Financial Management: Internal Control Weaknesses Leave 	 
Department of Education Vulnerable to Improper Payments 	 
(03-APR-01, GAO-01-585T).					 
								 
This testimony discusses the internal control weaknesses in the  
Department of Education's payment process. GAO identified	 
internal control weaknesses that sharply increase Education's	 
vulnerability to improper payments. GAO classified the weaknesses
into four broad categories (1) poor segregation of duties, (2)	 
lack of supervisory review, (3) inadequate audit trails, and (4) 
inadequate computer systems' application controls. GAO found that
some individuals at Education can control the entire payment	 
process for certain types of transactions. The Department is thus
vulnerable to the possibility of individuals using agency funds  
for personal expenses. GAO also found that Education has serious 
deficiencies in its process for reviewing and approving purchases
made with government credit cards. During fiscal year 2000,	 
Education employees made over $8 million in purchases using their
government purchase cards. Without proper review and approval for
these expenditures, the Department provides employees the	 
opportunity to improperly use the government charge cards without
detection. Regarding audit trails, Education lacks adequate	 
control over changes made to sensitive information for certain	 
types of payments, including contracting and third party drafts. 
Finally, weaknesses in Education's information systems controls  
increases the risk of unauthorized access or disruption in	 
services and make Education's sensitive grant and loan data	 
vulnerable to inadvertent or deliberate misuse, which could occur
without being detected. 					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-585T					        
    ACCNO:   A00726						        
    TITLE:   Financial Management: Internal Control Weaknesses Leave  
             Department of Education Vulnerable to Improper Payments          
     DATE:   04/03/2001 
  SUBJECT:   Auditing standards 				 
	     Computer security					 
	     Erroneous payments 				 
	     Financial management				 
	     Fraud						 
	     Internal controls					 
	     Payments						 
	     Program abuses					 
	     Questionable payments				 

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GAO-01-585T

For Release on Delivery Expected at 9: 30 a. m. Tuesday, April 3, 2001

FINANCIAL MANAGEMENT

Internal Control Weaknesses Leave Department of Education Vulnerable to
Improper Payments

Statement of Jeffrey C. Steinhoff Managing Director, Financial Management
and Assurance Testimony

Before the Subcommittee on Select Education, Committee on Education and
Workforce, House of Representatives

United States General Accounting Office

GAO

Page 1 GAO- 01- 585T

Mr. Chairman and Members of the Subcommittee: I am pleased to be here today
to discuss our ongoing work on the Department of Education's payment
processes, and how the existing internal control weaknesses we have noted
thus far in our review make the Department vulnerable to improper payments.
Improper payments include errors, such as duplicate payments and calculation
errors; payments for unsupported or inadequately supported claims; payments
for services not rendered or to ineligible beneficiaries; and payments
resulting from fraud and abuse.

Since 1990, we have designated Education's student financial assistance
programs as a high- risk area for waste, fraud, abuse, and mismanagement. 1
These programs remain at high- risk primarily because Education lacks the
financial and management information needed to manage these programs
effectively and the internal controls needed to maintain the integrity of
their operations. Additionally, again this year Education was unable to
obtain an unqualified audit opinion on its financial statements because
significant financial management system and internal control weaknesses
continue to impair the Department's ability to generate, analyze, and
present reliable financial information. Given the billions of dollars in

1 Major Management Challenges and Program Risks: Department of Education,
(GAO- 01- 245, January 2001) and High- Risk Series: An Update, (GAO- 01-
263, January 2001).

Page 2 GAO- 01- 585T

payments made by Education each year to recipients nationwide and abroad,
these known deficiencies in controls over financial reporting, accounting,
and information systems raise the risk that erroneous or fraudulent payments
could make their way through Education's processes without being prevented
or detected.

Because of these risks, you requested that we audit selected accounts at the
Department that may be particularly susceptible to improper payments. In
response to your request, we have initiated a body of work designed to (1)
identify Education's payment processes, (2) determine what internal controls
exist over these processes, (3) assess whether the internal controls provide
reasonable assurance that improper payments will not occur or will be
detected in the normal course of business, (4) identify additional controls
that should be implemented to provide reasonable assurance that improper
payments will not occur, and (5) use various computer auditing techniques to
identify potential improper payments made by Education during the period May
1998 to September 2000. This ongoing work, which builds upon earlier work
done by the Education Inspector General (IG), includes testing of grant and
loan payments to educational institutions and students, as well as payments
to contractors, vendors and others in support of Education's operations
totaling over $186 billion. We plan to use an automated approach, such as
data base searches and other computer analyses, to identify unusual

Page 3 GAO- 01- 585T

transactions and payment patterns and provide red flags that a payment may
be improper.

My testimony today addresses the first phase of our work – assessing
the internal controls over Education payment processes, as well as
highlighting some of the findings from the fiscal year 2000 financial
statement audit that was recently completed by an independent public
accounting firm, Ernst & Young, under contract to the IG.

Let me first make a few comments on the importance of internal controls.
Internal controls are a major part of managing an organization, serving as
the first line of defense in safeguarding assets and preventing and
detecting fraud, abuse, and errors. They consist of the plans, methods, and
procedures used to meet missions, goals, and objectives. People are what
make internal controls work. Internal control is not something to be built
in at the end, but must be part of the daily fiber of management. The
responsibility for good internal controls rests with all managers. The
integrity and ethical values maintained and demonstrated by management plays
a key role in the entire organization's ethical tone. By providing guidance
for proper behavior, removing temptations for illegal, improper, or
unethical behavior, and providing discipline when appropriate, management
portrays a positive control environment, which is essential in achieving an
agency's objectives.

Page 4 GAO- 01- 585T

During our analysis of the various payment processes, 2 we identified
internal control weaknesses that sharply increase Education's vulnerability
to improper payments. We classified the weaknesses into four broad
categories, which are consistent with our Standards for Internal Control in
the Federal Government: 3 (1) poor segregation of duties; (2) lack of
supervisory review; (3) inadequate audit trails; and (4) inadequate computer
systems' application controls. I would like to highlight some of the more
significant weaknesses within each of these broad categories.

To reduce the risk of fraud and other improper payments, key duties and
responsibilities associated with the payment process need to be divided or
segregated among different people. This should include separating the
responsibilities for authorizing transactions, processing and recording
them, reviewing the transactions, and handling the related funds.

2 Consistent with your request to focus our audit on payment processes
particularly susceptible to improper payments, we concentrated our efforts
on the following payment processes: (1) grants and direct loans; (2)
government purchase cards; (3) third party drafts; and (4) contract and
purchase order payments. Grant and direct loans are processed by the Grant
Administration and Payment System (GAPS), whereas the other payments are
processed by the Financial Management System Software (FMSS).

3 Standards for Internal Control in the Federal Government (GAO/ AIMD- 00-
21.3.1), which was prepared to fulfill our statutory requirement under the
Federal Managers' Financial Integrity Act, provides an overall framework for
establishing and maintaining internal control and for identifying and
addressing major performance and management challenges and areas at greatest
risk of fraud, waste, abuse, and mismanagement. Poor Segregation of

Duties

Page 5 GAO- 01- 585T

Segregation of duties is one of the most fundamental internal control
concepts.

However, we found that some individuals at Education can control the entire
payment process for certain types of transactions. For example, some
Education employees can issue hard copy checks, known as third party drafts,
without involving anyone else. Currently 49 Education employees can request
blank checks. We found that 21 of these individuals can also access the
system, generate a payment without prior obligation, print and sign the
check, and submit it to the payee. The Department is thus vulnerable to the
possibility of individuals using third party drafts to pay for personal
expenses, without any physical or system controls in place to prevent or
detect such an occurrence. These drafts can be issued for up to $10,000 each
and in fiscal year 2000, the Department reported issuing over 19,000 third
party drafts totaling approximately $23 million.

We also found inadequate segregation of duties related to the electronic
transfer of funds through the Federal Reserve Bank (FRB) network to a
payee's bank account. Electronic fund transfers are used primarily to
disburse grants and loans to schools, states, local education agencies and
others. These payments totaled over a reported $181 billion from May 1998 to
September 2000 – the period covered by our ongoing review. Although
Education has a policy that prohibits the same individual from creating,

Page 6 GAO- 01- 585T

certifying, and electronically transferring funds through the FRB, some
Education employees are capable of doing this without involvement from
anyone else. During a walkthrough of this payment process at the Office of
the Chief Financial Officer (OCFO), a staff member told us that one snowy
day last winter, when she was the only person in the office who works on
these electronic fund transfers, she created, certified, and transmitted the
payment files that day. There was no preventive control that limited the
employee from performing all facets of the electronic fund transfers.
Compounding this, because the Department does not have the appropriate
follow- up controls in place, such as a requirement that supervisors
document their post- review and approval of these types of transactions, the
Department may not detect unauthorized FRB transfers.

Basic control activities , such as approvals, authorizations, verifications,
reconciliations, and maintenance of documentation, are an integral part of
an agency's accountability for government resources and achieving effective
results, including the prevention and/ or detection of improper payments.
However, we found that Education has serious deficiencies in its process for
reviewing and approving purchases made with Government credit cards –
called purchase cards. Lack of Supervisory

Review

Page 7 GAO- 01- 585T

As of October 30, 2000, approximately 230 Education employees had government
purchase cards in their names. According to a Departmental directive,
Education's policy is to use government purchase cards for authorized
purchases of expendable goods and services costing $1,000 or less, such as
supplies not available from the GSA Customer Supply Center. Generally,
Education employees are limited to charging up to $10,000 per month. Some
employees have higher limits; we found that 36 individuals can charge
$25,000 or more per month, and 2 of those employees can charge up to $300,
000 in a single month. This policy also requires a person, designated as an
approving official, to perform a review of cardholders' monthly statements
prior submitting the statement for payment, to ensure that each purchase was
made for official use and in accordance with established internal
procedures. The approving official must sign the cardholders' monthly
statements upon completion of the review process. In this case, the
approving officials' review represents the principal internal control.

In order to determine whether Education is following its established
policies, we selected 4 months of cardholder' statements to review for
certain attributes, including approving official's signature. Of the 676
purchase cardholders' monthly statements that we have reviewed thus far,
141, valued at nearly $1 million, were not signed by an approving official
indicating that the purchases were approved. We also noted that several of

Page 8 GAO- 01- 585T

the types of purchases made by Education employees were items that could be
used either for official business or for employees' personal needs,
including computers, software, cell phones, and internet service.
Education's own policy specifically lists computers as an item that should
not be purchased with government purchase cards.

In June 2000, the Department of Defense (DOD) issued a Fraud Alert
indicating that government purchase card use is increasing and along with
the increase in spending levels there has been an increase in card abuse.
Specifically, the Fraud Alert noted that some cardholders have conspired
with unscrupulous vendors, while others have relied on the naï¿½ve trust of
their supervisors who may have been negligent in their review of purchases.
DOD has identified several instances involving the fraudulent use of
government purchase cards.

During fiscal year 2000, Education employees made over $8 million in
purchases using their government purchase cards. Without proper review and
approval for these expenditures, the Department provides employees the
opportunity to improperly use the government charge cards without detection.

Page 9 GAO- 01- 585T

Sound internal controls also include creating and maintaining adequate
documentation providing a means to trace transactions back to their
origination – in other words, generating “audit trails.”
While audit trails are essential to auditors and system evaluators, they are
also necessary for day- to- day operation of the system because they allow
for the detection and systematic correction of errors that arise. The Joint
Financial Management Improvement Program's 4 Core Financial System
Requirements state that federal financial systems must provide certain
crucial audit trails, including trails to identify document input, change,
approval, and deletions by originator.

Education refers to some of its audit trails as “trigger logs.”
For some payments, Education has a trigger log for documenting changes made
to sensitive records, such as bank account routing numbers and payment
histories for grants and administrative payments to schools. However, the
Department lacks adequate trigger logs for other types of payments,
including payments for contracting, third party drafts, and purchase cards,
which according to Education totaled about $2 billion in fiscal year 2000.

4 JFMIP is a joint cooperative undertaking of the Office of Management and
Budget, the Department of the Treasury, the Office of Personnel Management,
and the General Accounting Office working with operating agencies to improve
financial management practices through the government. Agencies must follow
JFMIP's federal financial management systems requirements in order to meet
the requirements of the Federal Financial Management Improvement Act of
1996. Inadequate Audit

Trails

Page 10 GAO- 01- 585T

For example, changing a payee's mailing address or adding new vendors to the
list of authorized vendors are sensitive transactions that must be closely
controlled. Education officials acknowledged this weakness and told us that
they are currently developing and implementing more effective controls.

Rapid advances in information technology have highlighted the importance of
internal controls related to modern computer systems. We have reported
information systems security as a governmentwide high- risk area since 1997,
most recently in January 2001. 5 In the past, the Education IG and Ernst &
Young have reported serious information systems weaknesses. Later in my
testimony I will highlight the information systems weaknesses Ernst & Young
reported as part of the fiscal year 2000 financial statement audit. The
Department places significant reliance on its automated systems to perform
basic functions, such as making payments to grantees and maintaining budget
controls. Consequently, continued weaknesses in information systems controls
increases the risk of unauthorized access or disruption in services and make
Education's sensitive grant and loan data vulnerable to inadvertent or
deliberate

5 Major Management Challenges and Program Risks: A Governmentwide
Perspective, (GAO- 01- 241, January 2001). Inadequate

Information Systems' Application Controls

Page 11 GAO- 01- 585T

misuse, fraudulent use, improper disclosure, or destruction, which could
occur without being detected.

As part of our ongoing review, we identified control weaknesses related to
the automated payment system's computer applications. As discussed in our
Internal Control Standards, computer application controls help ensure that
transactions completed through computerized applications are valid, properly
authorized, and completely and accurately processed and reported.
Application controls include (1) programmed control techniques, such as
automated edits, and (2) manual follow- up of computer- generated reports,
such as reviews of reports identifying rejected or unusual items.

One such application control in Education's system is an edit indicating
that an invoice number had already been entered into the system, which is
designed to avoid duplicate payments. However, our review of one of
Education's procedure manuals disclosed that the Department has created a
procedure that allows employees to circumvent this control. This manual
instructs Education employees to add a suffix to the invoice/ voucher number
when the system indicates that an invoice number has already been used. For
example, if invoice number 123 has already been entered into the system, an
employee can add the letter “a” to this invoice number and issue
another third party draft or other payment mechanism related to the invoice.

Page 12 GAO- 01- 585T

During our work, we found that it is common practice for Education employees
to use multiple third party drafts to pay for purchases in excess of the
$10,000 limit imprinted on the blank drafts. Education officials told us
that they use multiple third party drafts to pay invoices greater than
$10,000 primarily as a matter of convenience. For example, when it is
necessary to research a transaction, Education officials told us that it is
more convenient to have their own check numbers and copies of the checks on
hand rather than having to review records of payments from Treasury. This
process of circumventing a key control, combined with the lack of
segregation of duties I described earlier, further exacerbates Education's
vulnerability to making improper payments. In addition, this negates the
control of limiting third party drafts to $10,000.

Another example of an application control weakness at Education is the
Department's failure to use computer generated management reports that are
currently available. For instance, Bank of America, Education's contractor
for government purchase cards, provides several management reports for
monitoring the card's usage. One report that we reviewed showed the Merchant
Category Codes 6 (MCC) used by each cardholder. Approving officials could
use this report to identify unusual or

6 The Merchant Category Code relates to the types of supplies or services
that a vendor provides. The MCC for the Government Purchase Card consists of
11 retail categories. Agencies have the ability to prohibit cardholders from
purchasing certain supplies or services by blocking specific MCCs.

Page 13 GAO- 01- 585T

unauthorized purchases. For instance, if a cardholder used his or her
government purchase card to obtain a cash advance, which is prohibited by
Education's policies, the MCC for this type of transaction would appear on
the report next to the cardholder's name. Further, Bank of America can block
specific MCCs to prohibit certain types of charges that are clearly not
business related such as purchases from amusement parks and movie theaters.
However, Education officials told us that they do not use this control
because the Department relies on Approving Official's review of the
cardholder's purchases.

The fact that Education does not review MCCs as a check on cardholder
transactions or block certain MCCs, is particularly significant given the
inconsistent supervisory review and the inherent risk of fraud and abuse
associated with of credit card purchases. Together, they mean that Education
is not using preventive measures at its disposal – through the review
of MCC codes or the blocking of certain purchases – or detective
measures – the review and approval of purchases. Thus, the risk of
improper payments is substantially increased.

Page 14 GAO- 01- 585T

Education's fiscal year 2000 audited financial statements were issued on
January 26, 2001, before the March 1, 2001, deadline, and Ernst & Young's
opinion on the financial statements improved over that of fiscal year 1999.
Ernst & Young issued a qualified opinion 7 on all five of the fiscal year
2000 required financial statements. For fiscal year 1999, Ernst & Young
issued qualified opinions on four of Education's financial statements and a
disclaimer 8 on the Statement of Financing. Ernst & Young also reported that
Education continued to have serious internal control and financial
management systems weaknesses. Ernst & Young reported the following reasons
for the qualification of its audit opinion:

During fiscal year 2000, significant financial management weaknesses
continued to impair Education's ability to accumulate, analyze, and present
reliable financial information. Extensive manual adjustments enabled
Education to partially compensate for, but did not correct, certain aspects
of the material weaknesses in its financial reporting process.

? Education was unable to provide adequate documentation to support certain
amounts reported in net position included in the consolidated

7 Such an opinion is expressed when (1) there is a lack of sufficient
competent evidential matter or there are restrictions on the scope of the
audit that have led the auditor to conclude that he or she cannot express an
unqualified opinion and he or she has concluded not to disclaim an opinion
or (2) the auditor believes, on the basis of his or her audit, that the
financial statements contain a departure from generally accepted accounting
principles, the effect of which is material, and he or she has concluded not
to express an adverse opinion.

8 A disclaimer of opinion is expressed when the auditor is unable to obtain
satisfaction that the financial statement is fairly presented and does not
express an opinion. Fiscal Year 2000

Financial Statement Audit

Page 15 GAO- 01- 585T

balance sheet, and Ernst & Young was unable to perform other audit
procedures to satisfy themselves that the net position amount was correct.

? Education inconsistently processed certain transactions related to prior
years as fiscal year 2000 activity and was unable to provide Ernst & Young
with adequate documentation that these manual transactions were properly
reflected in the appropriate period.

In addition, Ernst & Young's report on internal controls for fiscal year
2000 included three material internal control weaknesses 9 -all long-
standing from prior years. For the purposes of financial statement
preparation, internal controls are to provide reasonable assurance that the
financial results reported are reliable, the agency is in compliance with
laws and regulations, and performance reporting is reliable. When the design
of internal controls is weak, errors, fraud, or noncompliance with laws and
regulations may occur that elevate the weakness to a material internal
control weakness.

The specific material internal control weaknesses cited by Ernst & Young for
fiscal year 2000 were (1) weaknesses in the financial reporting process, (2)
inadequate reconciliations of financial accounting records, and

9 A material internal control weakness is used to describe a condition where
an agency's internal controls do not reduce to a relatively low level the
risk that errors, fraud, or noncompliance involving significant amounts may
occur and may not be detected within a timely period by employees in the
normal course of performing their assigned functions.

Page 16 GAO- 01- 585T

(3) inadequate controls over information systems. Specifically, Ernst &
Young reported that:

? Education did not have adequate internal controls over its financial
reporting process. Its general ledger system was not able to directly
produce consolidated financial statements as would normally be expected from
such systems. Because of this weakness, Education once again had to resort
to a costly, labor- intensive, and time- consuming process involving manual
and automated procedures to prepare financial statements for fiscal year
2000 as it had in previous years.

? Again, similar to previous years, Education did not properly or promptly
reconcile its financial accounting records throughout fiscal year 2000 and
could not provide sufficient documentation to support some of its financial
transactions, specifically entries to correct prior year errors. In some
instances, Education adjusted its general ledger to reflect the balance in
its subsidiary records, without sufficiently researching the cause for
differences.

? Furthermore, Education was not able to identify and resolve differences
between its accounting records and cash transactions reported by the
Treasury for the past several years. Reconciling agencies' accounting
records with relevant Treasury records is required by Treasury policy and is
analogous to individuals reconciling their checkbooks to monthly bank

Page 17 GAO- 01- 585T

statements. Because most assets, liabilities, revenues, and expenses stem
from or result in cash transactions, errors in the receipt or payment data
affect the accuracy of the individual agency financial reports and various
U. S. government financial reports, including data provided by agencies for
inclusion in the President's Budget concerning fiscal year outlays. Further,
the lack of effective reconciliations increases the risk of fraud, waste,
abuse, and mismanagement of government funds.

? Ernst & Young's report discussed the seriousness of Education's computer
systems weaknesses. Ernst & Young found that Education had not completed its
corrective action plan to ensure that all mission critical systems had
adequate security plans and that corrective actions were taken to mitigate
known exposures. Additionally, Education had information systems control
deficiencies in (1) monitoring and reviewing access to sensitive computer
resources, (2) implementing a system software change management process, and
(3) developing and testing a comprehensive disaster recovery plan to ensure
the continuity of critical system operations in the event of disaster.

As a result, it took a lot of hard work by Education staff and costs for
contractor assistance to develop the information needed for financial
statements that were issued 4 months after the end of the fiscal year;
information that should be but is not routinely available. Education needs

Page 18 GAO- 01- 585T

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 program and congressional decisionmakers make timely,
well- informed judgements for day- to- day management and oversight. This is
what the Congress was seeking when it enacted the Chief Financial Officers
Act of 1990 and other financial reform legislation. While an unqualified
audit opinion is an important milestone, it is not the end goal.

Obtaining an unqualified audit opinion must be combined with sustained
efforts to improve underlying financial management systems and controls. As
the Comptroller General testified on March 30, 2001, 10 if agencies (such as
Education) continue year after year to rely on significant, costly and time-
intensive manual efforts to achieve or maintain unqualified opinions without
such improvements, it can serve to mislead the Congress and the public as to
the true status of agencies' financial management capabilities. In such a
case, an unqualified opinion would become an accomplishment without much
substance. As we look ahead, it will be essential for Education to
strengthen its financial reporting to make more meaningful information
available to the Congress, other policymakers, and the American public.

10 U. S. Government Financial Statements: FY 2000 Reporting Underscores the
Need to Accelerate Federal Financial Management Reform (GAO- 01- 570T, March
30, 2001).

Page 19 GAO- 01- 585T

To summarize, internal control and financial management weaknesses at
Education are not new. Last year we testified three times about the
financial management challenges faced by Education and the need to eliminate
internal control weaknesses to reduce the potential for fraud, waste, and
abuse at the Department 11 and Ernst & Young and the IG have reported
serious internal control problems. Our ongoing work is showing that
Education in several cases is not taking advantage of available means to use
or improve its controls over the review, approval, issuance and recording of
payments. In addition, the most recent financial statement audit disclosed
continuing serious weaknesses over (1) the financial reporting process, (2)
inadequate reconciliations of financial accounting records, and (3)
inadequate controls over information systems. Until Education is able to
correct its serious internal control and system deficiencies, it will be
hindered in its ability to achieve lasting financial management
improvements. As a result, it will continue to face an increased risk of
improper payments.

In the next phase of our work, we will be employing various computerized
techniques, referred to as “forensic auditing” techniques, to
identify data

Page 20 GAO- 01- 585T

anomalies that may be indicative of improper payments. These techniques
include data base searches, file comparisons and computer matches, and other
analyses to identify unusual transactions and unusual payment patterns.
Using this approach we can identify questionable payments – for
example payments to closed schools or to individuals with invalid social
security numbers. We will research and, as needed, investigate any
questionable payments to determine whether they represent simple data errors
or are in fact improper payments or even fraud. We will be in a position to
report to you on the results of this work sometime this summer.

In closing, Mr. Chairman, I want to underscore the importance of Education's
top management giving priority to (1) addressing the problems preventing the
auditors from being able to express an unqualified opinion on Education's
financial statements, (2) having effective internal control, and (3)
modernizing financial management systems.

Finally, I want to reiterate the value of sustained Congressional interest
in these issues, as demonstrated by this hearing and those you have held in
the past to oversee financial management reform at Education. Your work 11
Financial Management: Education Faces Challenges in Achieving Financial
Management Reform (GAO/ T- AIMD- 00- 106, March 1, 2000), Financial
Management: Education's Financial Management Problems Persist (GAO/ T- AIMD-
00- 180, May 24, 2000), and Financial Management: Financial Management
Challenges Remain at the Department of Education (GAO/ T- 00- AIMD- 00- 323,

September 19, 2000).

Page 21 GAO- 01- 585T

and that of the Committee over the past years to facilitate management
improvements at Education have been a catalyst to the progress we have seen
to date and will be critical to ultimately solving the Department's serious
long- standing internal control and financial management systems weaknesses.

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

For information about this statement, please contact Linda Calbom, Director,
Financial Management and Assurance, at (202) 512- 9508 or at calboml@ gao.
gov. Individuals making key contributions to this statement

include Dan Blair, Anh Dang, Bonnie Derby, Cheryl Driscoll, Cary Frye, Kelly
Lehr, Bonnie McEwan, Diane Morris, Brooke Whittaker, Doris Yanger, and Maria
Zacharias.

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