Adverse Opinion on the Financial Statements of the Student Loan Insurance Fund for FY 1980

AFMD-82-52: Published: Jul 8, 1982. Publicly Released: Jul 8, 1982.

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As required by the enabling legislation of the Guaranteed Student Loan Program, GAO reported to Congress its opinion on the Student Loan Insurance Fund's financial statements for the fiscal year (FY) ended September 30, 1980.

Since the fund's inception, serious accounting and reporting problems have resulted from inadequate internal controls and noncompliance with generally accepted accounting principles. Although GAO has regularly reported these problems since 1969, fund management has done little to correct them. In the opinion of GAO, the fund's financial statements do not fairly present its financial position at September 30, 1980, or the results of its operations and the changes in its financial position for FY 1980. This adverse opinion was necessary because: (1) control account balances, representing 64 percent of the fund's assets, could not be reconciled with computerized subsidiary records; (2) procedures have not been developed for several accounts, resulting in material misstatements; (3) cancelled checks totalling $14 million were added to the fund's cash balance without determining whether they had been recorded when initially issued; (4) supervisory reviews and other verification procedures were frequently ineffective; and (5) the uncollectible portion of insurance premiums receivable was not recorded.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Education agreed with the problem statement, but not with this recommendation. It does not intend to implement this recommendation, but it is pursuing other means of correction. It plans to implement procedures to improve document control, more clearly define organizational responsibilities, and upgrade accounting controls in general, with emphasis on payment and collection transactions.

    Recommendation: The Secretary of Education should delegate all accounting, recordkeeping, and financial statement preparation responsibilities to the Office of Student Financial Assistance.

    Agency Affected: Department of Education

  2. Status: Closed - Not Implemented

    Comments: Education plans no further action on this recommendation. It believes that the problems GAO identified stem from poor automatic data processing (ADP) systems; however, several years have past and a new ADP system has not been decided on.

    Recommendation: The Secretary of Education should direct the Office of Student Financial Assistance to: (1) prepare appropriate written accounting procedures; (2) record all cash transactions promptly; (3) analyze the fund's collection experience and establish an allowance for loss rates, which are based on this experience; (4) properly train and supervise accounting personnel; and (5) consistently verify manual computations when necessary to ensure the integrity of files and processing.

    Agency Affected: Department of Education

 

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