Financial Management:

Financial Management Challenges Remain at the Department of Education

T-AIMD-00-323: Published: Sep 19, 2000. Publicly Released: Sep 19, 2000.

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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.

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