Financial Audit

GAO reviewed the financial audit prepared by the Education Department's Office of Inspector General (OIG) on the Federal Family Education Loan Program's financial statements for fiscal years 1994 and 1993. The OIG was unable to express an opinion on the financial statements as a whole because student loan data on which the Education Department had based its costs to be incurred on outstanding guaranteed loans were unreliable. In addition, the OIG continued to report material weaknesses in internal controls related to the program's liabilities for loan guarantees and related program costs, effectively monitoring payments to guaranty agencies and lenders, and ensuring accurate financial reporting. Although internal control weaknesses persisted during fiscal year 1994, the Education Department has been trying to correct these shortcomings. GAO reviewed the OIG's work and concurs in its findings.

GAO found that: (1) although the Department of Education's Office of Inspector General (OIG) could not issue an overall opinion on the financial statements due to data reliability and material internal control weaknesses, there was no evidence of FFELP noncompliance with selected laws and regulations; (2) Education was unable to ensure that FFELP lenders' individual billing reports were reasonable; (3) the financial reporting process did not ensure the reliability of FFELP financial statements and management reports; (4) before Education implements its nationwide loan information database, it should test the accuracy and validity of the loan data; (5) Education OIG is requiring all FFELP lenders to undergo annual compliance audits, but Education needs to monitor audit requirements and ensure that it receives assurances of the accuracy of lenders' billings; (6) Education is redesigning its financial management system to produce FFELP financial statements by fiscal year 1997; (7) Education has hired a contractor to improve the interface between FFELP subsidiary and general ledger systems; (8) weaknesses exist in the FFELP information system's ability to prevent unauthorized use of sensitive data files, applications programs, and system software; and (9) Education has implemented 8 of 21 recommendations from prior years and has planned action for another 11 recommendations.