oversight

before the Subcommittee on Select Education, Committee on Education and the Workforce, US House of Representatives, on the results of the FY 2000 Financial Statement Audit and other financial management challenges facing the Department of Education on April 3, 2001 PDF

Published by the Department of Education, Office of Inspector General on 2001-04-03.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                       Statement of Lorraine Lewis
                               Inspector General, Department of Education
                                               Before The
                                   Subcommittee on Select Education
                               Committee on Education and the Workforce
                                     U.S. House of Representatives

                                               April 3, 2001



Mr. Chairman and Members of the Subcommittee:


Thank you for inviting me to participate in today’s hearing on the results of the audit of the

Department of Education’s (the Department) fiscal year 2000 consolidated financial statements.

You asked that I also cover in my testimony (1) a comparison of the fiscal year 2000 audit

findings to those of previous years, (2) the Department’s efforts to remedy financial management

and internal control weaknesses identified by auditors in previous years, (3) recommendations

that the Office of Inspector General (OIG) has made to the Department to improve its financial

management, and (4) our efforts to monitor the Department’s implementation of these

recommendations and those provided by outside auditors.



First, let me say that I commend the Subcommittee for its strong interest in these important

matters and for the attention it has given to financial management at the Department.

The Department received a qualified opinion on all of its fiscal year 2000 financial statements.

This represents a change from 1999, when the Department received a disclaimer of opinion on its

Statement of Financing and a qualified opinion on the other four financial statements. In

addition, this was the second year in a row where the Department submitted its financial

statements and audit reports on time to the Office of Management and Budget (OMB).
OVERVIEW OF RESULTS OF FISCAL YEAR 2000 AUDIT



The audit of the Department’s financial statements for fiscal year 2000 was conducted by Ernst

& Young, LLP (E&Y). Under the terms of this engagement, E&Y issued a report on its opinion

on the financial statements, a report on internal control, and a report on compliance with laws

and regulations. The OIG monitored the progress and completion of the work to ensure it

complied with Government Auditing Standards, issued by the Comptroller General of the United

States. Copies of the auditor’s reports are available on the Internet at

www.ed.gov/offices/OIG/Areports.htm.



Financial Statement Opinion

E&Y issued a qualified opinion on the Department’s Balance Sheet, Statement of Net Cost,

Statement of Changes in Net Position, Statement of Budgetary Resources, and Statement of

Financing. A qualified opinion states that, except for the effects of the matter to which the

qualification relates, the financial statements are fairly presented, in all material respects. E&Y

qualified their opinion primarily because of the Department’s inability to provide adequate

documentation to support certain amounts and prior period adjustments reported in the financial

statements and inconsistent processing of certain transactions related to prior years.




                                                                                                      2
Report on Internal Control

There were three material weaknesses and two reportable conditions included in the Report on

Internal Control. The material weaknesses cited were:



1. Financial Management Systems and Financial Reporting Need to be Strengthened (Modified

   Repeat Condition). The Department relies on a variety of work-around procedures to prepare

   its financial statements, including significant manual adjustments, due to deficiencies in the

   current general ledger system and the lack of a fully integrated financial management system.

   The Department was unable to provide sufficient documentation to support a significant

   amount of adjustments. In addition, the use of manual adjustments increases the risk that

   errors may occur.



2. Reconciliations Need to be Improved (Repeat Condition). The Department’s performance of

   reconciliations in fiscal year 2000 was inconsistent and evidence of supervisory review of

   reconciliations was not always documented. Also, in some instances the Department

   adjusted its general ledger to reflect the balances per the subsidiary records, without

   sufficiently researching the cause for the differences.



3. Controls Surrounding Information Systems Need Enhancement (Modified Repeat Condition).

   The Department has not finalized the development, documentation, and testing of the disaster

   recovery plan. The Department also has not implemented comprehensive logging and

   monitoring controls and a system software change management process.




                                                                                                    3
The following reportable conditions were cited:

1. Improvement of Financial Reporting Related to Credit Reform is Needed (Modified Repeat

   Condition). The Department needs a more effective process for preparing and reviewing the

   credit reform balances. The Department should more clearly define the roles and

   responsibilities of those involved in the estimation process and critically assess the estimates

   against actual data. It also should gather data that will facilitate better analysis of the impact

   of consolidated loans on the credit reform estimates.



2. Reporting and Monitoring of Property and Equipment Needs to be Improved (Modified

   Repeat Condition). The Department may not be capturing all items that it should capitalize.

   Unreconciled differences remain between the results of the inventory observation and the

   Department’s records. In addition, the Department has not yet fully implemented inventory

   controls for property and equipment.



Report on Compliance with Laws and Regulations

The Report on Compliance with Laws and Regulations noted the Department was not in full

compliance with the Clinger-Cohen Act. In addition, the Department's financial management

systems did not substantially comply with the Federal Financial Management Improvement Act

requirements.




                                                                                                        4
COMPARISON OF FISCAL YEAR 2000 AUDIT FINDINGS WITH PRIOR YEARS



For fiscal year 1999, the Department received qualified opinions on the Balance Sheet,

Statement of Net Cost, Statement of Changes in Net Position, Statement of Budgetary Resources

and a disclaimer of opinion on its Statement of Financing. There were four material weaknesses

and four reportable conditions included in the Report on Internal Control and three areas of non-

compliance cited in the Report on Compliance with Laws and Regulations.



For fiscal year 2000, the Department received qualified opinions on all five financial statements,

including the Statement of Financing. There were three material weaknesses and two reportable

conditions in the Report on Internal Control. As shown in Attachment 1, the number of reported

material weaknesses and reportable conditions in the Report on Internal Control declined for

fiscal year 2000. In addition, the instances of non-compliance in the Report on Compliance with

Laws and Regulations went from three in 1999 to two in 2000.



The Department made two improvements which facilitated the timely preparation of its year-end

financial statements. It prepared interim financial statements for the periods ended March 31,

2000, and June 30, 2000. The Department also enhanced communication among the various

offices by establishing a steering committee in support of the audit process and actively

addressing open audit recommendations.




                                                                                                     5
Over the years, underlying weaknesses in internal control have hampered the Department, and

several weaknesses have appeared as repeat findings in the Report on Internal Control for fiscal

years 1995 through 2000. Most notable among the recurring weaknesses are:

•   financial reporting needs to be strengthened (fiscal years 1997 through 2000);

•   reconciliations need to be improved (fiscal years 1995 through 2000); and

•   controls surrounding information systems need enhancement (fiscal years 1995 through

    2000).




EFFORTS TO ADDRESS FINANCIAL MANAGEMENT AND INTERNAL CONTROL

WEAKNESSES



During fiscal year 2000, the Department actively addressed open audit recommendations. On

March 1, 2000, we testified before the Subcommittee on Oversight and Investigations, House

Committee on Education and the Workforce, and reported that a total of 139 recommendations

had been made for the fiscal years 1995 through 1999 financial statement audits. At that time,

111 recommendations were open, 28 were closed, and 74 were non-repetitive. Since that

hearing, the Department provided us with corrective action plans for these open

recommendations.



Through the cooperative efforts of the Department and my office, 128 recommendations have

closed and 11 remain open. The fiscal year 2000 financial statement audit resulted in 21




                                                                                                   6
additional audit recommendations, bringing the total open audit recommendations to 32. Of

these, 23 are considered non-repetitive.




RECOMMENDATIONS TO IMPROVE FINANCIAL MANAGEMENT



The financial audit reports, particularly the Report on Internal Control and the Report on

Compliance with Laws and Regulations, provide the blueprint for addressing financial

management issues. Many of the underlying systemic weaknesses included in the Reports on

Internal Control and Compliance with Laws and Regulations are repeat conditions from fiscal

year 1999 and earlier years. For example, because the systemic weaknesses with the

Department’s accounting system (initially reported in fiscal year 1998) continued into fiscal

years 1999 and 2000, the Department utilized contractors and various automated tools to “work-

around” the system’s inability to produce a trial balance by reporting group or at the consolidated

level.



The lack of a fully integrated financial management system can impair the Department’s ability

to accumulate, analyze, and present reliable financial information. Until the Department

implements a new general ledger system, it will have to continue to perform “work-around”

procedures to prepare financial statements, including significant manual adjustments, as opposed

to producing system-generated financial statements in compliance with the Federal Financial

Management Improvement Act. In addition, reconciliations are a key control to ensure the

integrity of financial information. Similarly, system disaster recovery plans are necessary to help




                                                                                                      7
minimize operational disruption in the event of a disaster affecting the systems. The auditors

have made a number of recommendations to address the material weaknesses and reportable

conditions in the Report on Internal Control.



Other Reporting on Financial Management and Internal Controls

We have reported management challenges to Members of Congress since January 1998. Some

of the earlier challenges related to delays and data integrity problems experienced in

implementing Education’s Central Automated Processing System (EDCAPS) and Grant

Administration and Payment System (GAPS). Financial management was reported as a separate

challenge in December 1999. This followed the disclaimer on the fiscal year 1998 financial

statements.



On December 8, 2000, in response to requests from Senators Thompson and Domenici and

Representatives Armey, Burton, and Kasich, my office provided updated information on the top

ten management challenges facing the Department. Many of the issues were long-standing

concerns known to the Department and upon which my office remains committed to monitoring.

The first challenge dealt with correcting financial management problems. The problems were

essentially the same as the results of the fiscal year 2000 financial audit.



In addition to the annual audit of the Department’s financial statements, my office conducts a

variety of other work which directly or indirectly relates to improvements in the Department’s

financial management practices. We have four other OIG operations — the Systems Internal

Audit Team, Operations Internal Audit Team, Analysis and Inspections Service, and




                                                                                                 8
Investigations Service — that contribute to this effort. Examples of work performed by these

operations include:



Review of EDNet Security1 – In July 2000, we issued a report assessing the security posture of

the Department’s primary network infrastructure, also known as the Department of Education

Network (EDNet). EDNet is comprised of a telecommunications system and many connected

resources, including large computers, Local Area Network (LAN) servers and printers. The

Department’s financial systems reside on this network.



We identified many areas where the Department can strengthen its security posture. These are

summarized as follows:

•      Formal security policies and procedures are not enforced, causing inconsistent security

       configurations of network devices and mid-range platforms.

•      Configuration settings of network devices and mid-range servers allow excessive access to

       application-level network services, files, directories, and programs.

•      Controls over external network access points must be improved to eliminate potential entry

       points for unauthorized intruders.

•      The Department’s overall security program must be strengthened to improve its incident

       response capabilities, incorporate the use of audit logging mechanisms, and implement a

       documented and tested contingency plan.




1
    Review of EDNET Security (ED-OIG A11-90018)




                                                                                                    9
If controls over configuration settings for internal network servers, network devices, and external

network access points are not improved, the Department’s primary network infrastructure is

vulnerable to internal and external threats. The Department generally concurred with our

recommendations and has prepared a corrective action plan. As of March 28, 2001, the Chief

Information Officer reported completion of actions on 10 of our 60 recommendations.



Audit of Controls Over Government Furnished Property to Contractors2 - We recently issued

the first of four reports on the Department's controls over equipment furnished to the

Department's major student financial aid contractors. In the first report we found that one

contractor did not comply with recordkeeping, reporting, and inventory requirements, and that

government-furnished property was not properly identified. These weaknesses indicate that

errors, irregularities, and other inefficiencies may occur, resulting in inefficient and/or ineffective

performance. The contractor and the Department concur with our recommendations.



Improper Payments - Improper payments have become an area of concern throughout the federal

government in recent years. In October 1999, the General Accounting Office (GAO) issued a

report entitled Increased Attention Needed to Prevent Billions in Improper Payments. This

report defines improper payments as those “…made for unauthorized purposes or excessive

amounts, such as overpayments to program recipients or contractors and vendors.” The report

further states that improper payments can result from incomplete or inaccurate data used to make

payment decisions, insufficient monitoring and oversight, or other deficiencies in agency




2
    Audit of Controls Over Government Property Furnished to Computer Sciences Corporation (ED-OIG A19-B003)




                                                                                                              10
information system internal control weaknesses. In October 2000, GAO defined improper

payments to include “…inadvertent errors, such as duplicate payments and calculation errors;

payments for unsupported or inadequately supported claims; payments for services not rendered

or to ineligible beneficiaries; and payments resulting from outright fraud and abuse.”



The following recent OIG work has focused on various aspects of improper payments:


•   Controls Over Contract Payments3 - We issued a report last month assessing the

    Department’s contract payment process and whether controls are in place to prevent and

    detect improper payments. We found that improvements are needed in controls over the

    invoice review process, segregation of duties, and the process for establishing vendor

    information in the Department’s contract payment system. Based on our work, the

    Department lacks assurance that payments are proper. We made several recommendations to

    the Department to improve the controls. The Department generally concurred with our

    findings and agreed to take action on our recommendations.



•   Internal Control Reviews over Purchase Cards and Third Party Draft Payments4 - At the

    Department’s request, we reviewed its internal controls over the use of purchase cards and

    third party drafts. We found that, while the Department has established procedures to ensure

    the financial integrity of the purchase card and third party draft programs, these procedures,

    were not always current and were not always followed in practice.




3
Audit of Controls Over Contract Payments (ED-OIG A07-A0015)
4
Results of the OIG Review of Internal Controls Over the Procurement of Goods and Services Using Third Party
Drafts and Purchase Cards (ED-OIG 2000-015)




                                                                                                              11
The Office of the Chief Financial Officer (OCFO) administers both the purchase card and

third party draft programs. Each principal office has purchase cardholders and authorized

signers of third party drafts. We reviewed and tested controls in each principal office using

GAO’s Standards for Internal Control in the Federal Government. At the conclusion of each

review, we met with the head of the office to discuss the results and actions they should take

to improve controls. We issued 14 reports to principal offices between April 2000 and

October 2000 (Attachment 2). Also, in October 2000 we issued a capping report to the

Deputy Secretary identifying the most significant issues and provided recommendations to

address those issues. These reports and supported workpapers were also provided to GAO.



An important control for purchase cards is the review and approval of individual purchase

card statements by an approving official. This approval is evidenced by the approving

official's signature. We found that this procedure was not being followed. We reviewed the

purchase card statements in the files of the Financial Management Policies and

Administrative Programs Group, within the OCFO, for September 1999 and March 2000.

We found that in September 1999, the purchase card statement was either missing or the

statement was not signed for 70 percent of the individual cards with balances. In March

2000, that figure was 48 percent. We also identified transactions lacking sufficient

documentation. We were unable to trace some purchase card transactions to expenditures on

reports from the Department’s accounting system, EDCAPS. In some cases, transaction

numbers were not listed on the statements. In other cases, the transaction numbers did not

appear on the EDCAPS expenditure reports. We also found some transactions recorded with

incorrect dollar amounts. Further, payment of the September 1999 and March 2000 purchase




                                                                                                 12
card bills was authorized without reconciling the monthly Department-wide statement to the

individual principal office purchase card statements or to the Department accounting system.

In addition, we identified and reported on cardholders without appropriate warrants and

training.



Regarding third party drafts, the Department’s policy states that a person with signature

authority (an authorized official) cannot produce (print) a draft that he or she signs. During

our review we identified six employees from five offices who serve both as authorized

officials and data entry personnel. In addition, some principal offices were not maintaining

logs of blank drafts, which are negotiable instruments. We also discovered that principal

offices were not maintaining sufficient documentation to support individual third party draft

transactions. In some cases, approval signatures were missing from claim documents or files

were either missing or unavailable for our review. In other cases, the invoice amount did not

match the amount of the draft. In addition, in three principal offices we identified use of

multiple third party drafts to pay for purchases in excess of the $10,000 limit imprinted on

the blank drafts as an internal control deficiency.



We identified transactions exceeding the $2,500 micro-purchase threshold that lacked

appropriate documentation to demonstrate compliance with the Federal Acquisition

Regulations. We also identified acquisitions that were split into multiple purchases,

apparently to avoid the $2,500 micro-purchase threshold or spending limits of individual

cardholders.




                                                                                                 13
       Our capping report included a total of 22 recommendations to the Department, grouped

       according to the Standards for Internal Control in the Federal Government. These were to (1)

       strengthen the control environment over the use of purchase cards and drafts, (2) provide for

       an assessment of the risks the agency faces from both external and internal sources, (3)

       strengthen control activities over the use of cards and drafts, (4) strengthen information and

       communication regarding the use of cards and drafts, and (5) strengthen monitoring over the

       use of cards and drafts. These recommendations will help safeguard against potential misuse

       or waste and ensure that purchase card transactions and third party drafts serve program

       needs. In November 2000, the Department provided a corrective action plan to address

       reported weaknesses.



•      GAPS Duplicate Payment Analysis5 - We recently issued a report identifying duplicate

       payments from the Grant Administration and Payment System (GAPS). This analysis, the

       first of a series focusing on the Department’s payment processes, identified information in

       the GAPS database and Federal Reserve Bank records that could indicate duplicate

       payments. Before we began our analysis, the Department had identified eight instances of

       duplicate GAPS payments totaling $198 million that occurred during the period from May

       11, 1998, to September 30, 2000. We found 13 additional instances of duplicate payments

       totaling approximately $55 million. The recipients returned all funds to the Department

       except for $2,175 that was kept by one recipient and deducted from its grant balance. We

       identified another nine GAPS transactions for approximately $5.9 million that could be




5
    Analysis of GAPS Duplicate Payments (ED-OIG A11-B0001)




                                                                                                        14
•      potential duplicate payments. We will be following up on those payments. We made several

       recommendations to the Office of the Chief Financial Officer to identify and prevent

       duplicate payments. The recommendations focused on initiating or reviewing procedures to

       prevent duplicate payments, limiting drawdowns to authorized amounts, and making changes

       to bank accounts. The Department generally concurred with our recommendations and stated

       that it is in the process of addressing them.



•      Drawdown Controls in GAPS6 - We issued a report in September 2000, assessing whether

       the Department should implement additional controls to mitigate the negative effect of

       improper grant drawdown activity. The Department currently uses GAPS to provide funds to

       grant recipients. We found the potential for abuse of the grant delivery system. We

       recommended that the Department implement additional controls to detect and limit

       excessive drawdown transactions by grant recipients on a timely basis. In addition, we

       recommended that the Department provide project officers with guidance on establishing the

       appropriate control level (detective or preventive) for recipients in their program(s) once

       drawdown controls are implemented. Adoption of these recommendations will help the

       Department minimize the potential for GAPS payment abuse. The Department generally

       agreed with our recommendations and has plans to address them.



•      Investigations7 - In our September 19, 2000, testimony we indicated that we were conducting

       an investigation of individuals who, between 1997 and 1999, purchased and/or received

       electronic equipment paid for with federal funds for non-business related purposes and billed


6
    Audit of the Drawdown Controls in Grant Administration and Payment System (ED-OIG A03-80010)
7
    Information provided with respect to investigations is limited to what has been made a matter of public record.




                                                                                                                      15
    the Department for overtime hours not worked. The total cost of this activity was in excess

    of $1.2 million over a three-year period. Since September, four additional people have pled

    guilty to theft of government property and conspiracy charges in connection with this

    investigation, bringing the total number of guilty pleas to seven.



    We also indicated that my office and the Federal Bureau of Investigations are investigating

    the diversion of $1.9 million in Impact Aid grant funds wired into two unauthorized bank

    accounts. These Impact Aid funds should have been disbursed to two school districts in

    South Dakota. Nearly all the funds and property purchased with these funds were seized and

    forfeited to the United States and about $1.7 million was returned to the Department. Both

    cases are being supervised by the U.S. Attorney’s Office of the District of Columbia.




MONITORING IMPLEMENTATION OF RECOMMENDATIONS



There are a variety of ways in which the OIG monitors and reports on the Department’s

implementation of our recommendations. First, the OIG reports in its Semiannual Report to

Congress (SAR) all OIG audits issued in prior periods that were not resolved within the previous

six months. The OIG also reports on the status of corrective actions. This reporting mechanism

communicates to the Congress and the Department the status of prior OIG audits and

recommendations. The OIG’s reporting of unresolved audits and uncorrected recommendations

is not limited to financial audits. It also includes audits of the Department’s programs, computer

systems, and internal management operations.




                                                                                                     16
Since 1998, my office has provided the Congress a list of management challenges facing the

Department. Eight of the ten challenges have been reported before. As indicated above,

financial management was the first challenge listed in the most recent report. As part of that

challenge we reported the status of corrective actions taken on financial statement audit

recommendations.



Also, the OIG periodically plans for and performs audits of the Department’s audit follow-up

system. The general purpose of these audits is to obtain information, assure that the

Department’s audit follow-up system is functioning as intended, offer suggestions for

improvement where applicable, and to assess if appropriate corrective actions have been taken.

We currently have an audit follow-up assignment ongoing. The objectives of that audit are to:

    •    determine whether the Department’s controls ensure that agreed-upon corrective actions

         have been taken; and

    •    verify whether select corrective actions have been implemented as stated in the

         Department’s corrective action plans.



In addition, with respect to financial statement audits, the Government Auditing Standards

indicate that auditors should follow up on known material findings and recommendations from

previous audits. Our auditors disclose the status of prior year findings in a section at the end of

the Report on Internal Controls. This section presents the previous year’s material weaknesses

and reportable conditions, describes the control issue, and indicates the status of the current

audit.




                                                                                                      17
It is, of course, the responsibility of the Department to ensure that recommendations are

addressed and corrective actions implemented. OMB guidance on audit follow-up, Circular A-

50, states that the agency head is responsible for designating a top management official to

oversee audit follow-up, including resolution and corrective action. Agency management

officials are responsible for providing timely responses to the audit organization and taking

corrective action as agreed to. As GAO has stated, “Internal control serves as the first line of

defense in safeguarding assets and in helping to detect and prevent waste, fraud and abuse.”8



CONCLUSIONS



In summary, the Department has made progress. However, much work remains if the

Department is to reach its goal of obtaining an unqualified opinion on its financial statements

and eliminating internal control weaknesses and non-compliance with laws and regulations. We

and E&Y have made numerous recommendations to the Department over the years to improve

its financial management activities. The Department needs to remedy the underlying weaknesses

in its accounting systems and financial management activities. Implementation of our

recommendations will go a long way towards sound financial management in the Department.

We will work closely with the Department and the Congress to monitor the Department’s

progress towards making necessary improvements.



Mr. Chairman, this concludes my statement. I would be pleased to respond to any questions that

you or other Members of the Subcommittee may have at this time.

8
    GAO-01-104R, Education’s FY1999 Financial Management Weaknesses, October 16, 2000, page 9




                                                                                                   18
                                                                                            Attachment 1

                  Summary of FY 1999 Material Weaknesses and Reportable Conditions

            Issue Area                   Summary Control Issues                    FY 2000 Status
 Financial Reporting Needs to    Significant weaknesses in the              Improvements Noted -
 Be Strengthened                 Department’s financial reporting           Repeat Condition
 (Material Weakness)             processes existed as a result of the       Material Weakness
                                 EDCAPS general ledger software
                                 package, Financial Management
                                 System Software (FMSS).
 Reconciliations Need to Be      The Department did not perform             Improvements Noted -
 Improved                        proper or timely reconciliations of its    Repeat Condition
 (Material Weakness)             financial accounting records.              Material Weakness
 Controls Surrounding            Improvements are required in security      Improvements Noted -
 Information Systems Need        over financial systems and in disaster     Repeat Condition
 Enhancement                     recovery capabilities.                     Material Weakness
  (Material Weakness)
 Improvement of Credit Reform    The Department did not account for         Improvements Noted -
 Reporting is Needed (Material   transactions in accordance with the        Considered a Reportable
 Weakness)                       Federal Credit Reform Act of 1990.         Condition
 Documentation Supporting        Balances reported in subsidiary            Not Considered Reportable
 Obligations, Undelivered        records for allotments, obligations        Condition -
 Orders and Unobligated          incurred, undelivered orders, and the      Issues Reported in the
 Balances Needs to be            unobligated balances of funds were         Management Letter
 Improved                        inconsistent with balances reported
 (Reportable Condition)          on the financial statements.
 Communication and               The Department needs to improve its        Not Considered a Separate
 Coordination Efforts Need to    communication and coordination             Reportable Condition -
 be Improved for Financial       efforts among offices that are             Integrated within other
 Management                      responsible for providing information      internal control issues as
 (Reportable Condition)          in support of financial reporting.         appropriate
 Documentation Supporting        The Department needs to improve its        Not Considered Reportable
 Accounts Payable, Accrued       supporting documentation over              Condition -
 Liabilities, and Expenditures   liabilities and expenditures, subsidiary   Issues Reported in the
 Needs to be Improved            ledger system requirements, and            Management Letter
 (Reportable Condition)          refine the grant liability estimation
                                 methodology.
 Reporting and Monitoring of     The Department does not capitalize         Improvements Noted -
 Property and Equipment          purchases of property and equipment        Repeat Condition
 Needs to be Improved            and software. In addition, there are       Reportable Condition
 (Reportable Condition)          several internal control issues
                                 surrounding the Department’s efforts
                                 in safeguarding and reporting
                                 property and equipment.

Source: The U.S. Department of Education, Audited Financial Statements, Year Ended September 30,
2000, Report of Independent Auditors, Ernst & Young LLP (ED-OIG/A17-A0002, February 28, 2001).




                                                                                                         19
                                                                                          Attachment 2

                 Listing of Reports Related to Purchase Cards and Third Party Drafts


A&I 2000 – 001         Results of the OIG Review of the Office of Vocational and Adult
                       Education's Internal Controls Over the Procurement of Goods and
                       Services Using Third Party Drafts and Purchase Cards 4/18/00

A&I 2000 – 002         Results of the OIG Review of the Office of Elementary and Secondary
                       Education's Internal Controls Over the Procurement of Goods and
                       Services Using Third Party Drafts and Purchase Cards 5/22/00

A&I 2000 – 003         Results of the OIG Review of the Office of Bilingual Education and
                       Minority Languages Affairs' Internal Controls Over the Procurement of
                       Goods and Services Using Third Party Drafts and Purchase Cards 5/23/00

A&I 2000 – 004         Results of the OIG Review of the Office of Management's Internal
                       Controls Over the Procurement of Goods and Services Using Third Party
                       Drafts and Purchase Cards 6/26/00

A&I 2000 – 005         Results of the OIG Review of the Office of Special Education and
                       Rehabilitative Services' Internal Controls Over the Procurement of Goods
                       and Services Using Third Party Drafts and Purchase Cards 7/19/00

A&I 2000 – 006         Results of the OIG Review of the Office of Chief Financial Officer/Office
                       of Chief Information Officer's Internal Controls Over the Procurement of
                       Goods and Services Using Third Party Drafts and Purchase Cards 7/26/00

A&I 2000 – 007         Results of the OIG Review of the Office of Civil Rights' Internal Controls
                       Over the Procurement of Goods and Services Using Third Party Drafts
                       and Purchase Cards 8/2/00

A&I 2000 – 008         Results of the OIG Review of the Office of Intergovernmental and
                       Interagency Affairs' Internal Controls Over the Procurement of Goods and
                       Services Using Third Party Drafts and Purchase Cards 8/18/00

A&I 2000 – 009         Results of the OIG Review of the Office of Educational Research and
                       Improvement's Internal Controls Over the Procurement of Goods and
                       Services Using Third Party Drafts and Purchase Cards 8/28/00

A&I 2000 – 010         Results of the OIG Review of the Office of the Secretary/Office of the
                       Deputy Secretary/Office of Legislation and Congressional Affairs' Internal
                       Controls Over the Procurement of Goods and Services Using Third Party
                       Drafts and Purchase Cards 8/31/00




                                                                                                    20
                                                                                       Attachment 2

A&I 2000 – 011        Results of the OIG Review of the Office of the Under Secretary's Internal
                      Controls Over the Procurement of Goods and Services Using Third Party
                      Drafts and Purchase Cards 9/19/00

A&I 2000 – 012        Results of the OIG Review of the Office of the General Counsel's Internal
                      Controls Over the Procurement of Goods and Services Using Third Party
                      Drafts and Purchase Cards 9/18/00

A&I 2000 – 013        Results of the OIG Review of the Office of Postsecondary Education's
                      Internal Controls Over the Procurement of Goods and Services Using
                      Third Party Drafts and Purchase Cards 9/19/00

A&I 2000 – 014        Results of the OIG Review of Student Financial Assistance’s Internal
                      Controls Over the Procurement of Goods and Services Using Third Party
                      Drafts and Purchase Cards 10/5/00

A&I 2000 – 015        Results of the OIG Review of Internal Controls Over the Procurement of
                      Goods and Services Using Third Party Drafts and Purchase Cards
                      10/13/00



The web address for obtaining these reports is: http://www.ed.gov/offices/OIG/AIReports.htm




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