ARCHIVED INFORMATION -- Fiscal Year 1996 Annual Accountability Report

Highlights of Reporting Requirements

Federal Managers' Financial Integrity Act
The Federal Managers' Financial Integrity Act (FMFIA) requires agency managers to conduct regular evaluations of management controls with special attention to accounting systems to protect federal programs from fraud, waste and mismanagement. FMFIA compliance is embodied in larger efforts to reform management processes at the Department.

As shown in the chart below, six problem areas within the Department are considered serious or "material" as defined by the Act. The material weakness added in 1995 is the result of the first Department-wide financial statement audit for the fiscal year ended September 30, 1995. The auditors disclaimed an opinion on our financial statements because they were not satisfied with the reliability of data supporting estimated guaranteed loan liabilities. The Department has taken a more direct approach to developing these estimated liabilities for fiscal year 1996.

Management Control Issues

Material Weakness/Non Conformance

Year Identified

Year To Be
Corrected

Student Financial Aid - Institutional gatekeeping and monitoring activities are inadequate

1989

1998

The Department's general ledger cash balances do not always reconcile with the Treasury Department

1989

1998

Accounting for loan losses, interest subsidies and loan origination fees is inadequate

1990

1997

Student Financial Aid - There is no assurance that all schools are submitting audit reports and/or recovering misspent funds

1991

1997

ADP equipment inventory controls are inadequate

1994

1997

The quality of Federal Family Education Loan Program data is unreliable for management decisions

1995

1997

Management Response to Report on Audits of External Entities
The Inspector General Act Amendments of 1988 require departments to submit semiannual reports to Congress regarding management actions taken in response to Inspector General external entity audit recommendations. Audit follow-up activities at the Department are the responsibility of the Chief Financial Officer, who ensures that timely responses are made to all audit recommendations and that appropriate corrective action is taken.

In fiscal year 1996, the Department completed action on 807 audit reports and collected or received promissory notes totaling $9.9 million. Also during the reporting period, the Department took final action on one additional audit report which improved use of almost $119 million in federal funds by educational institutions and state entities.

Prompt Pay
The Prompt Payment Act requires that agencies report annually on the promptness with which they pay their bills. During fiscal year 1996 the Department's payments subject to the Act were made three ways: through the Department of Agriculture's National Finance Center, using the International Merchant Purchase Authorization Card (VISA® credit card) and issuing third party payment instruments. The Department's prompt payment performance for fiscal year 1996 was the best ever (97.7 percent prompt payments). Late payment penalties were paid on 734 invoices as compared to 1,045 invoices for fiscal year 1995. Furthermore, both the number of invoice payments and the dollar value of the invoices were greater in fiscal year 1996 than in fiscal year 1995 (31,832 payments totaling $521,537, 000 vs. 23,915 payments for $443,400,000). Increased use of government charge cards, coupled with solid cash management practices, has improved ED's performance under the Prompt Payment Act.
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[Financial Improvement Initiatives] [Table of Contents] [1996 Financial Statements and Accompanying Notes]