversight and jurisdiction of the tax dollar is a very important prerogative and a very important duty of the United States Congress.

We had a hearing in March to go over the Fiscal Year 1999 financial audit of the Department of Education, and we are still six months away from the March deadline for the Fiscal Year 2000 audit. I hope that today we will hear of additional improvements that the Department of Education has made towards having a clean opinion on the Fiscal Year 2000 audit.

On another front, I was pleased to hear that the Department of Education has trimmed regulations by one-third, reduced grant application paperwork, and aggressively implemented waiver authority for legal roadblocks to state reform. In 1999, the Department received four qualified opinions whereas the previous year, it had five disclaimers, not a good report. I look forward to hearing about additional steps that the Department has taken to ensure that the Fiscal Year 2000 audit is clean and that the Department makes even more progress in the future.

Some positive steps have been taken. The cohort default rate on student loans has declined for seven consecutive years and is now at a record low 8.8 percent. Collections on defaulted loans have more than doubled from $1 billion in Fiscal Year 1993 to over $3 billion in Fiscal Year 1999. Data improvement in the National Student Loan Data System has prevented the disbursement of as much as $1 billion in grants to ineligible students. These are significant steps toward making sure those programs work efficiently for the taxpayer and fairly for our students.

In March, we heard about a new accounting system that will be capable of producing an automated closing of the Department's books at the end of each fiscal year promptly and efficiently. I am anxious to hear how this new accounting system is being implemented.

While I look forward to ensuring the Department of Education is financially sound, I am also looking forward, as we move into the last weeks of this session, to spending important time in our Committees trying to find out innovative ways to hire new teachers because we are going to have a teacher shortage in our schools, and trying to work in a bipartisan way to pass the vitally important Elementary-Secondary Education Act. It may or may not be passed this year, and time is running out. Trying to find ways to promote public school choice and more charter schools, to fix the schools for our nation's children so that every student in America has access to a good education. And trying to make sure that we don't have people scared in our schools, either from crumbling schools that aren't safe because of construction problems or because of drug problems in our schools. Those also seem to me to be very important issues for this Committee to work on in a bipartisan way.

Finally, with regard to prosecution when mistakes are made in the Department of Education. There are some pending cases that I am very concerned about; electronic computer theft, the luxury vehicle instance that the Chairman brought up, and the Impact Aid grant account. These are problems that I hope will be addressed in two ways. One will be through the bipartisan fraud audit legislation that passed the House that the Chairman helped put together and shepherded through the House with bipartisan support now pending in the Senate, and through the Department of Justice.

I have a letter here from the Department of Justice that says the following about talking about the individual details of these cases in an open forum. I quote from the Assistant Attorney General, Robert Raben, "Consistent with longstanding Department of Justice policy concerning congressional testimony on matters involving ongoing criminal investigation in cases pending before the court, the United States Attorney for the District of Columbia has advised that the invitation must respectfully be declined. She does not believe that it would be appropriate for a prosecutor to testify publicly about these matters, whereas here they pertain to a pending criminal investigation. This is based on her concern that such testimony could interfere with the pending criminal investigation. The United States Attorney has similar concerns about the testimony from the Department of Education Inspector General," and it goes on. And I would ask unanimous consent that the entire letter be entered into the record, Mr. Chairman?

Chairman Hoekstra. Without objection, so ordered.

Mr. Roemer. I appreciate it.

So I am not an expert legally on these kinds of matters. I do know that indictments will probably be coming down in the next week to 10 days, and I do know that the prosecutors at the Department of Justice are probably more capable and able than politicians to make sure that when somebody breaks the laws, that they do something about sending those people to jail where they belong if they are guilty.

So, we hope that after September 26th or so that we can get to the bottom of these cases, through the legal system. And, again, I would just restate that we have problems in the audit and some of these investigations. We have some progress that has been made in some areas, and we have the prosecution that is on these cases. Hopefully, where guilty, we will be issuing indictments in the next 10 days.

And with that, Mr. Chairman, I yield back the balance of my time.

Chairman Hoekstra. Good. Thank you very much, Mr. Roemer. Let me introduce the panel. They are getting to be friends and frequent visitors, and welcome back. They have been a significant help to the Committee, and I appreciate the work that we have been able to do together.

Our first witness is Ms. Gloria Jarmon. She is Director, and I think she has a title that is almost as long as the title of this Subcommittee but her title is Health, Education, and Human Services Accounting and Information Management Division, with the U.S. General Accounting Office here in Washington. Welcome back. Our second witness is The Honorable Lorraine Lewis, who is the Inspector General for the U.S. Department of Education. Good morning. Our third witness is Mr. Daniel Murrin, who is a partner with Ernst & Young, the accounting firm. Thank you. Thank you for being here.

Ms. Jarmon, we will begin with you.

Ms. Jarmon. Mr. Chairman and Members of the Subcommittee, I am pleased to be here today to discuss the current financial management status of the Department of Education. To summarize my statement, I will focus on three issues. First, the Fiscal Year 1999 financial audit results and information we recently received on the Department's efforts to resolve weaknesses identified in the audit. Second, the relationship between the audit findings and potential for waste, fraud, and abuse. And, third, our planned work to address your recent request for us to perform audit work in areas that might be particularly susceptible to waste, fraud and abuse.

The bottom line on Education's current financial management status is that challenges remain and the Department still faces severe internal control and financial management systems weaknesses. However, Education's financial staff and its contractors worked very hard to prepare Education's Fiscal Year 1999 financial statements before the March 1, 2000 deadline. And the auditor's opinion on the financial statements improved over that of the previous year.

In addition, as part of the audit, the Department's auditors looked at Education's internal controls and reported four material weaknesses. They were (1) weaknesses in the financial reporting process; (2) weaknesses in reconciling financial accounting records; (3) weaknesses in accounting for certain loan transactions; and (4) weaknesses and controls over information systems.

In response to the auditors' findings, Education developed an implementation plan for the replacement of its general ledger system by Fiscal Year 2002. Education also purchased a software tool to help enhance its ability to reconcile its account balances with the corresponding Treasury account balances and developed Web-based policies and procedures for reconciling the Department's material accounts and programs. In addition, Education officials told us that they updated their security policies and procedures for the financial management system, and that they recently developed a disaster recovery plan for this system.

Although the Department has made notable efforts to address its internal control weaknesses, these weaknesses still highlight areas where there is potential for waste, fraud, and abuse. For example, the information systems weaknesses increase the risk of unauthorized access or disruption in services and make Education's sensitive grant and loan data vulnerable to inadvertent or deliberate misuse, fraudulent use, improper disclosure, or destruction. Those types of vulnerabilities were discussed in more detail in recent reports issued by the Department's IG.

We also recently reported on the results of information security audits at Federal agencies that show that Federal computer systems are riddled with weaknesses that continue to put critical operations and assets at risk.

In response to your recent request, we are auditing selected Education accounts that are deemed particularly susceptible to improper payments. This work is in the initial planning phase and is suspected to focus primarily on the Department's disbursement processes and EDP controls. We plan on using various electronic auditing techniques to determine whether the Department has inappropriately disbursed funds. We also plan to evaluate the vulnerability of the Department's EDP systems to fraud, misuse, and disruption.

In summary, Education needs to be able to generate reliable, useful, and timely information on an ongoing basis to ensure adequate accountability to taxpayers, manage for results, and help decision-makers make timely, well-informed decisions. While Education has planned and begun implementing many actions to resolve its financial management problems, it is too early to tell whether they will be successful.

Mr. Chairman, this concludes my statement. I would be happy to answer any questions from you or other Members of the Subcommittee.

Chairman Hoekstra. Thank you. Ms. Lewis?

Ms. Lewis. Yes, sir. Today, I will discuss matters related to financial management and computer security at the Department of Education. Specifically, the Department's progress on Fiscal Year 1999 financial statement audit recommendations, the status of the Fiscal Year 2000 audit, a summary of duplicate payments made in Fiscal Year 2000, Inspector General computer security reviews, and, finally, recent investigations.

On March 1st, a total of 139 recommendations had been made for the 1995 through 1999 financial statement audits, 111 recommendations remained open and 28 were closed. Today, 95 recommendations have closed and 44 remain open. Of the 24 recommendations contained in the 1999 audit, 18 are open and six are closed.

The Department provided my office with updated corrective action plans for all of these audits on September 15th. We are assessing these plans.

As a result of meeting the March 1st deadline for the 1999 audit, we are much further along in the audit of 2000 than we were this time last year with the greatest strides made in the coordination of our own system audit efforts with those of Ernst & Young's auditors. In addition, the Department has focused earlier on the financial statement preparation process. For example, the Department prepared two sets of interim statements as of March 31st and June 30th. The final financial statements are due to us on December 1st. As Ernst & Young will testify, we are unable to forecast or speculate as to the ultimate opinion which will be rendered.

Four instances of duplicate payments were issued in Fiscal Year 2000 involving either grants or student financial assistance. Two of the instances occurred in October 1999 and two occurred in December 1999. In October, a payment for $19 million was transmitted twice, then subsequently recovered by an electronic reversal. A second instance resulted in $125 million in duplicate payments being issued to approximately 48 grantees. In December 1999, duplicate payments totaling approximately $660,000 were issued to 51 schools and $6 million was issued to one school. All of these duplicate payments have been recovered.

Several Inspector General reports indicate that the Department needs to improve its computer security controls. The absence of such controls heightens the risk that the Department systems and data are vulnerable to security threats. In February 2000, we issued an audit that reviewed the security posture, policies, and plans for the Department's 14 mission-critical IT systems. We found several weaknesses, including the Department has not completed revisions of its security policies, security plans are not in place for six systems, and the Department did not complete security reviews for six systems.

The Department concurred with the findings and recommendations. For example, the chief information officer recently informed us that the security reviews have now been completed for the remaining six systems and that security plans should be in place for all critical systems by October of 2000. We have also performed detailed security audits of two critical systems in the Department, GAPS and Ednet. The Department concurred with our findings and recommendations.

We recently issued an audit entitled, ``Review of Planning and Assessment Activities for PDD-63, Critical Infrastructure Protection.'' We found that the Department needs to revise and implement its critical infrastructure protection plan, identify its critical assets and conduct vulnerability assessments of those assets. The Department concurred with our findings and recommendations.

Among those actions already implemented, the Department's CIO designated a deputy CIO for information assurance. The Department has also established the Information Security Steering Committee. The CIO has informed us that he expects to submit a revised critical infrastructure protection plan to the steering committee in October.

These audits identified control weaknesses that collectively constitute a threat to the security of the Department's IT systems and the data they process. We have identified improvement of computer security as a top management challenge. We will continue to closely monitor the Department's corrective actions on our existing audits. We plan to conduct an annual review of the Department's computer security program.

I am providing information on pending investigations. As you indicated, since the investigations are ongoing, I am providing only information that is publicly available through court filings or other public disclosures.

Regarding the first investigation. With the FBI, we are conducting a vigorous investigation of individuals who between 1997 and 1999 purchased equipment with Federal funds for non-business related purposes, billed the Department for hours not worked, and received goods purchased with Federal funds for personal use. These items included computers, printers, software, scanners, telephones, a 61-inch television, walkie-talkies, and compact disc players. The total cost of these items to the Department was over $300,000. In addition, it is estimated that between 1997 and 1999, approximately $630,000 in unworked hours were fraudulently charged to the Department.

Thus far, three individuals, Robert Sweeney, Joseph Morgan, and Raymond Morgan, Jr., have pled guilty based on their involvement in the case.

The U.S. Attorney's Office for the District of Columbia has filed criminal charges against three other individuals. These three individuals are current employees of the Department who have been placed on indefinite suspension without pay.

Regarding investigation two. I can discuss only what has been made a matter of public record by the filing of a civil complaint to recover fraudulently mis-directed Impact Aid funds. My office and the FBI are conducting a vigorous investigation in conjunction with the U.S. Attorney's Office for the District of Columbia.

On July 13th, the Department of Justice filed a verified civil complaint for forfeiture in rem to recover over $1.6 million from several bank accounts, two vehicles, and a building in Riverdale, Maryland. After serving the appropriate interested parties, publishing required notices and waiting the required period, during which time no answers or claims were filed, the Department of Justice filed a motion for default judgment of forfeiture, which is pending before the U.S. District Court.

Background information set forth in the complaint alleges that $1.9 million in Impact Aid grant funds were fraudulently wired into two local bank accounts. These Impact Aid funds should have been disbursed to two school districts in South Dakota. In both cases, a falsified direct deposit sign-up form for the school districts was submitted to the Department and the false information was entered into the electronic accounting system.

Nearly all of the funds and property purchased with these funds have been seized by the United States. A lis pendens has been placed against the real property. The cars were located and seized in April and May by IG, FBI, and local police personnel in Maryland.

In conclusion, our support for strong financial management and computer security is evidenced by the audits and investigations discussed above. We will continue to identify areas for improvement at the Department of Education.

That concludes my testimony, and I am happy to answer any questions.

Chairman Hoekstra. Thank you. Mr. Murrin?

Mr. Murrin. Thank you, Mr. Chairman. My name is Daniel J. Murrin. I am the National Director of Public Sector Services for Ernst & Young, LLP, a public accounting firm. I have been in public accounting for 20 years, with a specialty in the public sector, Federal Government.

We have been asked to share our recommendations for improving financial management of the Department of Education. This testimony reflecting our recommendations was first given on March 1, 2000 in connection with our report to this Committee on the 1999 audit. We, again, testified with respect to our financial management recommendations before the Education Task Force of the Committee on the budget on May 10, 2000, which I will parenthetically note was my birthday. Today, I will summarize Ernst & Young's recommendations that were set forth in the Department's 1999 audit.

The Office of Inspector General for the Department of Education did engage Ernst & Young to conduct the audits for the Department's Fiscal Year 2000, 1999, and 1998 financial statements. As Ms. Lewis has noted, with respect to the Fiscal Year 2000 audit effort, our Fiscal Year 2000 audit activities at the Department are currently in process. Our planning work for Fiscal Year 2000 commenced in the end of the second quarter. We are currently in the process of identifying and testing internal controls and preparing for our substantive account balance work, which would be performed as of September 30, 2000. At this time, we are really unable to forecast or speculate on progress that the Department may or may not have made in resolving prior audit findings or as to the ultimate opinion we will render until our procedures for Fiscal Year 2000 are complete in March of 2001.

With respect to the 1999 audit reports, in our prior testimony regarding the report of independent auditors to the Department of Education for Fiscal Year 1999, Ernst & Young issued a qualified opinion on four of the five required statements and disclaimed an opinion on the fifth statement. The report on internal control detailed four material weaknesses and four reportable conditions. We included a total of 24 recommendations in our report on internal control to assist the Department in addressing its internal control deficiencies.

In our earlier testimony, we highlighted several recommendations for areas for additional focus by the Department. The items identified in the remainder of my testimony are in addition to or expansion of procedures that are normally performed as part of a financial audit process.

In connection with your prior testimony, the Department informed us that they intended to prepare interim financial statements for Fiscal Year 2000 and beyond. Such statements have been prepared as of March and June 2000. We also recommended that the Department consider having a review conducted of those interim financial statements to provide early identification of any departures from Generally Accepted Accounting Principles.

We further suggested that reconciliation should be performed on a monthly basis and be subject to rigorous reviews and follow-ups. We understand the Department has ongoing procedures in place to identify potential duplicate payments in grant programs and the loan programs. We also suggested that an independent review be performed of that process at its conclusion.

In our prior testimony, we noted the Department plans to complete a physical inventory account of all of its fixed assets, including furniture and fixtures. And we understood at the time that the Department was conducting an inventory of computer and telecommunications equipment. We also suggested that if it was possible that an independent review of that process would be useful.

We noted that the Department might benefit from independent confirmations of financial data with its grantees, particularly at the award level so that you could get some information that the grantees know exactly what it is the departments have reflected in their records. And the Department may also want to consider ongoing efforts to review the accuracy of the data in the National Student Loan Data System.

Over-arching comments that we made in addition to our reports were really that the Department reviews the current organizational structure to update and more clearly define roles and responsibilities and ensure that financial reporting objectives established by management are being achieved. Such a review would include evaluating the recruiting, training, and retention of accountants and financial management personnel. We recommended that the Department develop an implementation plan for the replacement of the general ledger software package, which we have touched on today, and that the Department consider both short-term and long-term needs in that regard.

That concludes my testimony. I would be pleased to answer any questions you may have.

Chairman Hoekstra. Thank you very much. Mr. Roemer has indicated that he is going to let me author the bill to hire more auditors and accountants at the Department of Education, and we will begin working on that immediately after this hearing.

Thank you all very much for your testimony and thank you for being here. When I take a look at this pattern of behavior, and I think we had an opportunity just to talk about it briefly before the hearing began, one of the problems appears to be that there is a lack of internal controls. If you read through the filing on the embezzlement of Impact Aid funds, it appears that at least somewhere through the system someone was able to get into the computer system and change the direct deposit code so that instead of going to the school districts, the funds went into these other two accounts.

It appears that with the theft ring, with $300,000 of electronic equipment, a couple of systems may have come into play, one which may have been that the person who was requisitioning goods might have also authorized the payment of the goods and might also have been in a position to authorize payment of overtime.

With regard to the issue that Mr. Murrin mentioned about the Department doing a physical audit of its electronic equipment, unless there was an ongoing audit or an ongoing capital asset management process, the Department really had no way of knowing whether it bought a 61-inch television, whether it actually stayed within the Department or whether it found its way somewhere else.

I would guess the lack of internal controls is what leads to the duplicate payments, which have been an ongoing problem for the last couple of years. You tie that in and you overlay that with the whole issue of perhaps lack of integrity or a concern about computer security that has been mentioned by a number of you on the panel and we may want to do a hearing on it sometime in the future as well

So, again, I think many of the reasons why we end up with a failed audit is you have all of these things coming together, and you don't have the proper controls in place.

Ms. Jarmon, in your testimony you state and I quote, "Continued weaknesses in information systems controls increase the risks of unauthorized access or disruption in services and make education sensitive grant and loan data vulnerable to inadvertent or deliberate misuse, fraudulent use, improper disclosure or destruction, which could occur without being detected." Now, in these cases we are talking of the items that have been detected. I think the reason that we have got the fraud audit bill in place is because we have concerns that there may other cases where they have not been detected. I would guess from your testimony, you share that concern?

Ms. Jarmon. From the work that we have done and what we have seen that has been done related to computer security, as my testimony states, there is a risk that those things could occur and not be detected by controls that are in place within the Department.

Chairman Hoekstra. Mr. Murrin, do you have anything to say about the internal controls, the process or the system?

Mr. Murrin. I think we have emphasized in testimony before that key detect controls in place are very important for the Department. And to the extent that they can continue to improve those key detect controls, many of these matters would be detected earlier.

Chairman Hoekstra. Ms. Lewis, on the whole process of each of these cases, are you working with the Department and are you saying, "Okay, potentially the reason that this theft ring existed was because a really bright person cut through the system," or have you taken a look at the process and said, "Oh, wait a minute, we don't have the right internal controls in place. We really need to do a whole systems change with proper sign-off authorizations, and split responsibilities.'' How are you going through each one of these cases and what kinds of actions are you recommending the Department take, or how are you working with the Department to come up with corrective actions?

Ms. Lewis. In the case of the property that was purchased through the system and then diverted to family and friends, we have expressed to the Department concerns about the lack of segregation of duties, one person being in a position to control the process, the issues relating to reconciliations for financial transactions, and the importance of periodic reconciliations, non-performance of supervisory review, who above that individual was looking at the performance of that individual and identifying any problems. And, finally, insufficient supporting documentation relating to those transactions.

We have discussed that process. Our auditors have tracked from the beginning to the end how that scheme was able to be perpetrated. We have briefed the CIO's office. We have briefed other officials in the Department. We are using the lessons from that briefing to work with the Department on the importance of these issues.

Not specifically related to this case, the Department is also aware and we have pointed out that these larger issues of segregation of duties, supervisory review are mentioned in the Ernst & Young internal control reports. The case specifically is not mentioned, of course, but the larger issue. So, as we have testified before, the internal control report is a very important blueprint for corrective action.

Chairman Hoekstra. Have they changed their procedures now to a point where you believe they have put in the proper changes and adjustments to address the concerns that you identified or is this a work in progress?

Ms. Lewis. There are improvements that have been made, specifically regarding the role of that position from which the fraud was perpetrated. There is more supervisory involvement. There is high-level attention being given to this problem in the CIO's office. There is a new CIO, who has been in place about a year now, who is paying attention to these issues. And we are working very closely with him. Improvements have been made. With regard to the specific case, the improvements need to be worked on throughout all of the areas as well.

Chairman Hoekstra. One last comment, on the Impact Aid funds, I think all three of you have talked about the concern with computer security. Have you had an opportunity to go take a look at it and see how the account numbers were actually directed and whether the proper controls are in place there? I want to know how the numbers were changed? How can somebody go in and transfer $900,000 to South Dakota. If I change this number, instead of $900,000 going to South Dakota, I can transfer that into my bank account or I can transfer it into this bank account?

Ms. Lewis. May I refer to the complaint?

Chairman Hoekstra. Absolutely, yes.

Ms. Lewis. It is paragraph nine of the complaint that you spoke to. And in both instances, the direct deposit form, Standard Form 1199A, was changed.

Chairman Hoekstra. Right.

Ms. Lewis. In addition, the recipient, the beneficiary's name was changed from the school district, in the first case. Instead of the Bennett County School District, it ended up reading DANY Enterprises, Trading as Bennett County School District.

In the second case, it also occurred that the routing number was changed to Bank of America; it used to be NationsBank in Upper Marlboro, Maryland. According to the complaint that paper was provided to the individual in the system that took the data from the form and inputted it.

Your question, I think, is have controls been put in place to prevent that from occurring? Yes, we are aware that the Department has instituted an internal control that would provide for scrutiny of name changes before they are inputted into the system.

I want to make sure I answered your question, did I?

Chairman Hoekstra. Yes, I mean the question is how an account number gets changed? The Education Department deals with probably tens of thousands of account numbers for different school districts or individuals or universities or contractors around the country, and maintains the integrity of that original code to make sure that the payment is going to the proper place. At least in these two Impact Aid cases, it would be very helpful to understand how that process worked to change these code numbers, in order to prevent these types of things from happening in the future. Is the sign-off verified with the people in South Dakota that they actually want this to be changed so that there is integrity and security in the system?

Ms. Lewis. I am unable to go into detail beyond the complaint.

Chairman Hoekstra. All right. Good, thank you.

Mr. Roemer?

Mr. Roemer. Thank you, Mr. Chairman. I just want to reiterate, as a very strong supporter of public education in America, that I don't want things to take place, whether they be in Washington, D.C. in the Department of Education or some place else in our local communities, to erode the people's confidence or the taxpayers' confidence in that system. So when fraud occurs, I want to make sure we do something about it. We catch them. We nail them. And we make sure it doesn't happen again.

Ms. Lewis, I want to ask you a couple of questions, all within the framework that I outlined in my opening statement, that we don't talk about things that would in any way harm the prosecutor's ability to put these people in jail, and that we wait for these indictments to come forward. But we can discuss certain things in the public domain. So, let's make sure we abide by all ethical and legal rules. I want to get to the bottom of as much as we can in a public hearing about the fraud case with respect to the computer equipment, the TV, and electronic equipment that was stolen from the Department of Education.

Now, how many people are there at the Department of Education? How many employees are there, do you have any idea?

Ms. Lewis. I don't have the number off the top of my head.

Mr. Roemer. Is it 2,000, 3,000, 10,000?

Ms. Lewis. I believe it is probably around double that, 3,500.

Mr. Roemer. 3,500. And in this particular case, we have how many people that have been caught and indicted or possibly are indicted here?

Ms. Lewis. We have had three plea agreements. We have pending three informations that have been filed publicly for persons who are scheduled to come in and plea imminently.

Mr. Roemer. Does that mean that there are three from the Department of Education and three from the private sector, is that what you are saying? Or are there three that are going to be indicted and three that will have plea agreements?

Ms. Lewis. I believe of the six, four are former Department of Education employees or about to be former Department of Education employees. As part of the plea agreement, they will resign. As I indicated, they are on suspension without pay.

Mr. Roemer. Are they currently suspended without pay?

Ms. Lewis. That will be part of the plea agreement.

Mr. Roemer. Part of the plea agreement would have them terminate their jobs?

Ms. Lewis. Each plea agreement has that as a condition. And two of the other six are in the private sector.

Mr. Roemer. So again, keeping this within the public domain, there was some kind of collusion between the public sector and the private sector to pull this thing off, to steal this equipment?

Ms. Lewis. There are individuals who colluded to perform these crimes.

Mr. Roemer. Now, in order to do this, somebody in a management capacity was able to sign overtime, to perform management functions, to do some documentation?

Ms. Lewis. The telecommunications specialist was in the position to order the equipment off a GSA schedule and, yes, to authorize overtime for persons from Bell Atlantic and another company who performed the telecommunications duties for the Department.

Mr. Roemer. Now, do you feel, Ms. Lewis, that the Department of Education has instituted reforms so that one person is no longer able to perform those three or four different tasks? Are we doing something in government about this so that we prevent this from happening in the future?

Ms. Lewis. The Department is very aware that one of the problems that contributed to this scheme was the lack of supervisory oversight and the lack of segregation of duties. In this instance, the Department, the Office of Chief Information Officer has implemented reforms so that in an instance like this, involving these specific factors, it would not happen again. The individual was a Contracting Officer Technical Representative, a COTR in the jargon of the contracting world.

Mr. Roemer. A COTR?

Ms. Lewis. COTR, C-O-T-R.

Mr. Roemer. COTR means what?

Ms. Lewis. Contracting Officer Technical Representative, who provides guidance to the contractor, supervision of the contractor, and direction to the contractor. There are many COTRs throughout the Department of Education, throughout the government. Training of COTRs, emphasizing responsibilities, ensuring supervisory oversight of that function is one that is very important and every organization at this table would come to any organization, whether it is in the private sector or the public sector and say, "Make sure the COTRs are doing their jobs and know what they are doing." So the larger issue of making sure that that function is performed responsibly throughout the Department and throughout government is one that the Department has to remain ever vigilant about.

Mr. Roemer. So this is a problem that extends beyond the Department of Education with respect to COTRs in the Department of Commerce, Department of Defense?

Ms. Lewis. I don't have specific examples to bring but generally, yes, that inspector general offices and GAO, as contracting work is reviewed, whether it is through an audit or some other technique has identified COTR training and COTR responsibilities as a very important function.

Mr. Roemer. Now, I don't expect you to be able to answer this now, but I would hope you could get back to me. With respect to COTRs and with respect to different departments, are you sharing the knowledge of what happened in this particular case at the Department of Education so that it doesn't happen in other departments with other problems in these areas too?

Ms. Lewis. No, I have not specifically shared this other than through two opportunities to testify, once before the Budget Committee and today. The first investigation was highlighted, was the subject of a Washington Post article several months ago when Mr. Sweeney pled. So, we have had some publicity or information about it that way. Of course, in the semi-annual report, that is our regular means of communicating our six months of activities at the IG's office, which we are preparing now and will be issued in the fall. Of course, we will mention this there.

We do share, to some extent, our inspector general reports in the IG community. They are up on our website. We go visit other IG's websites. They visit ours. So, through that means, we have done some information sharing.

Mr. Roemer. I would hope that we would try to improve the integrity and the accountability and the internal controls of those positions, not only in the Department of Education but make sure that that is not something we are vulnerable to in other areas as well.

I know my time has expired, Mr. Chairman. Thank you for a couple of extra minutes. And thank you, Ms. Lewis, again, for your testimony.

Ms. Lewis. Thank you.

Chairman Hoekstra. Ms. Jarmon, just as a point of reference, is it 12 out of 24 Federal agencies did not get a fully clean audit? Is that correct? Is it 12 out of 24?

Ms. Jarmon. It is nine out of 24 that did not get clean opinions.

Chairman Hoekstra. Nine out of 24?

Ms. Jarmon. Yes. Fifteen did get clean opinions.

Chairman Hoekstra. All right, thank you.

Mr. Schaffer?

Mr. Schaffer. Thank you, Mr. Chairman. Ms. Jarmon, the testimony, which you have expressed verbally, and also, your written testimony are certainly shocking. As a parent of five kids, three of which are in public schools right now back in Colorado, this is a topic I take pretty seriously. The thought of the Department of Education hemorrhaging cash to this extent is something that I find very disturbing.

You mentioned on page 3 of your testimony, "As of August 2000, 15 of the 24 CFO Act agencies had received clean or unqualified opinions on their Fiscal Year 1999 financial statements. The Department of Education did not receive such an opinion because of its financial management weakness." I wonder if you could restate for the Committee in general terms, after your experience and oversight and investigation, what the bottom-line reason the Department continues to fail to be among the agencies that receive clean audits is?

Ms. Jarmon. It seems from our work over the last few years and looking at the auditors' reports in 1998 and 1999, many of the reasons seem to relate to some of the systems problems that the Department had and problems with reconciling information. The auditors, which I am sure Mr. Murrin can speak to, had problems getting comfortable with certain balances, which is why in 1999, they qualified their audit report, which means that they weren't comfortable with certain balances. This was an improvement, as I mentioned, over 1998, where the auditors disclaimed on all five statements. But in 1999, they were still uncomfortable with certain balances because of problems with reconciliations and because of problems with the new systems and some balances that were not supported.

Mr. Schaffer. I want to ask you about the Impact Aid theft again. I know some of the information that we would like to receive is unavailable to us because there is an ongoing investigation. But it is my understanding from what I have heard today, and what I have read about this particular case, that the government stumbled upon this crime basically because of the good sense of a third car dealer. I am not sure where, but a third car dealer in Washington because of some irregularities on the credit report.

My question is if it were not for the observance of a car salesman, when do you suppose we would have found that this crime had taken place? Ms. Jarmon, do you have any opinion on that?

Ms. Jarmon. We haven't really looked at the Impact Aid situation so I am not sure.

Mr. Schaffer. Okay.

Ms. Lewis, do you have any idea about that?

Ms. Lewis. I can confirm and identify that it was Lustine Chevrolet in Hyattsville, Maryland who identified problems on the credit report, and reported this to the FBI. Beyond that, I am not able to add any more details.

Mr. Schaffer. I just want to clarify the facts here. We have an employee or employees in the Department of Education. The ones who falsified the documents are the folks who process the direct deposit paperwork, is that what I heard you say before? It was a deposit slip of some sort?

Ms. Lewis. I am not able to speak to who falsified documents. Documents were falsified. Two direct deposit forms did have critical information changed on those forms, the routing number, the recipient, obviously, the place where it was supposed to go.

Mr. Schaffer. Funds were diverted to private accounts that were owned by the thieves, I take it, or in their names. So these folks tried to draw on the account to go buy cars with the money of two South Dakota school districts. In the other case of funds being diverted, almost $1 million was diverted to the Children's Cottage, Inc. Fund due to another fraudulently submitted direct deposit form.

These two cases are related? How did we find out about the latter one?

Ms. Lewis. I believe following the identification of the first diversion of funds, there was a check to see if there were any other anomalies or problems in that time frame and that revealed the second diversion of funds.

Mr. Schaffer. Could I ask you just to speculate on this in general?

In this particular incident that we are talking about now, this theft of the Impact Aid funds amounts to almost $2 million. I am not an investigator, but it would seem to me that if somebody were going to perpetrate a crime like this, they probably wouldn't have started with $2 million. They might have started out smaller a few times in order to see if the scam worked and proceed from there. Is it possible that this has occurred previously, prior to the car dealer finding this case for us?

Ms. Lewis. I don't have any information relating to any other. Certainly ensuring that there is a strong internal control in place to check the direct deposit forms and any changes to the deposit forms would be an important prevention mechanism to ensure that possibility doesn't take place. But I don't have any specific information on any other matters like this.

Mr. Schaffer. I don't have any further questions.

Say the car dealer's name again?

Ms. Lewis. Lustine Chevrolet.

Mr. Schaffer. Lustine Chevrolet. I am thankful for Lustine Chevrolet helping to recover $2 million in stolen funds that hopefully will get back to those children in South Dakota.

Thank you, Mr. Chairman.

Chairman Hoekstra. Mr. Schaffer, just a couple of things.

If you are talking about the funds that were diverted in the Children's Cottage account, the public document states, "A DOE employee entered the false information from the direct deposit sign-off form into an electronic accounting system. As a result, the funds were wired." I think in both cases, it says a Department of Education employee entered the information.

Ms. Lewis. Yes.

Chairman Hoekstra. But it does not say whether they knew it was fraudulent information or not. And so at this point in time, I don't think any of the public documents are indicating who was responsible for the incorrect information.

That is why we have the fraud audit bill out there to provide the resources to GAO and perhaps do an audit of accounts like the Impact Aid fund to see if this is a pattern or was an isolated event or had been going on for a period of time.

Mr. Ford?

Mr. Ford. Thank you, Mr. Chairman.

There have been a lot of things said. I appreciate our Committee's zeal in investigating. We have demonstrated perhaps a propensity to investigate better than anything else we do in Congress, and some of these matters need to be investigated. I am comforted to hear that there is progress being made on a lot of these fronts. As many of you know, we may end up having to hire Ernst & Young to audit us some time in the very near future because we are just 11 days away from the fiscal year ending and once again this Congress, which I am a part of and I take responsibility for, has not completed its work on the Fiscal Year 2001 budget yet. You may recall last year that we didn't finish last year's budget matters until late in the year, either. However, that is not necessarily important here because we are dealing with financial management issues at the Department of Education.

I am delighted to note that the Secretary was or very soon is going to be in my dear friend Nancy Johnson's district to discuss school construction. I know one of the articles suggested that he only travels to Democratic districts, and I am proud that he traveled to my district because I support a lot of the things that the Department is doing, and I think that we have to expect human error at some point. We certainly shouldn't tolerate it and should take steps to curb it and to discourage it. But by the same token, Mr. Hoekstra and my dear friend Mr. Schaffer, if you want to invite the car dealer out, I am sure Secretary Riley would love to meet you out in your district along with Messrs. Norwood and Hilleary and anyone else that may invite him to his or her district.

Mr. Hoekstra, the other night on the Floor, I think you made a comment referring to the Jacob Javitz Scholarships. I believe that you spoke to the cost of this mistake to the taxpayers of my district and yours and all across the nation approaching somewhere near $4 million. I know I am speaking in the abstract, all of those who are present and may be watching may not remember the testimony of Mr. Hoekstra. I make it a point to watch you whenever you are on television, Mr. Hoekstra, talking about education matters and happen to see it and have the transcript as well.

I guess I would pose the question to the panelist, in particular, Ms. Jarmon, if she may know, the actual cost to the Department and to the taxpayers for the 39 Jacob Javitz Scholarships that were awarded in error? I know that, Mr. Hoekstra, you said it was $4 million. I am just curious if, pardon me, Ms. Lewis, you may know the exact amount? I just learned of the hearing yesterday, so I do apologize for not knowing who may have answers to these questions.

Ms. Lewis. No need to apologize. I do not know, sir, but I would be happy to provide that information to you for the record.

Mr. Ford. If you would, that would be appreciated. Perhaps Mr. Hoekstra is right, I just have information that suggests otherwise or have a hunch that suggests otherwise.

My second question, I certainly won't take up very much time, is to know what corrective steps the Department is taking to reduce fraud, specifically, the discharge of loans due to death or permanent disability where the borrower subsequently earns income? Anyone that can answer that question, I would appreciate it.

Ms. Lewis. Yes, Mr. Ford, with regard to the issue of the death and disability discharges, the Chairman mentioned as well, we did do an audit that we issued last summer, the summer of 1999. On a personal note, that was just about two days before I got to the Department of Education, so there was a lot of interest in it. One of the key things for me to note and very important for me to note is that the Department of Education did request that audit by the Office of Inspector General, having identified some trends, and some increases in the area of discharges for death and disability cases. The Department of Education asked the IG to look into it before I got there and the report was issued just before I got there. And we have testified about it several times.

We worked with the Department to institute some changes. For example, for a death discharge, the Department issued a "Dear Colleague letter", "Dear Partner letter" requiring a certified death certificate to be forwarded to show actual proof of death. On the disability side, there were instructions given to the guarantee agencies in terms of ensuring that the application was signed, that there was a signature that came from medical personnel, the doctor's number or medical provider's number would be required. So these changes in the process were instituted last fall to immediately try to address the problem.

We have continued to work on specific individual cases in the disability arena. Individuals in my office have identified over a million dollars in specific cases that require the loans to be reinstated because the evidence showed that the persons were not disabled in meeting the criteria that the regulations set forth.

The Department has continued to discuss this matter with the community, and some time in early August published proposed changes to the Department's rules relating to death and disability. I can provide you a summary of that and some details for the record, if you would like. But there is a dialogue taking place with the community about how to address these issues, making changes to the regulations to tighten up the system. And my office, obviously, continues to investigate.

Mr. Ford. Was this an instance in which the Department asked the Inspector General's Office to investigate?

Ms. Lewis. To audit, sir.

Mr. Ford. I'm sorry, to audit, forgive me. But this was instigated at the behest of the Department itself?

Ms. Lewis. Yes, that is right.

Mr. Ford. If I may just ask one last question.

What is the general attitude of the Department when the Inspector General's Office or for that matter, outside auditors come in to examine the management practices? What is the general response attitude of the Department that you find, and I would ask the expert? You have done audits in the past and when you make recommendations, just in general, have you found the attitude to be resistant or is there a willingness to make changes or to generate improvements? Just out of curiosity for this Committee, because we certainly take our responsibilities seriously here, is that being reciprocated within the Department when recommendations are made by the IG's office or even by outside auditors?

I have learned more about auditing, I might add, over the last two years in this Committee than perhaps I would have otherwise, and it has been illuminating in a lot of ways. But I’m just curious, from your standpoint as professionals, do you find the Department willing? You all have done this in the past, I would imagine. Would you mind responding briefly to that?

I thank the Chairman for allowing me to go over my time.

Mr. Murrin. I think we have found that the Department takes our recommendations seriously, and certainly when we have meetings, they have the right people there discussing what the answers are and how to get the corrections in place. That said it is too early in this process for us to say whether they will have been successful in addressing our recommendations. But certainly from a tone standpoint, we don't find that they are not going to do anything.

Ms. Lewis. I have found that our recommendations are also taken seriously. I would expect no less. In particular, the effort over the last year by my office, under my leadership, the Deputy Secretary's leadership, and the CFO office leadership to resolve and get a handle on outstanding audit recommendations, both relating to the financial statement audit and other audits that have been issued is a very concentrated effort. Still there’s a lot of work to do. It is very important that having resolved an issue, the actual corrective actions actually take place. That is the key to government by results. But I have found a very serious and professional atmosphere in terms of dealing with the recommendations of the Office of Inspector General.

Chairman Hoekstra. Thank you.

I just want to take a little bit of a liberty here since my friend, Mr. Ford, invoked my name after watching Michigan and UCLA. I think you and I are probably both better off watching re-runs of my special orders.

[Laughter.]

Mr. Roemer You can watch a Notre Dame game.

Chairman Hoekstra. I am beginning to become a little bit more of a Notre Dame fan.

Mr. Roemer. That is right.

Chairman Hoekstra. It is closer to my home, and they are having a pretty good year.

Mr. Roemer. We take on Michigan State this week.

Chairman Hoekstra. Yes, we will see what happens this week.

The potential liability to the Federal Government for awarding 39 students Jacob Javitz scholarships is 39 x $100,000, which equals $3.9 million. That is how we come up with a $4 million dollar potential liability to the Federal Government. I think if you can buy four years of graduate school for $100,000 that is not a bad deal.

This is not about the attitude of the Department of Education. I would just like to ask Mr. Murrin one question: How many $40 billion dollar publicly held companies do you know of today that have failed their last two public audits and are in a position where they are going to fail their next three?

Mr. Murrin. I think a monosyllabic answer would be fine, none.

Chairman Hoekstra. A what?

Mr. Murrin. None.

Chairman Hoekstra. None. Absolutely none. When this happens in the private sector, they not only have a great attitude, they also get the job done.

Mr. Norwood?

Mr. Norwood. Thank you, Mr. Chairman.

I appreciate your having this hearing. I want to say to the panelists that it is a moral obligation of Congress to oversee the Federal agencies and from that then leads to investigations, and we require complete answers to do our job. We must make sure, I believe, that we do our job. This hearing is not about public education. It is about a Federal agency that is having a lot of problems that affect our taxpayers back home. They want some answers. And they want very complete answers.

Let me start by pointing out something Ms. Lewis says in her testimony, regarding two open theft investigations in your office that you and the Justice Department are jointly pursuing. Are these the only two criminal investigations currently underway involving theft of funds from the Department of Education? Ms. Jarmon, could you answer that? I am also curious about how much the GAO knows, not just the Inspector General's office. Are there more than two potential theft investigations going on?

Ms. Jarmon. The GAO hasn't been involved in the theft investigations, so I am not sure how many there are.

Mr. Norwood. Well, isn't this is about two things? Words that come to mind would be waste and misuse and inefficiency and incompetence. The Chairman pointed out many of those things in his opening remarks. And in addition to that is fraud and criminal activity for which the Justice Department has to investigate, and we have a moral obligation to understand.

I want somebody to tell me how big this is. Just how much money has been lost, either through mismanagement or fraud? What do we know thus far? Anybody? How many dollars?

Ms. Lewis. I am under obligation to ensure that any pending investigation_

Mr. Norwood. I am asking you about the date, not any pending investigation. And I am under obligation to get answers. How many dollars have been wasted or stolen thus far?

Ms. Lewis. I don't have a number.

Mr. Norwood. Tell me what the Office of the Inspector General does? You have $34 million a year to spend, what do you do?

Ms. Lewis. We are responsible for auditing the Department of Education’s programs.

Mr. Norwood. And how many dollars have been stolen to date? You should know the answer to that. Or wasted or misused?

Ms. Lewis. We do, sir, put out a semi-annual report each six months and this is the latest semi-annual report.

Mr. Norwood. And in that report, how many dollars have been wasted or misused to date?

Ms. Lewis. In the back of the report, which I can turn to, we identify recommendations from our audits both for funds put to better use and disallowed expenses that we summarize every six months.

Mr. Norwood. You don't show in that report how many dollars have been lost to either criminal activity or abuse thus far? And obviously some of these abuses occur when you send out checks to the wrong people. That is an abuse.

Ms. Lewis. In the report we do, for example, in our section relating to patterns of fraud, we do highlight the types of patterns of fraud that we encounter throughout our entire investigative program. And in those instances where we have dollar amounts, we do identify them in those write-ups.

Mr. Norwood. Is there anybody here that can answer the question how many dollars of the taxpayers' money have been lost to date through either criminal activity or abuse as the Chairman first mentioned? If you can, say, "Yes." If you can't, say, "No." That is all that is required.

Ms. Lewis. No.

Mr. Norwood. Nobody knows?

Well, do you want to know why the American taxpayer gets upset with things like this? They want to know. This is not about public education. It is about a Federal agency that has gone awry.

Ms. Jarmon, how long have you been with the GAO?

Ms. Jarmon. I have been with GAO since 1990.

One thing I wanted to mention, Mr. Norwood, is as part of the work that we are just beginning for this Subcommittee, we will be looking at disbursements, and improper payments, which is what I think you are getting to, to try to come up with some idea as to how big the problem is.

Mr. Norwood. Do you have a feeling for how big this is?

Ms. Jarmon. This is something we are just starting. We just recently received a request. So right now, I have no idea how big it is, but we are planning some ongoing work in this area.

Mr. Norwood. So the General Accounting Office, is going to look into this and somebody is going to tell us how many dollars are being wasted at the Department of Education through criminal activity, as well as inefficiency or incompetence. Is that what you are going to answer for us?

Ms. Jarmon. We are going to look at improper payments. It would depend on how the systems are and what information is available as to whether we can answer that question directly, but I can get back to you and let you know what we find out or the status of our work as we are going along.

Mr. Norwood. Well, I want to tell you as long as I can breathe, I am going to keep asking this question. I want to know how bad it is over there, and my sense of it is that we only know a little of it at this point. I mean we have to have a car dealer to tell our Inspector General that there is criminal activity going on in the Department of Education! I don't understand. I don't understand how we could get into a situation like this.

Mr. Chairman, I see the clock, but I want to make one final comment. This is not about these fine people right here. We have every obligation, I believe, to call in the Secretary, who has been the Secretary for eight years, and ask him some questions. How is it that this agency is getting to the point where we have to have hearings on criminal activities and obvious waste and abuse?

My view of it is the buck, at least at this point, ought to stop with the Secretary. He needs to come in here and explain it to us. Can he stay in Washington and away from taking trips long enough to run this agency or not?

Chairman Hoekstra. Thank you, Mr. Norwood.

I think in all three of these individuals' reports and the agencies they represent, the General Accounting Office, the Inspector General, and Ernst and Young, each have highlighted in either their audit reports or special investigations or overviews the critical problems facing this agency; the lack of internal controls, the lack of computer security and these types of things.

And, again, I think the reports that they have put together over the last few years were one of the things that have led us in a bipartisan way, as Mr. Roemer said, to the legislation. The legislation would provide additional funds to GAO to do a fraud audit to get a better handle on the extent of mismanagement and inappropriate use of Federal dollars within the Department of Education, because right now it is anecdotal.

We have a long list of anecdotal cases demonstrating the waste, fraud, and abuse. We have the big picture that has come from each of these three individuals and their agencies saying that they failed their audits; they don't have the internal controls in place. I think what the Subcommittee is hoping GAO will do is fill in this middle ground. The GAO will give us a better idea of the extent of the fraud and the waste within the Department due to the lack of internal controls by building off the specific cases of waste, fraud, and abuse that have been highlighted over the last year and a half.

Mr. Tancredo?

Mr. Tancredo. Thank you, Mr. Chairman.

I have one question for each member of the panel. Ms. Jarmon, did you say you have been at GAO since 1990?

Ms. Jarmon. Yes.

Mr. Tancredo. Were you in government service before that?

Ms. Jarmon. No, I was in the private sector. I worked with a CPA firm.

Mr. Tancredo. How long were you with the CPA firm?

Ms. Jarmon. I was with the CPA firm for eight and a half years.

Mr. Tancredo. Ms. Lewis?

Ms. Lewis. Sir, I worked in the Senate for a Committee for a number of years. I have worked at the NRLB. I have worked for a law firm. I have worked for another Federal agency and now I am at the Department of Education.

Mr. Tancredo. Mr. Murrin?

Mr. Murrin. I have been with Ernst & Young for 20-plus years. I did have two years during which I was a professional accounting fellow at the GAO.

Mr. Tancredo. So we are talking about, perhaps 60 years of cumulative experience here among the three of you.

In your experience during that time, in whatever capacity looking at issues similar to this with either private corporations or with government corporations, how many other instances have you come across something of this magnitude in terms of the number of concerns that you have listed over the time that we have been meeting with you? I am trying to get a sense of how I should judge this, and how I should look at it in comparison to the rest of the world?

Ms. Jarmon. I would like to mention at least Federal Government-wide, of the 24 largest agencies, there were eight other agencies, Education making nine agencies, that had enough financial management weaknesses or problems in 1999, that they could not get a clean opinion. So that gives you some idea that nine of the 24 were, for various reasons not able to get a clean opinion.

We testified last week about computer security issues, which is a government-wide issue. There are several. Of the 24 agencies, many of them do have similar problems related to computer security.

Mr. Tancredo. Are you capable of actually identifying for us, the scale of the problem in the Department of Education vis-a-vis these other organizations? Are you able to say whether the problem in the Department of Education is greater than the other seven that could not get a clean audit or not? Or is that something that you don't have the information to provide?

Ms. Jarmon. I don't have the information to determine the scale of Education compared to the other eight.

Mr. Tancredo. In the time you have spent in the government then, how many other times have you seen eight agencies not able to actually get clean audits?

Ms. Jarmon. In prior years, there were more agencies that did not get clean opinions. Many of the agencies have only been preparing statements and having them audited since Fiscal Year 1996. So there were actually more than nine agencies in the previous years.

Mr. Tancredo. This is pretty much endemic. You assume this kind of thing would be happening in every agency, the scale of problems that we are looking at today in the Department of Education.

Would it be possible that there would be the same scale of problems in these other agencies that could not get a clean audit?

Ms. Jarmon. There could be similar problems in the other eight agencies.

Mr. Tancredo. Similar? Okay.

Ms. Jarmon. Right.

Mr. Tancredo. Ms. Lewis?

Ms. Lewis. The experience I draw on is I did have the privilege of working for a Senate committee at the time the Inspector General Act amendments of 1988 and the CFO Act were enacted. And I was there for a good amount of the time when the GPRA legislation was being worked on, drafted, the hearings were being held, and then finally enacted into law.

Those experiences as a staff member really were my first introduction to government-wide issues. The committee I served on was the Governmental Affairs Committee. And it was a useful background to the job that I have just assumed last year, the inspector general job. I do think that the way I have approached the job is to ensure that in each and every matter that comes before me, whether it is an audit or investigation that I look at it in terms of the merits of that matter. I look at what the problem is, what our recommendations are, what our findings are, and what action needs to be taken, while keeping in mind, for example, whether there are systemic issues.

Mr. Tancredo. Yes, that is actually my next question. Since we are running out of time, let me try to jump to that very question here.

When you look at this, at least from my point of view you see a pattern. When you say that they meet with you and they are not resistant, the only thing that comes to my mind then is that they must be incompetent. One of the two things is true here, either there is internal resistance to reform or there is incompetence in bringing it about. Because, again, it appears to me that we could not have this much information and this much history of problems in this particular agency without one of those two things being true.

So, I am trying to determine the degree of systemic problem that exists. To what conclusion do you believe we should come with regard to the systemic nature of this problem? Or do you think is it just individually represented in the particular part of the agency that has got the problem?

Ms. Lewis. The only agency I have experience with is the Education Department in terms of looking at these kinds of issues. As I have testified before in this Subcommittee, the key to the fixes that need to take place are the internal control reports that are part of the annual financial statement auditing process. Those are blueprints to the fixes that need to take place, and they do identify the very key systemic issues that are in the agency. Complementing that is the work that my office does with the resources appropriated to us.

And Mr. Norwood and Mr. Tancredo, I do want to make sure that I have said for the record that when I am in a position to identify the dollar amounts that are associated with an audit or an investigation, we absolutely look to report those very publicly and whatever deterrent value or preventive value they can have for any other problem, we would want to make sure we are highlighting that.

Mr. Tancredo. Yes.

Ms. Lewis. But the systemic issues are very clearly set forth and need to be addressed in the internal control report, which is issued annually.

Mr. Tancredo. Thank you, Ms. Lewis. Thank you, Mr. Chairman.

Chairman Hoekstra. Thank you.

I have taken a look, Mr. Tancredo, at three things that I think are deep systemic problems, and I think that all three of you have pointed them out. They are the lack of internal controls, the risks faced because of a fear about a lack of computer security, and the third systemic problem is the need to update the general ledger. And those are just three top-of-the-mind serious systemic issues that need to be addressed before there is any likelihood that we will get clean audits and be able to address some of these items.

Mr. Tancredo. Mr. Chairman, in that light, although you are absolutely right and I certainly agree and understand the focus on those areas in our efforts to try to bring about positive change, you have to think to yourself about the degree to which individuals are responsible for the operation and who, in fact, should pay the price for this. Is it just those people that we identify in these documents as being involved with the fraud itself or the incompetence of that particular part of the agency, or does it go higher?

It is interesting because there are so many precedents that have been set by this Administration where something happens, for example in the Department of Justice, and everybody says, "I have no responsibility for it." Even though they are the head of the agency, everybody else is responsible. Therefore, how are we going to find out exactly who is responsible, what the name of the individual is, and what role they play at the Department?

That is why I keep pushing at the systemic issue, because I don't think anybody is going to come in here and say, "It is I, Mr. Chairman. Yes, I am the Secretary of the Department of Education, and I know the buck stops here." I have the feeling that is not going to happen. And so we are charged with the responsibility of trying to identify the systemic issue even when the people involved are claiming innocence.

Chairman Hoekstra. Thank you. Thank you for being here and thank you for your cooperation over the last 18 months as we have worked on this process. I am sure that we are going to continue working together on this process. I look forward to the day when we get a clean audit, and when we can get full information on some of the pending cases that are out there.

We are going to continue a dialogue with you on the progress of cleaning up the internal controls within the Department of Education. We are looking forward to Senate passage of our bill. Hopefully the President will sign it into law and thereby provide the opportunity for the General Accounting Office to do a more thorough, in-depth analysis of the Department of Education's internal systems to determine the extent and need for reform of these problems. Hopefully, this will still happen before we adjourn this fall.

The other thing that I have an interest in, and I will check with other Members of the Subcommittee on, is to get a more detailed briefing or a hearing on the extent that we as Members of Congress should be concerned about the lapses in computer security, the vulnerability and the risks that we are exposed to because of the reports and the comments that each of you have made in those areas. Obviously, there are some issues that Mr. Norwood and Mr. Tancredo were referencing that we will take a look at.

Mr. Norwood wants to ask a final question. I will yield to the gentleman from Georgia for a moment.

Mr. Norwood. Thanks, Mr. Chairman. This will be short.

Ms. Lewis, do we know how many payments the Department of Education makes each year? How many checks do they cut? Do we have any clue?

Ms. Lewis. Actual checks?

Mr. Norwood. That would be a payment. That is my view of it is when they send money to someone.

Ms. Lewis. Sure. Yes, I do have the answer to that question. For 1999, the third-party drafts or checks the Department issued approximately 22,700 drafts that totaled $25,240,000.

Mr. Norwood. $25 million, did you say? That is good enough.

Ms. Lewis. $25,240,000.

Mr. Norwood. That is a small amount out of $40 billion.

Ms. Lewis. For actual checks?

Mr. Norwood. Yes. Can you tell me how many of those were improper?

Ms. Lewis. No.

Mr. Norwood. Why?

Ms. Lewis. We have not looked at each of those checks to determine that. One of the things we have been doing since we started this job in the winter with my Inspections Division, is we have gone office by office looking at the use of purchase cards and the use of checks to determine what internal controls are in place and whether the office is meeting the internal control standards that GAO sets forth.

Mr. Norwood. But out of that 22,000 checks aren't you curious as Inspector General if any of them are improper?

Ms. Lewis. I am always vigilant in terms of identification of any problems.

Mr. Norwood. How many of those were improper? We know some are. And why in the world wouldn't the Inspector General’s office be right on top of that when you are sending Federal tax dollars out all over the United States totaling, as you said, $25 million? We don't even know if any of them are right or wrong or going to the right people? Who checks on that if the Inspector General doesn't?

Ms. Lewis. Well, I take very seriously my responsibility as the Inspector General to be on top of the audit, investigative, and inspection functions, and it is a matter I can assure you I will never let down in carrying out that duty.

Mr. Norwood. Will you put in your report how many checks are improper?

Ms. Lewis. Absolutely, sir. I will identify the corrective action for you, the Congress, and the Secretary.

Mr. Norwood. Has the Department of Education put in a report prior to this discussion today on how many checks go out of there that are improper and go to the wrong people, et cetera?

Ms. Lewis. Last October 1999, I think GAO issued a government-wide report related to improper payments and set forth a definition of improper payments. That is an analysis that my office is undertaking as well in terms of looking at our own agency. I am looking at or will be looking at the entire disbursement system in the Department in terms of how funds flow out of the Department.

Mr. Norwood. Excuse me, Ms. Lewis.

Ms. Jarmon, did you give out that report from GAO? Have we never, ever checked for improper payments prior to you putting out that report?

Ms. Jarmon. We did report on improper payments government-wide last year, and we also recently reported this year. We were asked to determine how many agencies actually report improper payments in their audit report.

Mr. Norwood. Were other agencies reporting prior to you putting out that report?

Ms. Jarmon. Yes. But I also wanted to mention, as Ms. Lewis stated, as far as the amount of checks that the Department issues, while the $25 million is correct, the Department also issues most of their grant payments through electronic funds transfers out of their Grant Administration Payment System. The auditors reported and we reported that about $30 billion of grant payments are made annually by the Department of Education. And as far as improper payments, we will be looking at the $30 billion disbursements to try to see if we can determine some estimates of the improper payments related to that.

Mr. Norwood. Well, it is not important to me whether it is electronic or whether you simply write a check. What is important to me is why all of a sudden you have to put out a report to ask people to check for improper payments when you say other agencies are doing that.

My question is why isn't the Department of Education checking their payments, whether it is electronic or paper? Why haven't they been on top of that?

Ms. Lewis. It is checked on. The point I was looking to make is the GAO highlighted this issue as a government-wide issue and it went to the 1997, I believe, financial statement audits and collected all that information and summed up examples of improper payments.

Of course, you are absolutely right, Mr. Norwood, agencies and inspector generals have looked at the issue of inappropriate payments or improper payments or whatever terminology. But one of the things that this GAO effort has done is really focused all the agencies to look at it as a government-wide issue, to use the same terminology. And we have been vigilant about that. We are very interested in learning more.

Mr. Norwood. Well, has the Department of Education in the last eight years, ever printed an improper payment anywhere? And, specifically, has it happened under your watch? Have you ever put in writing or informed anybody that there was an improper payment?

Ms. Lewis. Our audits identify payments that should not have gone to a certain source, absolutely identify that as an improper payment, whether we have actually used that specific terminology through the 20 years of the history of the Office of Inspector General at the Education Department, I can't say.

I do know that just a few short months after I arrived, I was handed the GAO report, I think perhaps right around the time we were bringing the 1998 audit to closure. I was very interested in making sure that our auditors, my staff throughout my organization and the Department, be aware that this was terminology that was important, a matter that was important and that however we have done this checking and monitoring auditing work in the past, we have to be ever mindful of improper payments and report those. And when crimes have been identified as part of that process, to ensure that referrals have been made to the prosecutors to see that prosecutions take place.

Mr. Norwood. Well, many agencies put out an annual estimate of the value of improper payments, and what that might cost the government. I note that the Department of Education does not. That might be a very good thing for you to do.

Ms. Lewis. Yes, sir.

Mr. Norwood. Let the world know what you expect improper payments to be and let us know where they are and when they happen. The American taxpayer deserves to know that.

Ms. Lewis. Yes, sir. We are looking at that, and I agree with you.

Mr. Norwood. And I thank you, Mr. Chairman.

Chairman Hoekstra. Thank you, Mr. Norwood.

I believe that is one of the outputs we hope to have a better idea of through the Comprehensive Audit Bill. If that gets passed into law, it will give us a much better picture of exactly what is going on within the agency.

I do believe that the Inspector General, GAO, and Ernst and Young have all been helpful in highlighting the specific cases of waste, fraud, and abuse and the systemic problems. Now what we need to do is just find out the total extent of the problem that we have here. That is the issue that we will continue working on over the coming months.

Mr. Roemer, for a closing statement?

Mr. Roemer. Mr. Chairman, I would only say that I want to thank the witnesses for their time and their attention and their counsel on some problems we are trying to get to the bottom of. We take our role on this Committee with respect to the Subcommittee's name, Oversight and Investigations, very seriously. Personally I support public education, but I want to get to the bottom of any kind of problems we have and do the necessary investigation and oversight, as you do.

We have the General Accounting Office here, which is a bipartisan group that objectively looks at facts and gives us recommendations. We have the Inspector General's office inside the department, which provides expertise and counsel and independence from any kind of politics and policy. Ms. Lewis we appreciate your help here today. Mr. Murrin of Ernst & Young, from the private sector, we appreciate your counsel on the audits and suggestions to come up with cleaner books and ultimately a better system.

I hope that we can find out not only more in the next 10 days about these specific three cases and get to the bottom of them, but finally in six months have a more perfect system on auditing for the Department. I also hope to have bipartisan hearings on the many other issues that are important to our parents, our teachers, and our school children, to continue to develop the best public schools in the world. And, I hope we would also look into how we bring new teachers into the system, how we get more public choice in our schools, how we have safer schools, how we can have more charter schools, and how we can formulate new ideas to boldly reform the public school system. These are things that Republicans and Democrats can work together on. How do we train our teachers in the new technology? How do we get more math and science teachers out there helping our children learn when we really need those skills in this new economy? How do we develop better worker training programs to keep our workers at 45 and 55 years old trained for this economy as well?

So, Mr. Chairman, thank you for the hearing today. I hope we can continue to work on these other issues as well. I look forward to working with all three witnesses with their counsel and expertise, while continuing to see much improvement at the Department of Education with respect to the issues we have covered today.

Thank you again, Mr. Chairman.

Chairman Hoekstra. Good, thank you. The Subcommittee will be adjourned.

Whereupon, at 11:30 a.m., the Subcommittee was adjourned.