ARCHIVED INFORMATION -- Annual Accountability Report Fiscal Year 1995

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. Five areas within the Department were designated as material management control weaknesses. The Department is near completion of implementing corrective actions aimed at addressing these material weaknesses.

FMFIA Compliance Status Matrix

Material Weaknesses
Material Weakness Year Identified Year (to be) Corrected
Student Financial Aid:
Institutional Gatekeeping
Fiscal Year 1989 Fiscal Year 1997
Office of Student Financial Assistance:
Audit Follow-up
Fiscal Year 1991 Fiscal Year 1996
Office of Student Financial Assistance:
Ineligible Pell Recipients
Fiscal Year 1994 Fiscal Year 1996
Office of Postsecondary Education:
Data Quality to Support Management Decisions
Fiscal Year 1995 To Be Determined
Information Resource Group:
ADP Inventory Control
Fiscal Year 1994 Fiscal Year 1996

The Department's accounting and financial systems generally conform to the Comptroller General's principles, standards and related requirements for accounting systems. However, four problem areas will be corrected in fiscal year 1996. The non-conformances are outlined in the following table.

FMFIA Compliance Status Matrix

Material Non-Conformances
Federal Family Education Loan System and Primary Accounting System:
   - Inadequate accounting for loan losses, interest subsidies, and loan origination fees
Impact Aid System:
   - Inadequate controls over accounts receivable transactions
   - Lack of written systems procedures
Financial Management Systems
   - Inadequate data sharing

Management Response to Semiannual Report to Congress on Audit Follow-up

The Inspector General Act Amendments of 1988 require departments to submit semiannual reports to Congress regarding management actions taken in response to Office of Inspector General (OIG) 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 actions are taken.

In fiscal year 1995, the Department completed action on 882 audit reports with disallowed costs, collecting or receiving promissory notes of $4.8 million. Also during the reporting period, the Department took final action on 34 additional audit reports which improved use of almost $229 million in Federal funds by educational institutions and state entities.

          PROMPT PAYMENT INTEREST PENALITIES HAVE DECREASED BY 35%                               SINCE 1993  1993 ==============================> $80,696  1994 ==================================> $84,237  1995 ==> $51,846        +---------+---------+---------+---------+      50,000    60,000    70,000    80,000    90,000                       $ INTEREST PENALTIES PAID _____________________________________________________________________  1993 ==================================>3.2%  1994 =======================================>3.5%  1995 =======================================================>4.4%       +-------+-------+-------+-------+-------+-------+-------+      1       1.5     2       2.5     3       3.5     4.0     4.5                    PERCENTAGE OF INVOICES PAID LATE ______________________________________________________________________                       INTEREST PENALTIES AS %                        OF INVOICE $ PAID                          FY 93     .0003%                         FY 94     .0002%                         FY 95     .0001% 

Prompt Pay

The Prompt Payment Act requires that agencies report annually on the status of payments subject to the Act. Virtually all of the Department's payments subject to the Act are made through the Department of Agriculture's National Finance Center in New Orleans, Louisiana. The Department's prompt payment performance for the last three years shows a pattern of improvement. Even though the percent of invoices paid late increased slightly during the year, both the dollar interest paid and interest penalties paid as a percentage of total dollars paid decreased. Increased use of computer based purchases, electronic commerce, and government charge cards, coupled with solid cash management practices, have brought about substantial reductions in total interest penalties paid for fiscal year 1995, down to $51,846 from $84,237 in fiscal year 1994.

Financial Statement Presentation

The financial statements have been prepared to report the financial position and results of operations of the Department of Education, pursuant to the requirements of the Chief Financial Officers Act of 1990. While the statements have been prepared from the books and records of the entity in accordance with formats prescribed by the Office of Management and Budget, the statements are different from the financial reports used to monitor and control the budgetary resources which are prepared from the same books and records.

It is expected that the development of the financial management systems, as well as the discipline necessary to prepare these statements, will lead to the production of more timely, reliable, and useful financial management information for use throughout the government.

The statements should be read with the understanding that they are for a component of a sovereign entity, that liabilities not covered by budgetary resources cannot be liquidated without the enactment of an appropriation, and that the payment of all liabilities other than for contracts can be abrogated by the sovereign entity.

[Financial Performance & Process Improvement Initiatives] [Table of Contents] [Report Card]