Financial Management:

Education's Financial Management Problems Persist

T-AIMD-00-180: Published: May 24, 2000. Publicly Released: May 24, 2000.

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Pursuant to a congressional request, GAO discussed the Department of Education's financial management problems, focusing on: (1) Education's fiscal year (FY) 1999 financial audit results; (2) the relationship between the audit findings and the potential for waste, fraud, and abuse, and (3) the results of GAO's review of the Department's grantback account.

GAO noted that: (1) while Education's financial staff and its contractors worked very hard to prepare Education's FY 1999 financial statements before the March 1, 2000, deadline, and the auditors' opinion on the financial statements improved over that of FY 1998, serious internal control and financial management systems weaknesses continued to plague the agency; (2) for FY 1999, Education made significant efforts to work around these weaknesses and produce financial statements; (3) these efforts enabled its auditors to issue qualified opinions on four of its five required financial statements and a disclaimer on the fifth statement; (4) 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; (5) in the auditors' internal controls report, they reported four material internal control weaknesses--three continuing from FY 1998 and one additional one for FY 1999--and that long-standing internal control weaknesses persist; (6) Education's auditors reported that it was not in compliance with three laws-the Federal Financial Management Improvement Act, the Clinger-Cohen Act, and the Federal Credit Reform Act of 1990; (7) the internal control weaknesses cited in the auditors' report need to be addressed to reduce the potential for waste, fraud, and abuse in the department; (8) for the grantback account, its auditors reported that approximately 97 percent of the balance at September 30, 1998, was composed of adjustments that had accumulated since FY 1993 for reconciling differences of various appropriations that could not be identified with any specific program; (9) the auditors also reported for FY 1999 that Education could not readily determine to which appropriations the adjustments balance belongs; and (10) Education had taken or plans to take actions to address the grantback account issues.

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