Financial Audit:

Federal Family Education Loan Program's Financial Statements for Fiscal Years 1993 and 1992

AIMD-94-131: Published: Jun 30, 1994. Publicly Released: Jun 30, 1994.

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GAO examined the Department of Education's Federal Family Education Loan Program's financial statements and its internal controls and compliance with laws and regulations for the fiscal year ended September 30, 1993.

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 for Executive Action

  1. Status: Closed - Implemented

    Comments: The Department has hired a security officer responsible for the overall security of the general ledger system. The individual has over 13 years of audit experience, including 6 years specializing in computer audits. He also has significant technical experience relating to systems security and controls in a wide variety of computer environments.

    Recommendation: The Secretary of Education should direct the Assistant Secretary for Human Resources and Administration to clearly identify security responsibilities and oversight for Education's general ledger system, including establishing a security officer responsible for the overall security of this system. The security officer's responsibilities should include: (1) developing and completing action plans to respond to previously reported security weaknesses; (2) properly maintaining and reviewing an audit trail of user activities; (3) ensuring that former contractors and terminated employees are denied access to the system; (4) changing passwords periodically (possibly monthly or quarterly); and (5) finalizing and testing a disaster recovery plan for the general ledger system.

    Agency Affected: Department of Education

  2. Status: Closed - Implemented

    Comments: Staff officers responsible for the general ledger system took a 2-day training course in August 1995. Additional security training that was planned for 1996 was completed by two employees in July and August 1996.

    Recommendation: The Assistant Secretary for Human Resources and Administration should require and ensure that security administrators and supporting technical staff, who are responsible for the general ledger system, have security training.

    Agency Affected: Department of Education: Office of the Assistant Secretary for Human Resources and Administration

  3. Status: Closed - Implemented

    Comments: The Department has, for the past 3 years, deactivated lenders that failed to submit billing reports for four quarters. Effective in December 1994, the Department further reduced the billing requirement to two quarters. Lenders and their Guaranty Agencies are notified of the deactivation, after non-receipt of the lender's billing for two quarters. To be reactivated, lenders must request that their Guaranty Agency contact the Department and provide documentation of the reason for reactivation.

    Recommendation: The Secretary of Education should direct the Assistant Secretary for Postsecondary Education to perform periodic analyses to determine whether lenders are submitting billing reports promptly, within 90 days after the end of the quarter, as instructed by Education. These analyses should include follow-up procedures with individual lenders not submitting billing reports promptly.

    Agency Affected: Department of Education

 

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