Financial Audit

GAO and the Education Department's Office of the Inspector General audited the financial statements of Education's Federal Family Education Loan Program and its internal controls and compliance with laws and regulations for fiscal year 1993. GAO was unable to give an opinion on the fiscal year 1992 financial statements because reliable student loan data upon which to base the liabilities for loan guarantees were unavailable. In addition, existing systems did not provide meaningful and reliable financial management information needed to effectively manage and report on program operations. Due to the limited amount of time between the fiscal year 1993 and 1992 audits and the severity of the long-standing financial management problems, many of the problems identified during the previous year's audit still exist. For these reasons, the opinions of GAO and the Inspector General on the fiscal year 1993 financial statements, internal controls, and compliance with laws and regulations are essentially the same as GAO's opinions covering fiscal year 1992. GAO and the Inspector General found weaknesses in the internal controls governing (1) how program costs are determined, (2) how payments to guaranty agencies and lenders are monitored, and (3) the accuracy of financial reporting. These weaknesses undermine Education's ability to make loans available to all eligible students at a reasonable cost to taxpayers. Also, without adequate financial information, Congress and Education cannot be sure of the program's operating costs or the extent of Education's liability for loan defaults.

GAO found that: (1) pervasive data inaccuracies prevented it from concluding whether the program's liabilities for loan guarantees were fairly stated as of September 30, 1993; (2) the program's statement of cash flows was reliable in all material respects; (3) it could not determine whether Education properly received or disbursed funds because of significant internal control weaknesses in its cost estimate, billing, and financial statement preparation procedures; (4) although the program's internal controls were not properly designed and implemented to effectively safeguard assets and ensure that there were no material misstatements, they were effective in ensuring compliance with selected budget authority laws and regulations; (5) ineffective controls and unreliable student loan data also affected the reliability of information contained in Education's annual budget submission; and (6) there was no evidence of noncompliance with selected laws and regulations.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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