Financial Management: Poor Internal Control Exposes Department of Education to Improper Payments

GAO-01-997T Published: Jul 24, 2001. Publicly Released: Jul 24, 2001.
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GAO and the Department of Education's Office of Inspector General have issued many reports in recent years on the Department's financial management problems, including internal control weaknesses that put the Department at risk for waste, fraud, abuse, and mismanagement. In an April 2001 assessment of the internal control over Education's payment processes and the associated risks for improper payments, GAO identified four broad categories of internal control weaknesses: poor segregation of duties, lack of supervisory review, inadequate audit trails, and inadequate computer systems' applications controls. This testimony discusses how these weaknesses make Education vulnerable to improper payments in grant and loan payments, third party drafts, and government purchase card purchases. GAO found that Education's student aid application processing system for grants and loans lacks an automated edit check that would identify potentially improper payments from students who were much older than expected, a single social security number associated with two or more dates of birth, grants to recipients in excess of statutory limits, and searches for invalid social security numbers. GAO also found problems with Education's third party draft system. Specifically, Education (1) circumvented a system's application control designed to avoid duplicate payments by adding a suffix to the invoice/voucher number when the system indicates that an invoice/voucher number has already been used; (2) allowed 21 of the 49 Education employees who could issue third party drafts to do so without involving anyone else; and (3) lacked adequate audit trails, such as a trigger log, to identify changes made to the list of approved vendors. GAO also found shortcomings with Education's internal controls over government purchase cards.

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