THE AMOUNT OF FEDERAL MONEY LOST THROUGH FRAUD AND WASTE HAS NOT BEEN DOCUMENTED, BUT ESTIMATES RUN INTO THE BILLIONS. WIDESPREAD FRAUD, WASTE, AND ABUSE HAVE BEEN REPORTED IN THE VETERANS ADMINISTRATION, THE SMALL BUSINESS ADMINISTRATION, THE AGRICULTURE DEPARTMENT, THE HOUSING AND URBAN DEVELOPMENT DEPARTMENT, AND THE LABOR DEPARTMENT. THE GREATEST LOSSES, HOWEVER, HAVE OCCURRED IN THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE (HEW). IN 1976, CONGRESS ESTABLISHED AN INSPECTOR GENERAL'S OFFICE IN HEW, WITH THE RESPONSIBILITY OF CONDUCTING INDEPENDENT INVESTIGATIONS OF FRAUD, WASTE, AND ABUSE. THE INSPECTOR GENERAL'S FIRST ANNUAL REPORT REVEALED HEW FRAUD, WASTE, AND ABUSE FROM $6.3 BILLION TO $7.4 BILLION. HEW HAS PLEDGED TO SAVE $1.1 BILLION IN FISCAL 1979 THROUGH ATTACKS ON FRAUD, WASTE, AND ABUSE. ABOUT HALF THE SAVINGS ($530 MILLION) IS EXPECTED TO COME FROM MEDICARE AND MEDICAID, WHERE FRAUD AND MISMANAGEMENT HAVE CREATED HUGE LOSSES. HEW SUBSIDIES SINCE 1977 FOR STATES TO INSTALL MEDICAID MANAGEMENT INFORMATION SYSTEMS TO RUN COMPUTER CHECKS ON FRAUD HAVE HELPED IN THE EFFORT. EFFORTS WILL ALSO BE MADE TO COLLECT STUDENT EDUCATION LOANS IN DEFAULT AND REDUCE THE AMOUNT OF GRANTS AND LOANS GOING TO INELIGIBLES. THROUGH A NEW COMPUTER SYSTEM, STUDENTS ARE SENT REGULAR MONTHLY BILLS, AND SERIOUSLY DELINQUENT ACCOUNTS ARE GIVEN TO COLLECTION AGENCIES. THIS HAS HELPED REDUCE THE NUMBER OF ACCOUNTS IN DEFAULT FROM 400,000 TO 300,000. ENCOURAGED BY THE SUCCESSES OF THE INSPECTOR GENERAL AT HEW, CONGRESS RECENTLY ESTABLISHED INSPECTOR GENERAL OFFICES IN 12 OTHER FEDERAL AGENCIES. TWO PHOTOGRAPHS ARE INCLUDED. (RCB)