Q Ernst & Young LLP Q Phone: (202) 327-6000 1225 Connecticut Avenue, N.W. Fax: (202) 327-6200 Washington, DC 20036 www.ey.com Report of Independent Auditors To the Inspector General U.S. Department of Education We have audited the accompanying reclassified balance sheets as of September 30, 2006 and 2005, and the related reclassified statements of net cost and changes in net position for the years then ended (hereinafter referred to as the special-purpose financial statements) contained in the special-purpose closing package of the U.S. Department of Education (the Department). These special-purpose financial statements are the responsibility of the Department’s management. Our responsibility is to express an opinion on these special-purpose financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and, Office of Management and Budget Bulletin (OMB) No. 06-03, Audit Requirements for Federal Financial Statements. Those standards and bulletin require that we plan and perform the audit to obtain reasonable assurance about whether the special-purpose financial statements are free of material misstatement. We were not engaged to perform an audit of the Department’s internal control over financial reporting for the special-purpose financial statements. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Department’s internal control over financial reporting for the special-purpose financial statements. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the special-purpose financial statement presentation, assessing the accounting principles used and significant estimates made by management, and evaluating the overall special-purpose financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The accompanying special-purpose financial statements and accompanying notes contained in the special-purpose closing package have been prepared for the purpose of complying with the requirements of the U.S. Department of the Treasury’s Financial Manual (TFM) Volume I, Part 2, Chapter 4700, solely for the purpose of providing financial information to the U.S. Department of the Treasury and the U.S. Government Accountability Office to use in preparing and auditing the Financial Report of the U.S. Government, and are not intended to be a complete presentation of the Department’s financial statements. Ernst & Young LLP is a member of Ernst & Young International, Ltd. !@ Q Ernst & Young LLP Report of Independent Auditors Page 2 In our opinion, the special-purpose financial statements referred to above present fairly, in all material respects, the financial position of the Department as of September 30, 2006 and 2005, and its net costs and changes in net position, for the years then ended in conformity with accounting principles generally accepted in the United States and the presentation pursuant to the requirements of the TFM Chapter 4700. The information included in the Other Data is presented for the purpose of additional analysis and is not a required part of the special-purpose financial statements, but is supplementary information required by TFM Chapter 4700. We have applied certain limited procedures, which consisted principally of inquiries of management regarding methodology and presentation of this information. We also reviewed such information for consistency with the related information presented in the Department’s financial statements. However, we did not audit this information, and express no opinion on it. In accordance with Government Auditing Standards and OMB Bulletin No. 06-03, we have also issued our reports dated November 7, 2006, on our consideration of the Department’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations and other matters. The purpose of those reports is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. Those reports are an integral part of an audit of principal financial statements performed in accordance with Government Auditing Standards and OMB Bulletin No. 06-03, and should be considered in assessing the results of our audit. In planning and performing our audit of the special-purpose financial statements, we also considered the Department’s internal control over the financial reporting process for the special- purpose financial statements and compliance with the TFM Chapter 4700. Management is responsible for establishing and maintaining internal control over financial reporting, including Other Data, and for complying with laws and regulations, including compliance with the TFM Chapter 4700 requirements. Our consideration of internal control over the financial reporting process for the special-purpose financial statements would not necessarily disclose all matters in the internal control over the financial reporting process that might be reportable conditions. Under standards issued by the American Institute of Certified Public Accountants, reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect the Department’s ability to initiate, record, process, and report financial data consistent with the assertions made by management in the special-purpose financial statements. Material weaknesses are reportable conditions in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by errors or fraud in amounts that would be material in relation to the special-purpose financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. !@ Q Ernst & Young LLP Report of Independent Auditors Page 3 We noted no matters involving internal control over the financial reporting process for the special-purpose financial statements that we consider to be material weaknesses, and our tests of compliance with the TFM Chapter 4700 requirements disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards or OMB Bulletin No. 06- 03. However, providing opinions on internal control over the financial reporting process for the special-purpose financial statements or on compliance with the TFM Chapter 4700 requirements were not objectives of our audit of the special-purpose financial statements and, accordingly, we do not express such opinions. This report is intended solely for the information and use of the Department, the U.S. Department of Treasury, the Office of Management and Budget and the U.S. Government Accountability Office in connection with the preparation and audit of the Financial 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 Special Purpose Financial Statements - Financial Statement Audits for Fiscal Years 2006 and 2005.
Published by the Department of Education, Office of Inspector General on 2006-11-17.
Below is a raw (and likely hideous) rendition of the original report. (PDF)