S!J ERNST & YOUNG • ErnSI & Yo ung llP • PtlOnc (202) 327-6000 1225 COI'lnec!,eol AV€ nua N W Fax a02j 327·6200 Wash,ngton. DC 20036 IWffl ey corn Report of Independent Auditors To the In spector Ge ne ral U.S. Department of Ed ucation We have audited the accompanyi ng reclassified balance sheets as of Se ptember 30, 2006 and 2005 , and the related reclassified statements of net cost and changes in net pos ition for the years then ended (here inafter referred to as the spcc ial· purpose financ ial statements) contained in the spec ial-purpose closi ng package of the U.S. Department o f Educati on (the Department). These spec ial-purpose fin ancia l statements are the responsib ility or the Department 's management. OUf respons ibi lity is to ex press an opinion on these special-purpose financia l statements based on our aud its. We conducted o ur audits in accordance with a uditin g standards generally accepted in the United States and the standards applicable to financ ial audits contained in Government Auditing Slandards, issued by the Comptroller Genera l o f the United States; and, Offi ce of Management and Bud get Bulleti n (OM B) No. 06-03, Alldit Reqlliremel1lsjor Federal Financial Statements. Those standards and bu llet in require that we plan and perform the audit to obtain reasonable assurance about whether the specia l-purpose financia l statemen ts are free of material misstatement. We were not engaged to perform an audit of the Department 's in ternal control over financial reporting for the special-purpose finan cial statemen ts. Ou r audit included consideration of internal contro l over fin anc ial reporting as a bas is fo r des igning audit procedures that are appropriate in the c irculTIslances, but not for the purpose of expressing an opinion on the effectiveness of the Departmen t's internal control over financial rcporting for the specia l-purpose finan c ial statements. Accordingly , we ex press no such opinion. An audit also includ es exam ining, on a test basis, evidence supporting the amounts and di scl osures in the special-purpose finan cia l statement presentation, assessi ng the accounting principles used and s ignificant estimates made by management, and eva luating the overall special-purpose finan cia l statement presentat ion. We believe that our aud its prov ide a reasonable basis for ou r opinion. The accompanying spec ial-purpose financial statements and accompany ing note s contained in the special-purpose clos in g package have been prepared for the purpose of comply ing with the requirements of the U.S. Department of the Treasury's Financial Manua l (TFM ) Vo lume I, Part 2, Chapter 4700, so lely for the purpose of prov iding financial information to the U.S. Department of the Treasury and the U.S. Government Accountability Offi ce to usc in preparing and audit ing the Financial Report ojthe u.s. Government, and are not intended to be a complete presentation of the Department 's finan cial state ments. I , ,, '"1" ~ ERNST & YOUNG • Erns t & You ng LlP Report of Independent Aud itors Page 2 In our opini on, the spec ial-purpose finan c ial statements refe rred to above present fairl y, in a ll material respects, the fin anc ial posit ion of the Departmen t as of September 30, 2006 and 2005, and its net costs and changes in net posit ion, for the years then e nded in conformity with account ing principles gene rall y accepted in the United States and the presentation pursua nt to the req uirements of the TFM Chapte r 4700. The information included in the Other Data is presented for the purpose of add itional analys is and is not a requi red part of the special-pu rpose financia l statements, but is supple mentary in formati on required by TFM Chapter 4700. We have applied certa in lim ited procedures, which consisted princ ipa ll y of inquiries of management regard in g methodology and presentation of thi s in format ion. We a lso reviewed such information for consistency with the related information prese nted in the Department' s financi a l state ments. However, we did not audit thi s informat ion, a nd ex press no op inion on it. In accordance with Government Auditing Standards and OM S Bull etin No. 06-03 , we have a lso issued our reports dated November 7, 2006, on our considerati on o f the Department' s internal control over financia l re porting and on our tests of its compl iance with certain prov isions o f laws, regu lations a nd other matters. The purpose o f those reports is to describe the scope of our testing o f interna l control over fin ancia l re po rting and compl iance and the results of that testing, and not to prov ide an opi ni on on the internal control over financial reporting or on compliance. Those reports arc an integra l part of an audit of principa l financ ial statements perfonned in accordancc with Government Auditing Standards and OMB Bu llet in No. 06-03, and shou ld be considered in assessing the results o f our aud it. [n planning and performing our audit of the spec ia l-purpose finan c ia l state me nts, we also co ns ide red the De partment' s internal co ntrol over the finan c ial reporting process for the specia l purpose financial statements and compli ance with the TFM Chapte r 4700 . Management is responsible fo r estab lishing and maintaining internal co ntro l over fina ncial reporting, including Othe r Data, and for compl yin g with laws and regulati ons, inc luding complia nce with the TFM Chapter 4700 req uirements. Our cons iderati on of interna l control ove r the financia l reporting process for the special-purpose finan cia l statements would not necessaril y disclose a ll matters in the internal control ove r the finan cial reporting process that might be reportable condi tions. Under standards issued by the Ame rican Institute of Cert ified Public Accounta nts, reportable cond itions invo lve matters coming to our attent ion re lating to s ignificant defi c ienci es in the des ign or operation of the inte rna l control over financial reporti ng that, in our j udgment, could adverse ly affect the Department' s ab ili ty to in it iate, record , process, and report fi nanc ia l data consistent with the asse rt ions made by manage ment in the spec ia l-purpose fin anc ial state ments. Material weaknesses a re re porta ble condit ions in wh ich the des ign or operation o f one or more of the internal contro l components does I10t reduce to a re lati ve ly low leve l the risk that mi sstateme nts cau sed by e rrors or fraud in amounts that would be material in relation to the speci a l-purpose fin ancia l statements being audited may occur and not be detected with in a timely period by employees in th e normal co urse of performing the ir ass igned fun ctions. SJ ERNST & YOUNG • Ern st & Young U.P Report of Independent Auditors Page 3 We noted no matters invo lvi ng internal control over thc financia l report in g process for the special-purpose fin ancial statements th at we con sider to be material weaknesses, and O Uf tests of compliance w ith thc TFM Chapter 4700 requirements disc losed no instances of noncompliance that arc req uired to be reported under Government Auditing Standards or OMB Bulletin No. 06 03. However, provi ding opinions on internal contro l over the financial reportin g process for the specia l-purpose financial statements or on compli ance with the TFM Chapter 4700 req uirements were not objecti ves of our audit ofth c spec ial-purpose fin ancial statements and, accordingly, we do not express such opin ions. T his report is intended so le ly for the in for mat ion and use of the Department, the U.S. Departme nt o f Treasu ry, the Office of Management and Budget and the U.S. Government Accountab ility Office in connect ion with the preparation and audit of the Financ ia l Report of the U.S. Government and is not intended to be and should not be used by anyone other than these specified parties. November 16, 2006
U.S. Department of Education's Special Purpose Financial Statements.
Published by the Department of Education, Office of Inspector General on 2005-11-18.
Below is a raw (and likely hideous) rendition of the original report. (PDF)