Financial Management: Financial Management Challenges Remain at the
Department of Education (Testimony, 09/19/2000, GAO/T-AIMD-00-323).

Pursuant to a congressional request, GAO discussed financial management
at the Department of Education, focusing on: (1) Eduction's current
financial management status as evidenced by its fiscal year (FY) 1999
financial audit results and the corrective actions it has taken to
resolve weaknesses identified in that audit; and (2) the relationship
between the audit findings and the potential for waste, fraud, and
abuse.

GAO noted that: (1) Eduction's financial activity is important to the
federal government because Education is the primary agency responsible
for overseeing the more than $75 billion annual federal investment in
support of educational programs for U.S. citizens and eligible
noncitizens; (2) Education is also responsible for collecting about $175
billion owed by students; (3) in FY 1999, more than 8.1 million students
received over $53 billion in federal student financial aid through
programs administered by Education; (4) Education's stewardship over
these assets has been under question as the agency has experienced
persistent financial management weaknesses; (5) beginning with its first
agencywide financial audit effort in FY 1995, Education's auditors have
each year reported largely the same serious internal control weaknesses,
which have affected Education's ability to provide reliable financial
information to decision makers both inside and outside the agency; (6)
to the extent that Education was able to improve on its financial
statements for FY 1999, it was generally the result of: (a)
time-consuming manual procedures; (b) various automated tools to "work
around" the system's inability to close the books and generate financial
statements; and (c) reliance on external consultants to assist in the
preparation of additional reconciliations and the financial statements;
(7) this approach does not produce the timely and reliable financial and
performance information Education needs for decision making on an
ongoing basis, which is the desired result of the Chief Financial
Officers Act of 1990; (8) Education continues to have serious internal
control and system deficiencies that hinder its ability to achieve
lasting financial management improvements; (9) the internal control
weaknesses need to be addressed to reduce the potential for waste,
fraud, and abuse; (10) some of the vulnerabilities identified in the
audit report include weaknesses in the financial reporting process,
inadequate reconciliations of financial accounting records, information
systems weaknesses, and property management weaknesses; (11) in response
to the Inspector General's report, Education has developed a corrective
action plan to address these weaknesses; and (12) vulnerabilities in
Education's student financial assistance programs have led GAO since
1990 to designate this a high-risk area for waste, fraud, abuse, and
mismanagement.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-AIMD-00-323
     TITLE:  Financial Management: Financial Management Challenges
	     Remain at the Department of Education
      DATE:  09/19/2000
   SUBJECT:  Financial management
	     Financial statement audits
	     Reporting requirements
	     Student financial aid
	     Internal controls
	     Federal agency accounting systems
IDENTIFIER:  Federal Family Education Loan Program
	     Dept. of Education Central Automated Processing System
	     ILOVEYOU Computer Virus

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GAO/T-AIMD-00-323

   * For Release on Delivery
     Expected at
   * 9:30 a.m.

Tuesday,

September 19, 2000

GAO/T-AIMD-00-323

financial management

Financial Management Challenges Remain at the Department of Education

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Statement of Gloria L. Jarmon

Director, Health, Education, and Human Services Accounting and Financial
Management Issues

Accounting and Information Management Division

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[0x08 graphic]

Testimony

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

United States General Accounting Office

GAO

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Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss (1) the Department of Education's
current financial management status as evidenced by its fiscal year 1999
financial audit results and the corrective actions it has taken to resolve
weaknesses identified in that audit and (2) the relationship between the
audit findings and the potential for waste, fraud, and abuse. Much of the
testimony today reflects my May 24, 2000, testimony on these issues.

The Department's financial activity is important to the federal government
because Education is the primary agency responsible for overseeing the more
than $75 billion annual federal investment in support of educational
programs for U.S. citizens and eligible noncitizens. The Department is also
responsible for collecting about $175 billion owed by students. In fiscal
year 1999, more than 8.1 million students received over $53 billion in
federal student financial aid through programs administered by Education.

The Department's stewardship over these assets has been under question as
the agency has experienced persistent financial management weaknesses.
Beginning with its first agencywide financial audit effort in fiscal year
1995, Education's auditors have each year reported largely the same serious
internal control weaknesses, which have affected the Department's ability to
provide reliable financial information to decisionmakers both inside and
outside the agency.

Background

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Federal decisionmakers need reliable and timely financial management
information to ensure adequate accountability, manage for results, and make
timely and well-informed decisions. However, historically, such financial
management information has not been available across the government. Agency
Inspector General (IG) reports, independent public accountants' reports, and
our own work have identified persistent limitations in the availability of
quality financial data for decision-making. Audits have shown that federal
financial management is in serious disrepair, which results in incorrect
financial information being provided to the Congress and the administration.
Without reliable financial information, government leaders do not have the
full facts necessary to make investments of scarce resources or direct
programs. Creating a government that runs more efficiently and effectively
has been a public concern for decades.

Over the past 10 years, dramatic changes have occurred in federal financial
management in response to the most comprehensive management reform
legislation of the past 40 years. The combination of reforms ushered in by
(1) the Chief Financial Officers (CFO) Act of 1990, (2) the Government
Management Reform Act of 1994, (3) the Federal Financial Management
Improvement Act (FFMIA) of 1996, (4) the Government Performance and Results
Act (GPRA) of 1993, and (5) the Clinger-Cohen Act of 1996 will, if
successfully implemented, provide the necessary foundation to run an
effective, results-oriented government. Efforts to continue to build the
foundation for generating accurate financial information through lasting
financial management reform are essential. Only by generating reliable and
useful information can the government ensure adequate accountability to
taxpayers, manage for results, and help decisionmakers make timely,
well-informed judgments.

Education's fiscal year 1999 audit was conducted by Ernst & Young LLP,
independent auditors contracted for by the Education Inspector General. We
reviewed the independent auditors' reports and workpapers. We also
interviewed Education officials to obtain the status of corrective actions
and reviewed available corrective action plans. We shared a draft of this
statement with Education officials, who provided technical comments. We have
incorporated their comments where appropriate. Our work was conducted in
accordance with generally accepted government auditing standards.

Fiscal Year 1999 Audit Results

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The Office of Management and Budget's (OMB) implementation guidance for
audited financial statements requires the 24 CFO Act agencies to receive
three reports from their auditors annually: (1) an opinion or report on the
agencies' financial statements, (2) a report on the agencies' internal
controls, and (3) a report on the agencies' compliance with laws and
regulations. As of August 2000, 15 of the 24 CFO Act agencies had received
clean or unqualified opinions on their fiscal year 1999 financial
statements. The Department of Education did not receive such an opinion
because of its financial management weaknesses.

Report on the Financial Statements

While Education's financial staff and its contractors worked very hard to
prepare Education's fiscal year 1999 financial statements before the
March 1, 2000, deadline, and the auditors' opinion on the financial
statements improved over that of fiscal year 1998, serious internal control
and financial management systems weaknesses continued to plague the agency.
For fiscal year 1999, Education made significant efforts to work around
these weaknesses and produce financial statements. These efforts enabled its
auditors to issue qualified opinions on four of its five required financial
statements and a disclaimer on the fifth statement. Its auditors' qualified
opinion states that except for the effect of the matters to which the
qualification relates, the financial statements present fairly, in all
material respects, financial position, net costs, changes in net position,
and budgetary resources in conformity with generally accepted accounting
principles. The auditors stated the following reasons or matters for their
qualification:

   * The Department had significant systems weaknesses during fiscal year
     1999 affecting its financial management systems. The new accounting
     system, implemented in fiscal year 1998, had several limitations,
     including an inability to perform a year-end closing process or produce
     automated consolidated financial statements. Through its efforts and
     those of its contractors, Education was able to partially compensate
     for, but did not correct, certain aspects of the material weaknesses in
     its financial reporting process. In addition, during fiscal year 1999,
     Education experienced significant turnover of financial management
     staff, which also contributed to the overall weakness in financial
     reporting.
   * Education was unable to provide adequate support for about $800 million
     reported in the September 30, 1999, net position balance in its
     financial statements, and the auditors were unable to perform other
     audit procedures to satisfy themselves that this amount was correct.
   * Education processed many transactions from prior fiscal years as fiscal
     year 1999 transactions and manually adjusted its records in an effort
     to reflect the transactions in the proper period; however, the auditors
     could not determine if these adjustments for certain costs and
     obligations were correct.
   * The auditors were unable to determine whether beginning balances for
     accounts payable and related accruals were accurate.

In addition, the auditors did not issue an opinion (referred to as a
disclaimer of an opinion) on the Department's Statement of Financing. The
Statement of Financing provides a reconciliation or translation from the
budget to the financial statements. The statement is intended to help those
who work with the budget to understand the financial statements and the cost
information they provide. The auditors stated that the reason for this
disclaimer was that the Department did not perform adequate reconciliations
and present support for amounts on the Statement of Financing in a timely
manner.

To the extent that Education was able to improve the opinion it received on
its financial statements for fiscal year 1999, it was generally the result
of (1) time-consuming manual procedures, (2) various automated tools to work
around the system's inability to close the books and generate financial
statements, and (3) reliance on external consultants to assist in the
preparation of additional reconciliations and the financial statements. This
approach does not produce the timely and reliable financial and performance
information Education needs for decision-making on an ongoing basis, which
is the desired result of the CFO Act.

Report on Internal Controls

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The Department also receives annually from its auditors a report on internal
controls. This report is significant for highlighting the agency's internal
control weaknesses that increase its risk of mismanagement that can
sometimes result in waste, fraud, and abuse. In this report for fiscal year
1999, the Department's auditors reported four material internal control
weaknessesthree continuing from fiscal year 1998 and one additional one for
fiscal year 1999and that long-standing internal control weaknesses persist.

The specific material internal control weaknesses cited by the independent
auditors for fiscal year 1999 were (1) weaknesses in the financial reporting
process, (2) inadequate reconciliations of financial accounting records, and
(3) inadequate controls over information systems. The independent auditors
also identified a new material internal control weakness related to
accounting for certain loan transactions. Summaries of the material internal
control weaknesses follow:

   * Education did not have adequate internal controls over its financial
     reporting process. Its general ledger system was not able to perform an
     automated year-end closing process and directly produce consolidated
     financial statements as would normally be expected from such systems.
     Because of these weaknesses, Education had to resort to a costly,
     labor-intensive, and time-consuming process involving manual and
     automated procedures to prepare financial statements for fiscal year
     1999. In addition, Education had to rely heavily on contractor services
     to help perform reconciliations among the various data sources used. In
     one instance, Education reported a balance of approximately $7.5
     billion for its cumulative results of operations. However, the majority
     of this amount, which pertains to the Federal Family Education Loan
     Program (FFELP), should have been reported as a payable to Treasury
     rather than as cumulative results of operations. As a result of the
     independent auditors' work, an adjustment was made to reclassify the
     $7.5 billion to the proper account. When such errors occur and are not
     detected by the Department's controls, there are increased risks that
     the Department could retain funds inappropriately that should be
     returned to Treasury.

In response to the auditors' findings, Education officials told us that they
have developed an implementation plan for the replacement of the general
ledger system. The officials further stated that Education had purchased a
new general ledger system and completed all the planned corrective actions
in response to the auditors' recommendations related to financial reporting
weaknesses. However, this new general ledger system will not be fully
implemented for fiscal year 2000, and Education will continue to work around
the system to produce consolidated financial statements. Education officials
said that the Department plans to fully implement the new general ledger
system by August 2001 and to eliminate the current general ledger system by
January 2002. To facilitate the fiscal year 2000 consolidated audit,
Education officials told us they prepared and analyzed interim financial
statements as of March 31, 2000, and June 30, 2000.

   * Education again did not properly or promptly reconcile its financial
     accounting records during fiscal year 1999 and could not provide
     sufficient documentation to support some of its financial transactions.
     Weaknesses in the Department's internal controls over the
     reconciliation process prevented timely detection and correction of
     errors in its underlying accounting records. In some instances,
     Education adjusted its general ledger to reflect the balance per the
     subsidiary records, without sufficiently researching the cause for
     differences. Also, as indicated in prior audits, Education has not been
     able to identify and resolve differences between its accounting records
     and cash transactions reported by the Treasury. For example, for fiscal
     year 1999, Education adjusted its Fund Balance with Treasury, due to a
     difference between its general ledger and the Treasury, by a net amount
     of about $244 million. Reconciling agencies' accounting records with
     relevant Treasury records is required by Treasury policy and is
     analogous to individuals reconciling their checkbooks to monthly bank
     statements. In another instance, as we recently reported, Education
     used its grantback account as a suspense account beginning in 1993 for
     hundreds of millions of dollars of activity related to grant
     reconciliation efforts. We also reported that Education did not
     maintain adequate detailed records for certain grantback account
     activity by the applicable fiscal year and appropriation. In addition,
     Education used the grantback account to clear unreconciled differences
     in various grant appropriation fund balance accounts and adjust certain
     appropriation fund balances to ensure that they did not become
     negative.

In response to the auditors' findings, Education has purchased a software
tool to help enhance its ability to reconcile its account balances with the
corresponding Treasury account balances on a monthly basis. Education has
also developed web-based policies and procedures for reconciling the
Department's material accounts and programs.

During fiscal year 1999, Education did not properly account for its funds
disbursed under FFELP. Specifically, it did not return about $2.7 billion in
net collections specific to its liquidating account to Treasury as required
by the Credit Reform Act of 1990. The liquidating account is used to record
transactions for loans originated prior to fiscal year 1992. Any unobligated
balances in this account at fiscal year end are unavailable for obligations
in subsequent fiscal years and must be transferred to the general fund.
Further, Education did not sufficiently analyze the balances reflected on
the financial statements to ensure that the FFELP balances agreed with
relevant balances in the Department's budgetary accounts. The auditors
stated that this situation resulted in an unexplained difference of about
$700 million between the FFELP Fund Balance with Treasury account and
related budgetary accounts as of September 30, 1999. By not properly
accounting for and analyzing its FFELP transactions as required by the
Federal Credit Reform Act of 1990, Education could not be assured that its
financial or budgetary reports were accurate.

Education returned the $2.7 billion to the Treasury in February 2000. The
Department also established policies and procedures to ensure compliance
with the Credit Reform Act.

   * Education had information systems control deficiencies in
     (1) implementing user management controls, such as procedures for
     requesting, authorizing, and revalidating access to computing
     resources, (2) monitoring and reviewing access to sensitive computer
     resources,
     (3) documenting the approach and methodology for the design and
     maintenance of its information technology architecture, and
     (4) developing and testing a comprehensive disaster recovery plan to
     ensure the continuity of critical system operations in the event of
     disaster. The Department places significant reliance on its financial
     management systems to perform basic functions, such as making payments
     to grantees and maintaining budget controls. Consequently, continued
     weaknesses in information systems controls increase the risk of
     unauthorized access or disruption in services and make Education's
     sensitive grant and loan data vulnerable to inadvertent or deliberate
     misuse, fraudulent use, improper disclosure, or destruction, which
     could occur without being detected.

According to Education officials, the Department has developed and
implemented a formal approach and methodology for designing and maintaining
an entity-wide security program technology architecture and has updated its
security policies and procedures for its financial management system to
ensure that changing system security needs are reflected, access
authorizations are documented, and access rights are revalidated
periodically. The Department has developed a disaster recovery plan for
Education's Central Automated Processing System (EDCAPS), the accounting
system implemented by the Department in fiscal year 1998.

Our work in this area has shown that other agencies have improved their
financial audit report results but are also facing material internal control
weaknesses. A number of other agencies have focused their efforts primarily
on trying to develop short-term stop-gap measures designed to produce
year-end balances rather than on the fundamental solutions that are needed
to address the management challenges they face. As a result, these agencies
continue to experience pervasive material weaknesses in the design and
operation of their financial management and related operational systems,
accounting procedures, documentation, recordkeeping, and internal controls,
including computer security controls. Consequently, these agencies rely on
costly, time-consuming ad hoc procedures to determine year-end balances.
This approach does not produce the timely and reliable financial and
performance information needed for decision-making on an ongoing basis. This
approach is also inherently incapable of addressing the underlying financial
management and operational issues that adversely affect these agencies'
ability to fulfill their missions.

Report on Compliance With Laws and Regulations

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The third report that the auditors issue annually is a report on agency
compliance with laws and regulations. Specifically, the Department's
auditors reported that it was not in full compliance with three laws as
noted below.

   * For fiscal year 1999, the independent auditors found that Education was
     not in compliance with FFMIA because it lacked adequate, integrated
     financial management systems, reports, and oversight to prepare timely
     and accurate financial statements. Many agencies have significant
     financial management systems weaknesses, and, in fiscal year 1999, 21
     of 24 agencies' systems did not comply with FFMIA. However, it is
     imperative that these problems be resolved so that agencies can produce
     needed financial information on a day-to-day basis in a timely and
     accurate manner. FFMIA requires that agency financial management
     systems substantially comply with (1) federal financial management
     systems requirements, (2) federal accounting standards, and (3) the
     U.S. Government Standard General Ledger at the transaction level.
   * The Department had neither fully implemented a capital planning and
     investment process nor performed an assessment of the information
     resource management knowledge and skills of agency personnel, including
     a plan to correct identified deficiencies, as required by the
     Clinger-Cohen Act of 1996. A key goal of the Clinger-Cohen Act is that
     agencies should have processes and information in place to help ensure
     that information technology (IT) projects are being implemented at
     acceptable costs and within reasonable and expected time frames and
     that they are contributing to tangible, observable improvements in
     mission performance. By not fully implementing the plans called for
     under the act, Education was not maximizing the value and assessing and
     managing the risks of its IT investments.

Education officials told us that the Department has since established an
Investment Review Board that assesses information technology investments.

   * The Department did not transfer its excess funds related to FFELP,
     specifically the $2.7 billion of net collections previously mentioned,
     to Treasury as required by the Federal Credit Reform Act of 1990.

Education officials stated that they believe the noncompliance with the
Credit Reform Act issue will be resolved for the fiscal year 2000 audit
because they have developed and implemented policies and procedures to
respond to this issue.

Potential for Fraud, Waste, and Abuse

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Education continues to have serious internal control and system deficiencies
that hinder its ability to achieve lasting financial management
improvements. The internal control weaknesses discussed above and in more
detail in the auditors' report need to be addressed to reduce the potential
for waste, fraud, and abuse in the Department. Some of the vulnerabilities
identified in the audit report include weaknesses in the financial reporting
process, inadequate reconciliations of financial accounting records,
information systems weaknesses, and property management weaknesses. Specific
examples of vulnerabilities related to these weaknesses follow:

   * The material internal control weakness related to financial reporting
     highlights the fact that managers do not receive accurate and timely
     financial information, such as information on disbursements made and
     amounts collected, that could be used to identify unusual activity and
     other anomalies.
   * Some of the known duplicate payments mentioned by the auditors in their
     report on internal controls could have been identified earlier if
     proper reconciliations had been performed. The auditors stated that the
     Department has procedures in place that should detect duplicate
     payments and correct them within a reasonable time frame. We have not
     reviewed these procedures.
   * The auditors stated that because the Department has not developed
     formal policies and procedures to reconcile grant expenditures between
     its payments system and its general ledger system, there is increased
     risk that material errors or irregularities could occur and not be
     detected on a timely basis. This is significant because the volume of
     grant transactions is over $30 billion per year.

In response to this issue, Education has developed policies and procedures
to reconcile grant expenditures to the general ledger.

   * The information systems weaknesses highlight some of the computer
     security vulnerabilities, such as the lack of an effective process to
     monitor security violations on all critical systems of the Department.
     Information systems control weaknesses increase the risk of
     unauthorized access or disruption in services and make Education's
     sensitive grant and loan data vulnerable to inadvertent or deliberate
     misuse, fraudulent use, improper disclosure, or destruction, which
     could occur without being detected. A report issued by the Department's
     Inspector General in February emphasizes the need for the Department to
     focus on addressing its computer security vulnerabilities. In addition,
     earlier this year, the White House recognized the importance of
     strengthening the nation's defenses against threats to public and
     private sector information systems that are critical to the country's
     economic and social welfare when it issued its National Plan for
     Information Systems Protection. In the aftermath of the recent attack
     by the ILOVEYOU virus, which disrupted operations at large
     corporations, governments, and media organizations worldwide, we
     recently testified about the need for federal agencies to promptly
     implement a comprehensive set of security controls. We also recently
     reportedon the results of information security audits at federal
     agencies that show that federal computer systems are riddled with
     weaknesses that continue to put critical operations and assets at risk.
     These types of concerns led us, in 1997 and 1999 reports to the
     Congress, to identify information security as a high-risk issue.

In response to the IG's February report, Education's Chief Information
Officer has developed a corrective action plan to address these weaknesses.
This plan proposes developing security plans for the 6 mission-critical
systems that did not have them. Education envisions that the plans will meet
the requirements of OMB Circular A-130 and the Computer Security Act of
1987. The plan also calls for establishing requirements for security
training and a monitoring process to ensure that security personnel receive
adequate training. We did not evaluate the effectiveness of these corrective
actions.

   * The auditors reported that Education had not taken a complete,
     comprehensive physical inventory of property and equipment for at least
     the past 2 years. Comprehensive inventories improve accountability for
     safeguarding the government's assets, such as computer software and
     hardware, and establish accurate property records. Without such an
     inventory, property or equipment could be stolen or lost without
     detection or resources could be wasted by purchasing duplicate
     equipment already on hand. An alleged equipment theft is currently
     under investigation by the OIG and the Department of Justice.

In addition, vulnerabilities in the Department's student financial
assistance programs have led us since 1990 to designate this a high-risk
area for waste, fraud, abuse, and mismanagement. As we reported in our
high-risk series update in January 1999, our audits as well as those by the
Department's IG have found instances in which students fraudulently obtained
grants and loans.

In response to your request, we are auditing selected Education accounts
that are deemed particularly susceptible to improper payments based on a
risk assessment that takes into account previous findings by GAO, the IG,
and Education's independent public accountants. This work is in the initial
planning phase and is expected to focus primarily on the Department's
disbursement processes and EDP controls. We plan on using various electronic
auditing techniques to determine whether the Department has inappropriately
disbursed funds. We also plan to evaluate the vulnerability of the
Department's EDP systems to fraud, misuse, and disruption.

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In summary, Education needs 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 decisionmakers make timely,
well-informed judgments. While Education has planned and begun implementing
many actions to resolve its financial management problems, it is too early
to tell whether they will be successful. It is critical that Education rise
to the challenges posed by its financial management weaknesses because its
success in achieving all aspects of its strategic objectives depends in part
upon reliable financial management information and effective internal
controls. It is also important to recognize that several of the financial
management issues that have been raised in reports emanating from reviews of
Education's financial statements directly or indirectly affect Education's
ability to meet its obligations to its loan and grant recipients and
responsibilities under law.

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

Contact and Acknowledgments

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For information about this statement, please contact Gloria Jarmon at (202)
512-4476 or at [email protected]. Individuals making key contributions to
this statement included Dan Blair, Anh Dang, Cheryl Driscoll, and Meg Mills.

(916379)

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Orders by Internet

For information on how to access GAO reports on the Internet, send an e-mail
message with info in the body to:

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or visit GAO's World Wide Web home page at:

http://www.gao.gov

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Contact one:

Web site: http://www.gao.gov/fraudnet/fraudnet.htm

E-mail: [email protected]

1-800-424-5454 (automated answering system)

Department of Education, Fiscal Year 1999 Consolidated Financial Statements,
Ernst & Young LLP, February 2000.

Financial Management: Education's Financial Management Problems Persist
(GAO/T-AIMD-00-180, May 24, 2000).

For fiscal year 1995, a year before the Government Management Reform Act
(GMRA) requirements became effective, the Department's Inspector General
(IG) hired a contractor to perform its first agencywide financial audit.

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.

A material internal control weakness is a reportable condition that
precludes the entity's internal controls from providing reasonable assurance
that material misstatements in the financial statements or material
noncompliance with applicable laws or regulations will be prevented or
detected on a timely basis. In addition to these material internal control
weaknesses, the independent auditors also reported four reportable
conditions. Reportable conditions are matters coming to the auditors'
attention that, in their judgment, should be communicated because they
represent significant deficiencies in the design or operation of internal
controls that could adversely affect the organization's ability to meet the
objectives of reliable financial reporting and compliance with applicable
laws and regulations.

Financial Management: Review of Education's Grantback Account
(GAO/AIMD-00-228 August 18, 2000).

The financial management systems requirements have been developed by the
Joint Financial Management Improvement Program, which is a joint and
cooperative undertaking of the Department of the Treasury, OMB, GAO, and the
Office of Personnel Management.

The Standard General Ledger provides a standard chart of accounts and
standardized transactions that agencies are to use in all their financial
systems.

Review of Security Posture, Policies and Plans (ED-OIG/A11-90013) February
2000.

Defending America's Cyberspace: National Plan for Information Systems
Protection: Version 1.0: An Invitation to a Dialogue, released January 7,
2000, the White House.

Critical Infrastructure Protection: ILOVEYOU Computer Virus Highlights Need
for Improved Alert and Coordination Capabilities (GAO/T-AIMD-00-181, May 18,
2000) and Information Security: ILOVEYOU Computer Virus Emphasizes Critical
Need for Agency and Governmentwide Improvements (GAO/T-AIMD-00-171, May 10,
2000).

Computer Security: Critical Federal Operations and Assets Remain at Risk
(GAO/T-AIMD-00-314, September 11, 2000) and Information Security: Serious
and Widespread Weaknesses Persist at Federal Agencies (GAO/AIMD-00-295,
September 6, 2000).

High- Risk Series: Information Management and Technology (GAO/HR-97-9,
February 1, 1997) and High-Risk Series: An Update (GAO/HR-99-1, January
1999).

High-Risk Series: An Update (GAO/HR-99-1, January 1999).
*** End of document. ***