ARCHIVED INFORMATION -- Annual Accountability Report Fiscal Year 1996

Report on Compliance with Laws and Regulations

To the Inspector General
U.S. Department of Education

We were engaged to audit the consolidated financial statements of the U.S. Department of Education (Education) as of and for the year ended September 30, 1995, and have issued our report thereon dated June 4, 1996. In that report we disclaimed an opinion on the consolidated financial statements because certain amounts reported in Education's consolidated financial statements could not be supported by sufficient and reliable accounting information and certain differences between financial statement amounts and underlying accounting records could not be adequately explained.

Compliance with laws and regulations applicable to Education is the responsibility of Education's management. As part of our effort to audit the consolidated financial statements, we performed tests of Education's compliance with certain provisions of applicable laws and regulations. However, the objective of our tests was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion.

The results of our tests disclosed no instances of non-compliance that are required to be reported herein under Government Auditing Standards. The results of our tests disclosed immaterial instances of noncompliance with the above requirements will be communicated to management in a separate letter.

This report is intended for the information of the Inspector General, Education's management, and the Congress. However, this report is a matter of public record and its distribution is not limited.

Price Waterhouse LLP
June 4, 1996
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