THREE MAJOR ACTIVITIES--AUDIT, INVESTIGATIONS, AND SYSTEMS REVIEW--ARE IDENTIFIED, EACH WITH ITS OWN WORK PROGRAM. THE INSPECTOR GENERAL'S OFFICE SERVES AS A LEADER AND CATALYST IN ASSEMBLING JOINT TEAMS OF MIXED DISCIPLINES TO ATTACK PROBLEMS. OPERATIONS SHOULD BE HIGHLY DECENTRALIZED WITH AN EFFECTIVE COMMUNICATIONS SYSTEM. THE REPORT HIGHLIGHTS THE ACTIVITIES AND KEY FINDINGS OF SEVEN AREAS OF ACTIVITY: (1) PUTTING LOSSES DUE TO FRAUD, ABUSE AND ERROR INTO PERSPECTIVE; (2) HIGHLIGHTS OF 1978 AUDIT EFFORTS; (3) HIGHLIGHTS OF THE OFFICE OF INVESTIGATIONS AND OTHER FRAUD INVESTIGATION AGENCIES; (4) INITIATIVES TO ATTACK FRAUD, ABUSE AND ERROR IN HEALTH CARE FINANCING PROGRAMS; IN INCOME MAINTENANCE PROGRAMS; AND IN THE STUDENT FINANCIAL ASSISTANCE PROGRAMS; AND (5) OIG ACTIVITIES RELATED TO CONTRACTS AND DISCRETIONARY GRANTS. THE 18 APPENDIXES PROVIDING SUPPORTIVE INFORMATION INCLUDE TABLES, PROJECT SUMMARIES, ANALYSES, AND AUDITS. (TAG)