U.S. OFFICE OF SPECIAL COUNSEL TRANSMITS REPORT OF INVESTIGATION IN RESPONSE TO WHISTLEBLOWER'S ALLEGATIONS OF GROSS MISMANAGEMENT AT THE U.S. DEPARTMENT OF EDUCATION

FOR IMMEDIATE RELEASE - 1/31/01
CONTACT: JANE MCFARLAND
(202) 653-7984          

    The U.S. Office of Special Counsel (OSC) today transmitted to the President and the Congress, an investigative report from the U.S. Department of Education (Education), into whistleblower allegations of violations of law, rule, or regulation, gross mismanagement, a gross waste of funds, and an abuse of authority at the Department of Education, in Washington, D.C. 

    The agency’s report of investigation addressed allegations made to OSC by Mr. John Gard, a Systems Accountant in the Office of the Chief Financial Officer (OCFO) at the agency. Mr. Gard alleged, among other things, that the OCFO has failed to properly account for billions of dollars of Federal grant money. He alleged that the grantee payment arm of the agency’s new financial management system, known as the Grants Administration and Payment System (GAPS), implemented in late 1997, does not contain proper internal and external security controls, audit trails, or accounting functions. As a result, Mr. Gard alleged, Education has been unable to fully account for grant monies, audit its accounts, or produce financial statements necessary for year-end reconciliations. 

    OSC reviewed Mr. Gard’s allegations and determined that they established a substantial likelihood that violations of law, gross mismanagement, a gross waste of funds, and an abuse of authority had occurred in OCFO. Accordingly, pursuant to its statutory authority, OSC referred the matter to The Honorable Richard Riley, former Secretary of Education, for an investigation.

    The agency’s report partially substantiates Mr. Gard’s allegations, which had already been investigated independent of the OSC referral by, among others, Education’s Office of Inspector General (OIG). According to the report, Education has addressed most of the concerns raised by the OIG regarding GAPS, and is currently addressing additional concerns raised by the General Accounting Office and the agency’s independent financial statement auditor. 

    Education’s report included a GAO review of its use of a deposit fund known as the grantback account. GAO issued a report critical of the agency’s financial management system and manual internal controls over grantback activity and related funds control. The GAO report found that financial management system deficiencies, inadequate systems of funds control, and manual internal control weaknesses continued to exist in the OCFO, creating an increased risk of fraud, waste, and mismanagement. 

    The Education report concluded that while it did identify violations of federal financial management laws, Mr. Gard’s allegations did not rise to the level of “gross mismanagement,” a gross waste of funds, or an abuse of authority, in part because it did not act in deliberate disregard of known deficiencies. In transmitting the report, the Special Counsel noted her disagreement with the agency’s legal conclusion. She observed that the agency’s failure to maintain adequate accounting controls, to produce auditable financial statements, and to account for billions of taxpayer dollars, suggests management action or inaction that has created a substantial risk of significant adverse impact upon the agency’s ability to accomplish its mission. 

    Among its other functions, the Office of Special Counsel provides federal employees with a secure channel for blowing the whistle on violations of law, rule, or regulation, gross mismanagement or waste of funds, an abuse of authority, or a substantial and specific danger to public health and safety. The OSC is empowered to require agencies to conduct investigations whenever it finds a substantial likelihood that a federal employee’s disclosures demonstrate the existence of one of these conditions, and to report back to the OSC its findings along with any corrective action taken. After the OSC reviews the report to insure that it contains the necessary information and that its findings appear reasonable, the OSC transmits the report to the President and the Congress for further action, if appropriate.

    Copies of the Department’s report, Mr. Gard’s comments, and Special Counsel Elaine Kaplan’s transmittal letter may be obtained by contacting the OSC.
                                                                                                            

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