Archived Information

![](media/image2.png){width="6.768055555555556in"
height="9.039583333333333in"}**\`**

The *Performance and Accountability Report* for fiscal year (FY) 2004
presents, to the Administration and the public, the status of the
Department of Education's program performance and fiscal operations.
This document is the principal report produced by the Department
delineating our improvements and progress for this year.

The Department recognizes the importance of public disclosure and
accountability to the American taxpayer. This *Performance and
Accountability Report* is a demonstration of our commitment to fulfill
our fiduciary and reporting responsibilities.

I am pleased to present the U.S. Department of Education's financial
statements for FY 2004 as a part of this report. For the third
consecutive year, our independent public accounting firm, Ernst & Young
LLP, selected by our Inspector General, issued an unqualified or "clean"
opinion on the Department's consolidated financial statements. This
outcome is the best possible audit result and ensures that the reader
can have confidence that the financial statements fairly state the
Department's financial position.

The financial statements fairly present the Department's financial
position and were prepared in accordance with standards developed by the
Federal Accounting Standards Advisory Board and accounting principles
generally accepted in the United States. These statements are presented
in the format required by the Office of Management and Budget and the
Government Management Reform Act of 1994.

We continue to strive for excellence in the financial management of the
Department of Education as illustrated throughout this *Performance and
Accountability Report*. In FY 2004, the Department had no material
weaknesses. The Department continues its efforts to correct our two
reportable conditions. To address the reportable condition noted in
FY 2003 by our auditors regarding Credit Reform, the Department
established a working group to study, analyze, and rectify the issues.
Further, steps were taken to improve the controls surrounding
information systems. This important work will be completed in FY 2005.

![](media/image3.png){width="2.1979166666666665in"
height="0.8229166666666666in"}The Department accomplished three
significant achievements in FY 2004: (1) the FY 2003 *Performance and
Accountability Report* won the Certificate of Excellence in
Accountability Reporting Award, (2) the Department achieved "Green"
status in Financial Management on the President's Management Scorecard,
and (3) the Department received the Alexander Hamilton Award for our use
of technology relating to treasury management. These achievements are
recognition of the Department's commitment to continually strive for
excellence.

Jack Martin

Chief Financial Officer

November 12, 2004

Management has prepared the accompanying financial statements to report
the financial position and operational results for the U.S. Department
of Education for fiscal years 2004 and 2003 pursuant to the requirements
of Title 31 of the United States Code, section 3515(b).

While these statements have been prepared from the books and records of
the Department in accordance with generally accepted accounting
principles (GAAP) for federal entities and the formats prescribed by OMB
Bulletin 01-09, *Form and Content of Agency Financial Statements*, these
statements are in addition to the financial reports used to monitor and
control budgetary resources, which are prepared from the same books and
records.

The statements should be read with the understanding that they represent
a component of the U.S. Government, a sovereign entity. One implication
of this is that the liabilities presented herein cannot be liquidated
without the enactment of appropriations, and ongoing operations are
subject to the enactment of future appropriations.

  ---------------- -------------------- ------------------- --------------------------------------- ------------ ------------
  **United States                                                                                                
  Department of                                                                                                  
  Education**                                                                                                    

  **Consolidated                                                                                                 
  Balance Sheet**                                                                                                

  **As of                                                                                                        
  September 30,                                                                                                  
  2004 and 2003**                                                                                                

  **(Dollars in                                                                                                  
  Millions)**                                                                                                    

  **0**                                                                                                          

  ** **            ** **                ** **               ** **                                   ** **        ** **

  ** **            ** **                ** **               ** **                                   **Fiscal     **Fiscal
                                                                                                    Year**       Year**

  ** **            ** **                ** **               ** **                                   **2004**     **2003**

  ** **            ** **                ** **               ** **                                                 

                   Assets:                                                                                        

                   Intragovernmental:                                                                             

  1001                                                      Fund Balance with Treasury (Note 2)     \$ 66,371    \$ 57,908

  1003                                                      Accounts Receivable (Note 5)            3            4

  \#                                                        Other Intragovernmental Assets          17           27

                                        Total                                                       66,391       57,939
                                        Intragovernmental                                                        

                                                                                                                  

  2001                                  Cash and Other                                              1,040        1,108
                                        Monetary Assets                                                          
                                        (Note 3)                                                                 

  2003                                  Accounts                                                    152          179
                                        Receivable, Net                                                          
                                        (Note 5)                                                                 

  2004                                  Credit Program                                              104,966      97,965
                                        Receivables, Net                                                         
                                        (Note 4)                                                                 

  2006                                  General Property,                                           21           28
                                        Plant and                                                                
                                        Equipment, Net                                                           
                                        (Note 6)                                                                 

  2007                                  Other Assets                                                39           39

                                                                                                                  

                   Total Assets                                                                     \$ 172,609   \$ 157,258

                                                                                                                  

                                                                                                                  

                   Liabilities:                                                                                   

                   Intragovernmental:                                                                             

  3001                                                      Accounts Payable                        \$ 14        \$ 14

  3002                                                      Treasury Debt (Note 7)                  96,649       92,018

  3003                                                      Guaranty Agency Federal and Restricted  1,040        1,107
                                                            Funds Due to Treasury (Note 3)                       

  3004                                                      Payable to Treasury (Note 8)            4,993        7,023

  3005                                                      Other Intragovernmental Liabilities     4            105
                                                            (Note 9)                                             

                                        Total                                                       102,700      100,267
                                        Intragovernmental                                                        

                                                                                                                  

  4001                                  Accounts Payable                                            485          286

  4002                                  Accrued Grant                                               1,361        1,366
                                        Liability (Note 11)                                                      

  4003                                  Liabilities for                                             23,329       15,432
                                        Loan Guarantees                                                          
                                        (Note 4)                                                                 

  4004                                  Federal Employee                                            19           22
                                        and Veterans\'                                                           
                                        Benefits (Note 10)                                                       

  4005                                  Other Liabilities                                           381          450
                                        (Note 9)                                                                 

                                                                                                                  

                   Total Liabilities                                                                \$ 128,275   \$ 117,823
                   (Note 10)                                                                                     

                                                                                                                  

                                        Commitments and                                                           
                                        Contingencies (Note                                                      
                                        18)                                                                      

                                                                                                                  

                   Net Position:                                                                                  

  6001                                  Unexpended                                                  \$ 47,285    \$ 43,931
                                        Appropriations                                                           
                                        (Note 12)                                                                

  6002                                  Cumulative Results                                          (2,951)      (4,496)
                                        of Operations (Note                                                      
                                        12)                                                                      

                                                                                                                  

                   Total Net Position                                                               \$ 44,334    \$ 39,435

                                                                                                                  

                   Total Liabilities                                                                \$ 172,609   \$ 157,258
                   and Net Position                                                                              
  ---------------- -------------------- ------------------- --------------------------------------- ------------ ------------

The accompanying notes are an integral part of these statements.

  ---------------- ----------------- ------------------------------------------ ------------ -----------
  **United States                                                                            
  Department of                                                                              
  Education**                                                                                

  **Consolidated                                                                             
  Statement of Net                                                                           
  Cost**                                                                                     

  **For the Years                                                                            
  Ended September                                                                            
  30, 2004 and                                                                               
  2003**                                                                                     

  **(Dollars in                                                                              
  Millions)**                                                                                

                                                                                             

                                                                                **Fiscal     **Fiscal
                                                                                Year**       Year**

                                                                                **2004**     **2003**

  ***Program                                                                                 
  Costs***                                                                                   

                   **Program A                                                                
                   (Enhancement of                                                           
                   Postsecondary and                                                         
                   Adult                                                                     
                   Education)**                                                              

                   \#                Intragovernmental Gross Costs              \$ 6,376     \$ 6,627

                   \#                Less: Intragovernmental Earned Revenue     1,627        1,535

                                     *Intragovernmental Net Costs*              4,749        5,092

                                                                                             

                   \#                Gross Costs with the Public                28,167       26,060

                   \#                Less: Earned Revenues from the Public      4,812        4,972

                                     *Net Costs with the Public*                23,355       21,088

                                                                                             

                   **Program A Total                                            \$ 28,104    \$ 26,180
                   Net Cost**                                                                

                                                                                             

                   **Program B                                                                
                   (Creation of                                                              
                   Student                                                                   
                   Achievement,                                                              
                   Culture of                                                                
                   Achievement and                                                           
                   Safe Schools)**                                                           

                   \#                Intragovernmental Gross Costs              \$ 174       \$ 152

                   \#                Less: Intragovernmental Earned Revenue     103          8

                                     *Intragovernmental Net Costs*              71           144

                                                                                             

                   \#                Gross Costs with the Public                21,933       20,128

                   \#                Less: Earned Revenues from the Public      \(0\)        \(0\)

                                     *Net Costs with the Public*                21,933       20,128

                                                                                             

                   **Program B Total                                            \$ 22,004    \$ 20,272
                   Net Cost**                                                                

                                                                                             

                   **Program C                                                                
                   (Transformation                                                           
                   of Education)**                                                           

                   \#                Intragovernmental Gross Costs              \$ 77        \$ 31

                   \#                Less: Intragovernmental Earned Revenue     4            6

                                     *Intragovernmental Net Costs*              73           25

                                                                                             

                   \#                Gross Costs with the Public                578          632

                   \#                Less: Earned Revenues from the Public      14           \(0\)

                                     *Net Costs with the Public*                564          632

                                                                                             

                   **Program C Total                                            \$ 637       \$ 657
                   Net Cost**                                                                

                                                                                             

                   **Program D                                                                
                   (Special                                                                  
                   Education and                                                             
                   Program                                                                   
                   Execution)**                                                              

                   \#                Intragovernmental Gross Costs              \$ 34        \$ 19

                   \#                Less: Intragovernmental Earned Revenue     4            2

                                     *Intragovernmental Net Costs*              30           17

                                                                                             

                   \#                Gross Costs with the Public                12,848       11,678

                   \#                Less: Earned Revenues from the Public      \(0\)        \(0\)

                                     *Net Costs with the Public*                12,848       11,678

                                                                                             

                   **Program D Total                                            \$ 12,878    \$ 11,695
                   Net Cost**                                                                

                                                                                             

  **Total Program                                                               **\$         **\$
  Net Costs**                                                                   63,623**     58,804**

                                                                                              

                                                                                             

  **Net Cost of                                                                 **\$         **\$
  Operations (Note                                                              63,623**     58,804**
  17)**                                                                                      
  ---------------- ----------------- ------------------------------------------ ------------ -----------

The accompanying notes are an integral part of these statements.

  -----------------------------------------------------------------------
  **United States Department of Education**

  **Consolidated Statement of Changes in Net Position**

  **For the Years Ended September 30, 2004 and 2003**

  **(Dollars in Millions)**
  -----------------------------------------------------------------------

![](media/image4.wmf)

The accompanying notes are an integral part of these statements.

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| t |   |                       |        |          |   |   |       |         |
| y |   |                       |        |          |   |   |       |         |
| : |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Appropriations        | \$     | \$ 1     |   |   | \$    | \$ 16   |
|   | # | Received              | 72,090 |          |   |   | 6     |         |
|   | # |                       |        |          |   |   | 7,776 |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Borrowing Authority   | 0      | 22,483   |   |   | 0     | 21,766  |
|   | # |                       |        |          |   |   |       |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Net Transfers         | 0      | 0        |   |   | 0     | 0       |
|   | # |                       |        |          |   |   |       |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Other                 | 0      | 0        |   |   | 0     | 0       |
|   | # |                       |        |          |   |   |       |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 2 |   |                       |        |          |   |   |       |         |
| \ |   |                       |        |          |   |   |       |         |
| . |   |                       |        |          |   |   |       |         |
| U |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| b |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| g |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| d |   |                       |        |          |   |   |       |         |
| B |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| c |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| : |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Beginning of Period   | 5,329  | 9,766    |   |   | 4,682 | 7,805   |
|   | # |                       |        |          |   |   |       |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 3 |   |                       | 0      | 0        |   |   |       |         |
| \ |   |                       |        |          |   |   |       |         |
| . |   |                       |        |          |   |   |       |         |
| S |   |                       |        |          |   |   |       |         |
| p |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| d |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| g |   |                       |        |          |   |   |       |         |
| A |   |                       |        |          |   |   |       |         |
| u |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| h |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| y |   |                       |        |          |   |   |       |         |
| F |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| m |   |                       |        |          |   |   |       |         |
| O |   |                       |        |          |   |   |       |         |
| f |   |                       |        |          |   |   |       |         |
| f |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| g |   |                       |        |          |   |   |       |         |
| C |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| c |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| : |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 3 |   |                       |        |          |   |   |       |         |
| . |   |                       |        |          |   |   |       |         |
| 1 |   |                       |        |          |   |   |       |         |
| E |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| d |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Collected             | 5,250  | 37,716   |   |   | 5,387 | 32,978  |
|   | # |                       |        |          |   |   |       |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Receivable From       | 0      | 4        |   |   | \     | 0       |
|   | # | Federal Sources       |        |          |   |   | (70\) |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 3 |   |                       |        |          |   |   | 0     |         |
| . |   |                       |        |          |   |   |       |         |
| 2 |   |                       |        |          |   |   |       |         |
| C |   |                       |        |          |   |   |       |         |
| h |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| g |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| U |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| f |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| d |   |                       |        |          |   |   |       |         |
| C |   |                       |        |          |   |   |       |         |
| u |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| m |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| O |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| d |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Advance received      | \(34\) | 0        |   |   | 55    | 0       |
|   | # | (collected)           |        |          |   |   |       |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Without advance from  | \(5\)  | 0        |   |   | 76    | 0       |
|   | # | Federal sources       |        |          |   |   |       |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 3 |   |                       | \$     | \$       |   |   | \$    | \$      |
| . |   |                       | 5,211  | 37,720   |   |   | 5,448 | 32,978  |
| 5 |   |                       |        |          |   |   |       |         |
| S |   |                       |        |          |   |   |       |         |
| u |   |                       |        |          |   |   |       |         |
| b |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 4 |   |                       | 1,587  | 3,047    |   |   | 1,277 | 269     |
| \ |   |                       |        |          |   |   |       |         |
| . |   |                       |        |          |   |   |       |         |
| R |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| c |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| v |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| f |   |                       |        |          |   |   |       |         |
| P |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| Y |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| O |   |                       |        |          |   |   |       |         |
| b |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| g |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 6 |   |                       | (      | (18,893) |   |   | (6    | (       |
| \ |   |                       | 6,575) |          |   |   | ,225) | 17,471) |
| . |   |                       |        |          |   |   |       |         |
| P |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| m |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| y |   |                       |        |          |   |   |       |         |
| N |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| A |   |                       |        |          |   |   |       |         |
| v |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| b |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| * |   |                       | \$     | \$       |   |   | \$    | \$      |
| * |   |                       | 77,642 | 54,124   |   |   | 7     | 45,363  |
| T |   |                       |        |          |   |   | 2,958 |         |
| o |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| B |   |                       |        |          |   |   |       |         |
| u |   |                       |        |          |   |   |       |         |
| d |   |                       |        |          |   |   |       |         |
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| e |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
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| e |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| u |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| c |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| ( |   |                       |        |          |   |   |       |         |
| N |   |                       |        |          |   |   |       |         |
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| * |   |                       |        |          |   |   |       |         |
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+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| * |   |                       |        |          |   |   |       |         |
| * |   |                       |        |          |   |   |       |         |
| S |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
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| u |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
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| f |   |                       |        |          |   |   |       |         |
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| d |   |                       |        |          |   |   |       |         |
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| t |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| y |   |                       |        |          |   |   |       |         |
| R |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| u |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| c |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| : |   |                       |        |          |   |   |       |         |
| * |   |                       |        |          |   |   |       |         |
| * |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 8 |   |                       |        |          |   |   |       |         |
| \ |   |                       |        |          |   |   |       |         |
| . |   |                       |        |          |   |   |       |         |
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| b |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| g |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| I |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| c |   |                       |        |          |   |   |       |         |
| u |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| d |   |                       |        |          |   |   |       |         |
| : |   |                       |        |          |   |   |       |         |
| ( |   |                       |        |          |   |   |       |         |
| N |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| 1 |   |                       |        |          |   |   |       |         |
| 4 |   |                       |        |          |   |   |       |         |
| ) |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Direct                | \$     | \$       |   |   | \$    | \$      |
|   | # |                       | 75,306 | 38,996   |   |   | 6     | 35,597  |
|   | # |                       |        |          |   |   | 7,549 |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Reimbursable          | 91     | \(0\)    |   |   | 82    | \(0\)   |
|   | # |                       |        |          |   |   |       |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Subtotal              | \$     | \$       |   |   | \$    | \$      |
|   | # |                       | 75,397 | 38,996   |   |   | 6     | 35,597  |
|   | # |                       |        |          |   |   | 7,631 |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 9 |   |                       |        |          |   |   |       |         |
| \ |   |                       |        |          |   |   |       |         |
| . |   |                       |        |          |   |   |       |         |
| U |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| b |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| g |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| d |   |                       |        |          |   |   |       |         |
| B |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| c |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| : |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Apportioned           | 655    | 948      |   |   | 2,981 | 396     |
|   | # |                       |        |          |   |   |       |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| > |   |                       | 1,590  | 14,180   |   |   | 2,346 | 9,370   |
|   |   |                       |        |          |   |   |       |         |
| 1 |   |                       |        |          |   |   |       |         |
| 0 |   |                       |        |          |   |   |       |         |
| U |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| b |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| g |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
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| d |   |                       |        |          |   |   |       |         |
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| l |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| c |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| > |   |                       |        |          |   |   |       |         |
|   |   |                       |        |          |   |   |       |         |
| N |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| > |   |                       |        |          |   |   |       |         |
|   |   |                       |        |          |   |   |       |         |
| A |   |                       |        |          |   |   |       |         |
| v |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| b |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| * |   |                       | \$     | \$       |   |   | \$    | \$      |
| * |   |                       | 77,642 | 54,124   |   |   | 7     | 45,363  |
| T |   |                       |        |          |   |   | 2,958 |         |
| o |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
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| S |   |                       |        |          |   |   |       |         |
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| f |   |                       |        |          |   |   |       |         |
| B |   |                       |        |          |   |   |       |         |
| u |   |                       |        |          |   |   |       |         |
| d |   |                       |        |          |   |   |       |         |
| g |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
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| r |   |                       |        |          |   |   |       |         |
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| R |   |                       |        |          |   |   |       |         |
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| s |   |                       |        |          |   |   |       |         |
| * |   |                       |        |          |   |   |       |         |
| * |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| * |   |                       |        |          |   |   |       |         |
| * |   |                       |        |          |   |   |       |         |
| R |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| h |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| p |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
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| O |   |                       |        |          |   |   |       |         |
| b |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| g |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| O |   |                       |        |          |   |   |       |         |
| u |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
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| * |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 1 |   |                       | \$     | \$ 8,399 |   |   | \$    | \$      |
| 2 |   |                       | 42,419 |          |   |   | 3     | 6,812   |
| . |   |                       |        |          |   |   | 8,961 |         |
| O |   |                       |        |          |   |   |       |         |
| b |   |                       |        |          |   |   |       |         |
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| d |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 1 |   |                       |        |          |   |   |       |         |
| 4 |   |                       |        |          |   |   |       |         |
| . |   |                       |        |          |   |   |       |         |
| O |   |                       |        |          |   |   |       |         |
| b |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| g |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| d |   |                       |        |          |   |   |       |         |
| B |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| c |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| , |   |                       |        |          |   |   |       |         |
| N |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| , |   |                       |        |          |   |   |       |         |
| E |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| d |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| f |   |                       |        |          |   |   |       |         |
| P |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| r |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| d |   |                       |        |          |   |   |       |         |
| : |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Accounts Receivable   | \(3\)  | \(2\)    |   |   | \(3\) | \(0\)   |
|   | # |                       |        |          |   |   |       |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Unfilled customer     | \(71\) | \(0\)    |   |   | \     | \(0\)   |
|   | # | orders from Federal   |        |          |   |   | (76\) |         |
|   | # | Sources               |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Undelivered Orders    | 46,468 | 7,666    |   |   | 4     | 8,382   |
|   | # |                       |        |          |   |   | 0,744 |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Accounts Payable      | 1,753  | 124      |   |   | 1,755 | 16      |
|   | # |                       |        |          |   |   |       |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 1 |   |                       |        |          |   |   |       |         |
| 5 |   |                       |        |          |   |   |       |         |
| . |   |                       |        |          |   |   |       |         |
| O |   |                       |        |          |   |   |       |         |
| u |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| y |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| : |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Disbursements         | 68,087 | 36,557   |   |   | 6     | 33,741  |
|   | # |                       |        |          |   |   | 2,890 |         |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Collections           | (      | (37,716) |   |   | (5    | (       |
|   | # |                       | 5,217) |          |   |   | ,443) | 32,978) |
|   | # |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
|   | \ | Subtotal              | \$     | \$       |   |   | \$    | \$ 763  |
|   | # |                       | 62,870 | (1,159)  |   |   | 5     |         |
|   | # |                       |        |          |   |   | 7,447 |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| 1 |   |                       | 51     | \(0\)    |   |   | 44    | \(0\)   |
| 6 |   |                       |        |          |   |   |       |         |
| . |   |                       |        |          |   |   |       |         |
| L |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| : |   |                       |        |          |   |   |       |         |
| O |   |                       |        |          |   |   |       |         |
| f |   |                       |        |          |   |   |       |         |
| f |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| n |   |                       |        |          |   |   |       |         |
| g |   |                       |        |          |   |   |       |         |
| R |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| c |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| i |   |                       |        |          |   |   |       |         |
| p |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+
| * |   |                       | \$     | \$       |   |   | \$    | \$ 763  |
| * |   |                       | 62,819 | (1,159)  |   |   | 5     |         |
| N |   |                       |        |          |   |   | 7,403 |         |
| e |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| O |   |                       |        |          |   |   |       |         |
| u |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| l |   |                       |        |          |   |   |       |         |
| a |   |                       |        |          |   |   |       |         |
| y |   |                       |        |          |   |   |       |         |
| s |   |                       |        |          |   |   |       |         |
| ( |   |                       |        |          |   |   |       |         |
| N |   |                       |        |          |   |   |       |         |
| o |   |                       |        |          |   |   |       |         |
| t |   |                       |        |          |   |   |       |         |
| e |   |                       |        |          |   |   |       |         |
| 1 |   |                       |        |          |   |   |       |         |
| 4 |   |                       |        |          |   |   |       |         |
| ) |   |                       |        |          |   |   |       |         |
| * |   |                       |        |          |   |   |       |         |
| * |   |                       |        |          |   |   |       |         |
+---+---+-----------------------+--------+----------+---+---+-------+---------+

The accompanying notes are an integral part of these statements.

  ---------------- ------- ------- ------------------------------------------ ----------- ------- -----------
  **United States                                                                                 
  Department of                                                                                   
  Education**                                                                                     

  **Consolidated                                                                                  
  Statement of                                                                                    
  Financing**                                                                                     

  **For the Years                                                                                 
  Ended September                                                                                 
  30, 2004 and                                                                                    
  2003**                                                                                          

  **(Dollars in                                                                                   
  Millions)**                                                                                     

                                                                                                  

  ** **            ** **   ** **   ** **                                      **Fiscal    ** **   **Fiscal
                                                                              Year**              Year**

  ** **            ** **   ** **   ** **                                      **2004**    ** **   **2003**

                                                                                                   

  **Resources Used                                                                                 
  to Finance                                                                                      
  Activities**                                                                                    

  **Budgetary                                                                                      
  Resources                                                                                       
  Obligated**                                                                                     

  ** **                            Obligations Incurred (Note 14)             \$                  \$
                                                                              (114,393)           (103,228)

  ** **                            Less: Spending Authority from Offsetting   47,565              39,972
                                   Collections & Recoveries                                       

  ** **                            Obligations Net of Offsetting Collections  (66,828)            (63,256)
                                   and Recoveries                                                 

  ** **                            Less: Offsetting Receipts                  \(51\)              \(44\)

  ** **                            Net Obligations                            \$ (66,879)         \$ (63,300)

  **Other                                                                                          
  Resources**                                                                                     

  ** **                            Transfers In/Out Without Reimbursement     0                   0
                                   (+/-)                                                          

  ** **                            Imputed Financing From Costs Absorbed by   \(32\)              \(30\)
                                   Others                                                         

  ** **                            Net Other Resources Used to Finance        \(32\)              \(30\)
                                   Activities                                                     

  ** **                                                                                            

  **Total                                                                     \$ (66,911)         \$ (63,330)
  Resources Used                                                                                  
  to Finance                                                                                      
  Activities**                                                                                    

  ** **                                                                                            

  **Resources Used                                                                                 
  to Finance Items                                                                                
  Not Part of Net                                                                                 
  Cost of                                                                                         
  Operations**                                                                                    

  ** **                            Change in Budgetary Resources Obligated    \$ (4,809)          \$ (5,251)
                                   for Goods, Services and Benefits Ordered                       
                                   but not Yet Provided (+/-)                                     

  ** **                            Resources that Fund Expenses Recognized in 213                 (1,258)
                                   Prior Period (Note 15)                                         

  ** **                                                                                            

  ** **                            Credit Program Collections Which           35,339              31,786
                                   Increase/Decrease Liabilities for Loan                         
                                   Guarantees, or Credit Program Receivables,                     
                                   Net including Allowances for Subsidy                           

  ** **                                                                                            

  ** **            14.20           Other                                      0                   \(72\)

  ** **                            Resources Used to Finance the Acquisition  (31,145)            (28,065)
                                   of Fixed Assets, or Increase/Decrease                          
                                   Liabilities for Loan Guarantees or Credit                      
                                   Program Receivables, Net in the Current or                     
                                   Prior Period                                                   

  ** **                            ** **                                                           

  **Total                                                                     \$ (402)            \$ (2,860)
  Resources Used                                                                                  
  to Finance Items                                                                                
  Not Part of the                                                                                 
  Net Cost of                                                                                     
  Operations**                                                                                    

  ** **                                                                                            

  **Total                                                                     \$ (66,509)         \$ (60,470)
  Resources Used                                                                                  
  to Finance the                                                                                  
  Net Cost of                                                                                     
  Operations**                                                                                    

  ** **                                                                                            

  **Components of                                                                                  
  the Net Cost of                                                                                 
  Operations that                                                                                 
  Will Not Require                                                                                
  or Generate                                                                                     
  Resources in the                                                                                
  Current Period**                                                                                

                                                                                                   

  Components                                                                                       
  Requiring or                                                                                    
  Generating                                                                                      
  Resources in                                                                                    
  Future Periods                                                                                  

                                   Increase in Annual Leave Liability         \$ (30)             \$ (26)

                                   Upward/Downward Reestimates of Credit      (1,559)             (1,318)
                                   Subsidy Expense                                                

                                   Increase in Exchange Revenue Receivable    1,070               1,088
                                   from the Public                                                

                                   Other (+/-)                                41                  \(11\)

                                                                                                   

                                   Total Components of the Net Cost of        \$ (478)            \$ (267)
                                   Operations that Will Require or Generate                       
                                   Resources in Future Periods                                    

                                                                                                   

  Components Not                                                                                   
  Requiring or                                                                                    
  Generating                                                                                      
  Resources                                                                                       

                                   Depreciation and Amortization              \$ 1,797            \$ 1,933

                                   Other (+/-) (Note 15)                      1,567               0

                                                                                                   

                                   Total Components of the Net Cost of        \$ 3,364            \$ 1,933
                                   Operations that Will Not Require or                            
                                   Generate Resources                                             

                                                                                                   

  **Total                                                                     \$ 2,886            \$ 1,666
  Components of                                                                                   
  the Net Cost of                                                                                 
  Operations that                                                                                 
  Will Not Require                                                                                
  or Generate                                                                                     
  Resources in the                                                                                
  Current Period**                                                                                

                                                                                                   

  **Net Cost of                                                               \$ (63,623)         \$ (58,804)
  Operations (Note                                                                                
  17)**                                                                                           
  ---------------- ------- ------- ------------------------------------------ ----------- ------- -----------

The accompanying notes are an integral part of these statements.