fy 2021

AGENCY

FINANCIAL

REPORT

U.S. DEPARTMENT OF EDUCATION
U.S. Department of Education

Miguel Cardona

Secretary

Office of Finance and Operations

Denise Carter

Delegated the authority to perform the functions and duties of the position of Chief Financial Officer 

November 19, 2021

This report is in the public domain. Authorization to reproduce it in whole or in part is granted. While permission to 

reprint this publication is not necessary, the citation should be U.S. Department of Education, Fiscal Year 2021 Agency 

Financial Report, Washington, DC. 

This report is available at http://www.ed.gov/about/reports/annual/index.html

NOTICE OF AVAILABILITY OF ALTERNATE FORMATS

On request, the report also is available in alternative formats, such as Braille, large print, or compact disc. For more information, 

please contact our Alternate Format Center at 202-260-0852 or the 504 coordinator via email at om_eeos@ed.gov

To become connected to the Department through social media, please visit the Department’s website at www.ed.gov. Our 

Twitter page is at @usedgov, and our blog is at Homeroom.

NOTICE TO LIMITED ENGLISH PROFICIENT PERSONS

If you have difficulty understanding English, you may request language assistance services, free of charge, for this 

Department information by calling 1-800-USA-LEARN (1-800-872-5327) (TTY: 1-800-877-8339), 

or by emailing us at Ed.Language.Assistance@ed.gov

For fiscal year 2021, in addition to the Agency Financial Report (AFR), the Department will post to its website the Annual 

Performance Report and Annual Performance Plan (Report and Plan). This Report and Plan and the Congressional Budget 

Justification will be posted on the Department’s website at http://www.ed.gov/about/reports/annual/index.html with the 

FY 2023 budget.

Please submit your comments and questions regarding this report, and any suggestions to improve its usefulness to 

AFRComments@ed.gov or write to:

Office of Finance and Operations

U.S. Department of Education

Washington, DC 20202-0600
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION i

About This Report

The purpose of the U.S. Department of Education’s 

(Department’s) fiscal year (FY) 2021 Agency Financial 

Report (AFR) is to inform Congress, the President, other 

external stakeholders, and the American people on how 

the Department used the federal resources entrusted 

to it to advance the mission of the Department to 

promote student achievement and preparation for global 

competitiveness by fostering educational excellence and 

ensuring equal access. The Department accomplishes 

its mission and the related strategic goals and objectives 

by administering programs that range from preschool 

education through postdoctoral research; enforcing 

civil rights laws to provide equal access and treatment; 

and supporting research that examines ways that states, 

schools, districts, and postsecondary institutions can 

improve America’s education system. As evidenced by 

the information contained in this AFR, the Department 

has demonstrated that it is a good steward of financial 

resources and has put in place well-controlled and wellmanaged business and financial management systems, 

processes, and practices. 

The AFR also provides high-level financial and performance 

highlights, assessments of controls, a summary of challenges, 

and a demonstration of the Department’s stewardship. 

This report is required by legislation and complies with the 

requirements of the Office of Management and Budget’s 

Circulars A-11, Preparation, Submission, and Execution of 

the Budget; A-123, Management’s Responsibility for Enterprise 

Risk Management and Internal Control; and A-136, Financial 

Reporting Requirements. 

Federal Student Aid (FSA), a principal office of the 

Department and a designated Performance-Based 

Organization, produces a separate Annual Report that 

details its financial and program performance. Summary 

level information about FSA activities can be found in the 

applicable sections of this report. For more detail on FSA’s 

performance and financial information, refer to www.

StudentAid.gov.

Certificate of Excellence

The Department won its 17th prestigious 

Certificate of Excellence in Accountability 

Reporting award from the Association of 

Government Accountants for its FY 2020 AFR. 

Additionally, the Department was awarded 

with a Best-in-Class award for an Innovative 

Presentation of A Matter of Wide Public Interest.
ii FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

How This Report Is Organized

The AFR is designed to focus on use of federal resources provided to or distributed by the Department to support its 

mission, with an emphasis on the challenges ahead.

M A NAGEMENT’S DISCUSSION

and ANALYSIS

This section provides information about the Department’s mission and organizational structure 

as well as its high-level performance results, financial highlights, management assurances 

regarding internal controls, and forward-looking information.

FINANCIAL SECTION

This section provides a message from the chief financial officer, the financial statements and 

notes, required supplementary information, and the report from the independent auditors.

OTHER INFORMATION

This section provides the Office of Inspector General’s Management and Performance Challenges 

for FY 2022, a summary of financial statement audit and management assurances, Payment 

Integrity Information Act reporting details, civil monetary penalty adjustment for inflation, and 

Grants Oversight and New Efficiency Act of 2016 and grant closeout process reporting.

APPENDICES

This section provides a listing of selected Department web links, education resources, and a 

glossary of acronyms and abbreviations.
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iv FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

November 19, 2021

Message From the Secretary

Fiscal year (FY) 2021, while challenging, was also a year in 

which the U.S. Department of Education (the Department) 

redoubled our efforts to ensure that the nation’s students 

receive an education that unlocks their potential—no 

matter their background or circumstance. With a great 

education, children can do and become anything they 

choose. That is the American dream so many of us have 

experienced, and I am committed to making sure that all 

our students can achieve their dreams. I see this Department 

as a service agency, devoted to that goal. 

Our priorities for FY 2021 were to: reopen schools safely 

for students, educators, and school staff amid the evolving 

COVID-19 pandemic, understanding the vital importance 

of in-person learning; reinvest in the supports and resources 

students need to thrive; and reimagine our education 

system so that it truly serves all students well. The current 

public health and resulting economic crises have revealed 

needs and yielded lessons that must inform our work with 

states and communities as, together, we strive to advance 

excellence and equity for the nation’s diverse learners. We 

can heal, restore, and rebuild—creating a U.S. education 

system that is better than ever before. 

I spent much of this year traveling to multiple states 

and territories, talking directly to educators, parents, 

and students; touring classrooms; visiting enriching and 

engaging summer programs; attending college vaccination 

clinics; and observing school buildings in desperate need 

of upgrade. I have seen firsthand the opportunities and 

challenges in education. I also have seen the incredible 

resilience of our communities and the immense care our 

educators have for their students. These experiences have 

given me an invaluable perspective and reinforced my 

passion for advancing the goals of President Biden’s Build 

Back Better agenda.

This is America’s moment to ensure that we reopen our 

schools safely while we deliver on education’s potential to 

be the “great equalizer”—the force that can open the doors 

of opportunity for every child. Simply going back to how 

things were before the pandemic would mean returning to 

a system in which too many students, particularly students 

of color, students from low-income backgrounds, English 

learners, and students with disabilities, would continue to 

be underserved. The potential of every child is limitless, 

but we know that educational opportunity—access to 

outstanding educators; safe, welcoming schools; rigorous 

coursework, and other critical support—is not distributed 

equally, which negatively impacts student outcomes. This 

Administration has made equity—making sure every

child receives what they need to succeed in school—a 

core priority. It is why we studied the disparate impacts 

of the pandemic on America’s students and made sure 

that schools had the resources they needed to reopen for 

in-person instruction and to support students’ academic, 

social, emotional, and mental health needs. 

This is America’s moment to reinvest in public education. 

That’s why the American Rescue Plan Act of 2021 (ARP) 

provides unprecedented resources to help schools meet the 

needs of students most affected by COVID-19—often 

the same students furthest from opportunity before the 

pandemic. Importantly, there is $122 billion in ARP 

Elementary and Secondary School Emergency Relief funds 

and $40 billion in ARP funds for emergency relief for 

colleges and universities. The Biden administration also has 

proposed historic investments in education, from preschool 

through college, via the Build Back Better agenda.

To support students during the pandemic, safely reopen 

schools, and begin the transformation of our education 

system, we, at the Department, have taken important steps. 

In March, we hosted the National Safe School Reopening 

Summit where panels of students, educators, school 

district leaders, and other partners engaged in productive 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION v

MESSAGE FROM THE SECRETARY

conversations about the pandemic’s impact, strategies 

to reopen schools, and ways to rebuild. We embarked 

on a listening tour to assess the needs of our local 

communities. We released three COVID-19 handbooks 

to help prekindergarten through grade 12 schools, as 

well as colleges and universities, address the pandemic’s 

impacts, and launched the Safer Schools and Campuses 

Best Practices Clearinghouse to share promising practices 

for reopening. We partnered with the National Governors 

Association and the Council of Chief State School 

Officers to create the Summer Learning and Enrichment 

Collaborative to help states and school districts use their 

ARP funds to address lost instructional and extracurricular 

time. We paused student loan payments, helping 

borrowers burdened by debt during the COVID-19 

emergency. We expanded the Second Chance Pell 

experiment, which provides Pell Grants to incarcerated 

students, so they may pursue postsecondary education 

and better their lives and the lives of their families. 

Finally, we partnered closely with experts at the federal, 

state, and local levels in shaping responsive policies and 

resources; provided continuous assistance and guidance to 

educators, students, and parents; and engaged thousands 

of stakeholders in our nationwide efforts.

This is America’s moment to reimagine education, in ways 

that are more innovative and inclusive, and fairer than ever. 

Toward that end, the Department’s Office for Civil Rights 

(OCR) published back-to-school resource collections 

designed to assist schools with planning for a successful 

and equitable return to prek-12 schools and college 

campuses. The two collections include fact sheets, Q&As, 

letters to educators, and other materials explaining the 

obligations that elementary, secondary, and postsecondary 

schools have under the federal civil rights laws enforced 

by OCR to provide educational environments free 

from discrimination. In June, OCR issued a Notice of 

Interpretation, explaining that it will enforce Title IX’s 

prohibition on discrimination on the basis of sex, to include 

discrimination based on sexual orientation and gender 

identity. In addition, the administration took action to 

help borrowers receive student loan discharges due to total 

and permanent disability and provided relief for tens of 

thousands of student loan borrowers whose postsecondary 

institutions engaged in misconduct. 

As we reimagine teaching and learning, we must do 

more to level the playing field, including providing a 

strong foundation from birth, improving the diversity of 

our teacher workforce, and creating learning pathways 

that work for all students. Our FY 2022 budget request 

includes nearly $103 billion for Department programs, a 

41% increase over the FY 2021 appropriation. The request 

would address disparities between under-resourced schools 

and their wealthier counterparts, expand access to quality 

preschool, increase the availability of wraparound services 

in underserved schools, provide greater funding for the 

Individuals with Disabilities Education Act, significantly 

increase Pell Grants, and offer two years of free community 

college to first-time college students.

The Department continues to make stewardship of 

taxpayer funds a priority. I have been assured that the 

financial and performance data included and assessed 

in this Agency Financial Report are complete and reliable 

in accordance with federal requirements. The financial 

report includes information and assurances about the 

Department’s financial management systems and controls 

as well as control and compliance challenges noted by the 

Department. Similarly, the Department’s related Annual 

Performance Report and Annual Performance Plan (Report 

and Plan) provides information on the overall performance 

of the Department as a federal agency. Each year this 

Report and Plan accompany the Department’s annual 

budget submission and links performance goals with 

resources for achieving targeted levels of performance.

This year, the Department received an unmodified or 

“clean” opinion on its FY 2021 financial statements. The 

preceding year (FY 2020), the internal control report 

identified one material weakness, “Controls over the 

Reliability of Underlying Data Used in Credit Reform Reestimates Need Improvement” for which the Department 

has developed corrective action plans that have been 

implemented over the past year. Nonetheless, this material 

weakness is included again in this year’s audit report. The 

Department remains committed to evaluating its internal 

controls for improvement opportunities.

There is a great sense of urgency about this work. 

Generations of inequity have left far too many students 

without high-quality, inclusive learning opportunities. A 

great education has the power to transform lives, uplift 

whole communities, and strengthen our democratic 

society—if we prioritize and invest in what works for 

students. The U.S. Department of Education has done so 

this year and will do so in the coming year and beyond.

Miguel A. Cardona, Ed.D.
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FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION vii

Contents

About This Report ..................................................i

How This Report Is Organized .............................ii

Message from the Secretary ...............................iv

M A N A G E M E N T ’S D I S C U S S I O N 

and ANALYSIS (UNAUDITED)

About the Management’s 

Discussion and Analysis ...................................... 2

About the Department ......................................... 3

The Department in Fiscal Year 2021 ................... 4

The Department’s Approach to Performance ...... 5

Financial Highlights ........................................... 10

Analysis of Systems, 

Controls, and Legal Compliance ....................... 23

Secretary’s Statement of Assurance ................. 23

Forward-Looking Information............................. 34

FINANCIAL SECTION

Message From the Chief Financial Officer ........ 44

About the Financial Section ............................... 46

Financial Statements ......................................... 48

Notes to the Financial Statements for the 

Years Ended September 30, 2021, 

and September 30, 2020 ................................... 52

Required Supplementary Information

(Unaudited) ........................................................ 94

Report of the Independent Auditors ................... 98

OTHER INFORMATION

(UNAUDITED)

About the Other Information Section ................113

Memorandum from the Office 

of Inspector General .........................................114

Office of Inspector General’s 

Management and Performance 

Challenges for Fiscal Year 2022 ......................115

Summary of Financial Statement 

Audit and Management Assurances ................ 140

Payment Integrity Information 

Act Reporting ................................................... 141

Civil Monetary Penalty 

Adjustment for Inflation .................................... 144

The Grants Oversight and New Efficiency 

Act of 2016 (GONE Act) and Education’s 

Grant Closeout Process .................................. 145

APPENDICES

Appendix A: Selected Department 

Web Links and Education Resources .............. 148

Appendix B: Glossary of 

Acronyms and Abbreviations ........................... 151

Acknowledgements ......................................... 154
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MANAGEMENT’S

DISCUSSION

AND ANALYSIS
2 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

About the Management’s

Discussion and Analysis

The U.S. Department of Education (Department) 

continued to enhance the content quality, report 

layout, and public accessibility of the fiscal year (FY) 2021 

Agency Financial Report (AFR) by refining graphics and 

providing more useful, balanced, and easily understood 

information about the Coronavirus Aid, Relief, and Economic 

Security Act, also known as the CARES Act, and about the 

Department’s loan programs, including additional cost 

and risk information. The Department also chose relevant 

web content to provide users with more information 

about the Department’s operations and performance.

To take advantage of the hyperlinks embedded in the 

report, the Department recommends reading it on the 

Internet. To continue to improve the quality and usefulness 

of information provided in the AFR, the Department

encourages the public and other stakeholders to provide 

feedback and suggestions at AFRComments@ed.gov.

This section highlights information on the Department’s 

performance, financial statements, systems and controls, 

compliance with laws and regulations, and actions taken 

or planned to address select challenges.

M I S S I O N A N D 

ORGANIZATIONAL STRUCTURE

This section provides information about the Department’s 

mission, an overview of its history, and its structure. The 

active links include the organization chart and principal 

offices and a link to the full list of Department offices

with a description of selected offices by function.

T H E D E PA R T M E N T ’ S A P P R O AC H 

TO PERFORMANCE

This section provides a summary of the Department’s 

performance goals and results for FY 2021. Since the 

Department has chosen to produce separate financial 

and performance reports, a detailed discussion of 

performance information for FY 2021 will be provided in 

the Department’s FY 2021 Annual Performance Report and 

FY 2023 Annual Performance Plan to be released online 

at the same time as the President’s FY 2023 Budget of the 

United States Government (President’s Budget) in February 

2022. For more information, prior year performance 

reports can be found on the Department’s website. The 

Department also urges readers to seek programmatic data 

as it is reported in the Congressional Budget Justification, 

as well as on the web pages of individual programs. 

Any questions or comments about the Department’s 

performance reporting should be emailed to PIO@ed.gov. 

For more details on performance, please refer to the 

Department’s budget and performance web page at www.

Performance.gov.

FINANCIAL HIGHLIGHTS

This section provides summarized information and analyses 

about the Department’s assets, liabilities, net position, 

sources and uses of funds, program costs, and related trend 

data. It provides a high-level perspective of the detailed 

information contained in the financial statements and 

related notes and provides an analysis of key financial 

statement changes.

A N A LYS I S O F SYS T E M S , C O N T R O L S , 

AND LEGAL COMPLIANCE

The Department’s internal control framework and its 

assessment of controls, in accordance with Office of 

Management and Budget (OMB) Circular A-123, 

Management’s Responsibility for Enterprise Risk 

Management and Internal Control, provide assurance 

to Department leadership and external stakeholders that 

financial data produced by the Department’s business and 

financial processes and systems are complete, accurate, 

and reliable.

FORWARD-LOOKING INFORMATION

The Forward-Looking Information section describes the 

challenges that the Department aims to address to achieve 

progress on Enterprise Risk Management, Direct Loans, 

Next Generation Federal Student Aid (Next Gen FSA), 

Leveraging Data as a Strategic Asset, and Technology 

Business Management Solutions (TBMS).
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 3

MANAGEMENT’S DISCUSSION AND ANALYSIS

About the Department

Our Mission

The U.S. Department of Education’s mission is to 

promote student achievement and preparation for 

global competitiveness by fostering educational 

excellence and ensuring equal access.

Who We Are. In 1867, the federal government recognized 

that furthering education was a national priority and 

created a federal education agency to collect and report 

statistical data. The Department was established as a 

Cabinet-level agency in 1980. Today, the Department 

supports programs in every area and level of education 

from preschool through postdoctoral research.

The Department makes funds and information available 

to individuals pursuing an education, colleges and 

universities, state education agencies, and school districts 

by engaging in four major categories of activities:

• Establishing policies related to federal education 

funding, including distributing funds, collecting on 

student loans, and using data to monitor the 

use of funds.

• Supporting data collection and research on 

America’s schools.

• Identifying major issues in education and focusing 

national attention on them.

• Enforcing federal laws promoting equal access and 

prohibiting discrimination in programs that receive 

federal funds.

Our Public Benefit. The Department executes the 

laws passed by Congress to promote student academic 

achievement and preparation for global competitiveness. 

The Department works with students, parents, educational 

institutions, school districts, and states to foster 

educational excellence and to ensure equal access to a 

high-quality education for all students. While recognizing 

the primary role of states and school districts in providing 

high-quality education, the Department is committed to 

helping ensure students throughout the nation develop 

skills to succeed in school, pursue postsecondary options, 

and transition to the workforce. The Department’s vision 

is to improve educational outcomes for all students.

Many of the Department’s programs involve awarding 

grants to state and local educational agencies and 

providing grants and loans to postsecondary students. The 

Department’s largest outlays are for its portfolio of student 

loans (see the Financial Highlights and Notes sections). 

Grant programs constitute the second-largest driver of 

outlays. The grant programs include student aid to help 

pay for college through Pell Grants, Work-Study, and 

other campus-based programs; grants awarded based on 

statutory formulas mostly for elementary and secondary 

education; and competitive grant programs to promote 

innovation. The Department also supports research, 

collects education statistics, and enforces civil rights laws. 

The Department manages and spends financial resources 

on programs designed to support parents, teachers, 

principals, school leadership, institutions, and states in 

the pursuit of instilling knowledge and transferring skills 

to students.
4 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

The Department in Fiscal Year 2021

This chart reflects the coordinating structure of the U.S. Department of Education. A text version of the FY 2021 

coordinating structure of the Department is available.

Note: The colors on this chart are for aesthetics only.

* The Office of the Under Secretary is responsible for the administration of the White House Initiative on Advancing Educational Equity, Excellence, and Economic Opportunity 

through Historically Black Colleges and Universities.

** The White House Initiatives are Center for Faith and Opportunity Initiatives; White House Initiative on American Indian and Alaska Native Education; White House Initiative 

on Advancing Educational Equity, Excellence, and Economic Opportunity for Hispanics; and White House Initiative on Educational Excellence for African Americans.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 5

MANAGEMENT’S DISCUSSION AND ANALYSIS

The Department’s Approach to Performance

PERFORMANCE MANAGEMENT FRAMEWORK

In accordance with the GPRA Modernization Act of 20101, the Department’s framework for performance management 

starts with the four-year Strategic Plan, including its two-year Agency Priority Goals (APG), which serve as the foundation 

for establishing and implementing long-term priorities and performance goals, objectives, and measures by which the 

Department can gauge achievement of its stated outcomes. Progress towards the Department’s strategic goals and its APGs 

is measured using data-driven review and analysis. Additional information on performance management is available in the 

Annual Performance Plans and Annual Performance Reports.

The FY 2018–22 Strategic Plan is comprised of four strategic goals and five FY 2020 and FY 2021 APGs. The Strategic 

Plan aims to align the administration’s yearly budget requests and the Department’s legislative agenda, supported by the 

considerable experience and resources available from its staff. The Department will implement a new Strategic Plan for 

FY 2022–26 that will include new strategic goals and strategic objectives. Additionally, new APGs will be implemented for 

FY 2022 and FY 2023. Questions or comments about the Strategic Plan should be emailed to PIO@ed.gov.

FY 2018–22 Strategic Goals and Strategic Objectives

1 GPRA Modernization Act of 2010 amends the Government Performance and Results Act of 1993 (GPRA).

Strategic Goal 1: Support state and local efforts to improve learning outcomes for all prekindergarten–grade 12 students in every community.

Strategic Objective 1.1 Increase high-quality educational options and empower students and parents to choose an education that meets their needs.

Strategic Objective 1.2 Provide all prekindergarten–grade 12 students with equal access to high-quality educational opportunities.

Strategic Objective 1.3 Prepare all students for successful transitions to college and careers by supporting access to dual enrollment, job skills 

development and high-quality science, technology, engineering and mathematics (STEM).

Strategic Objective 1.4 Support agencies and institutions in the implementation of evidence-based strategies and practices that build the capacity 

of school staff and families to support students’ academic performance.

Strategic Goal 2: Expand postsecondary educational opportunities, improve outcomes to foster economic opportunity and promote an informed, 

thoughtful and productive citizenry.

Strategic Objective 2.1 Support educational institutions, students, parents and communities to increase access and completion of college, lifelong 

learning and career, technical and adult education.

Strategic Objective 2.2 Support agencies and educational institutions in identifying and using evidence-based strategies or other promising 

practices to improve educational opportunities and successfully prepare individuals to compete in the global economy.

Strategic Objective 2.3 Support agencies and educational institutions as they create or expand innovative and affordable paths to relevant careers 

by providing postsecondary credentials or job-ready skills.

Strategic Objective 2.4 Improve quality of service for customers across the entire student aid life cycle.

Strategic Objective 2.5 Enhance students’ and parents’ ability to repay their federal student loans by providing accurate and timely information, 

relevant tools and manageable repayment options.

Strategic Goal 3: Strengthen the quality, accessibility and use of education data through better management, increased privacy protections

and transparency.

Strategic Objective 3.1 Improve the Department’s data governance, data life cycle management and the capacity to support education data.

Strategic Objective 3.2 Improve privacy protections for, and transparency of, education data both at the Department and in the 

education community.

Strategic Objective 3.3 Increase access to, and use of, education data to make informed decisions both at the Department and in the 

education community.

Strategic Goal 4: Reform the effectiveness, efficiency and accountability of the Department.

Strategic Objective 4.1* Improve regulatory processes. 

Strategic Objective 4.2 Identify, assess, monitor and manage enterprise risks.

Strategic Objective 4.3 Strengthen the Department’s cybersecurity by enhancing protections for its information technology infrastructure, systems 

and data.

Strategic Objective 4.4 Improve the engagement and preparation of the Department’s workforce using professional development and 

accountability measures.

* Strategic Objective 4.1 was revised due to Executive Order 13992, Revocation of Certain Executive Orders Concerning Federal Regulation
6 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

THE DEPARTMENT’S AGENCY PRIORITY GOALS

The Department identified five APGs for FY 2020–2021. These goals aimed to increase education choices, enhance 

multiple pathways for student success in career and job ready skills, improve the Department’s Federal Student Aid (FSA) 

customer service, improve student privacy protection and cybersecurity at institutions of higher education (IHE), and 

provide regulatory relief and burden reduction to stakeholders. The Department discontinued reporting on the APGs 

with the change of administration in January 2021. GPRA requires agencies to report quarterly updates of progress 

APG Education Freedom: Improve awareness of and access to high-quality K-12 education opportunities for students 

and families. By September 30, 2021, the Department will increase both the number and percentage of total charter 

school students and total scholarship students nationwide. 

• Charter school enrollment will increase from 3.29 million to 3.51 million (6.90 percent of all students in public schools). 

• The number of scholarship students, including participants in state-based vouchers, tax-credit scholarship, and education 

savings account program, will increase from 482,000 to 579,250 (1.10 percent of the total school age population). 

• The number of parents who receive support and engagement through technical assistance and other resources will 

increase by 5 percent per year.

Related Strategic 

Objective

Strategic Objective 1.1: Increase high-quality educational options and empower students and parents to choose an 

education that meets their needs.

APG Multiple Pathways to Success: Improve nationwide awareness of and access to career pathways that support 

job skills development and career readiness. By September 30, 2021, the Department will, through programs such as 

the Career and Technical Education and Adult Education State Grants:

• Support the creation and expansion of integrated education and training (IET) programs in all 50 states, Puerto Rico, 

and the District of Columbia. 

• Increase enrollment of participants in IET programs to 56,000.

• Support the enrollment of Career and Technical Education concentrators in science, technology, engineering, and 

mathematics (STEM) fields. 

• Increase by 25,000 the number of federal financial aid recipients who earn a postsecondary credential in STEM.

Related Strategic 

Objective

Strategic Objective 1.3: Prepare all students for successful transitions to college and careers by supporting access to 

dual enrollment, job skills development and high-quality science, technology, engineering and mathematics (STEM).

Related Strategic 

Objective

Strategic Objective 2.3: Support agencies and educational institutions as they create or expand innovative and 

affordable paths to relevant careers by providing postsecondary credentials or job-ready skills.

APG FSA Customer Service: Leverage the Next Generation Financial Services Environment (Next Gen FSA) to 

improve and personalize customers’ experience with Federal Student Aid (FSA). By September 30, 2021, FSA will 

transform its relationship with prospective and current customers through deployment of significant components of the 

Next Gen FSA that result in a personalized experience:

• The number of individuals submitting a Free Application for Federal Student Aid® (FAFSA®) through a mobile device 

will increase to 2.6 million. 

• The overall customer satisfaction level throughout the student aid life cycle, as measured by the FSA Customer 

Satisfaction score*, will increase.

Related Strategic 

Objective

Strategic Objective 2.4: Improve quality of service for customers across the entire student aid life cycle.

APG Student Privacy and Cybersecurity: Improve student privacy and cybersecurity at institutions of higher 

education (IHEs) through outreach and compliance efforts. By September 30, 2021, the Department will participate 

in 12 engagements with sector-related non-governmental organizations to inform the development of five best practice 

programmatic improvements.

Related Strategic 

Objective

Strategic Objective 3.2: Improve privacy protections for, and transparency of, education data both at the Department 

and in the education community.

APG Regulatory Reform: Provide regulatory relief to education stakeholders as necessary and appropriate**. 

(Related Strategic Objective: 4.1) By September 30, 2021, the Department will provide regulatory relief for education 

stakeholders by taking no fewer than eight deregulatory actions, which includes reduction in paperwork burden.

Related Strategic 

Objective

Strategic Objective 4.1: Improve regulatory processes.

* The Federal Student Aid Customer Satisfaction Score is an annual composite metric that measures the overall customer satisfaction level throughout the student aid life 

cycle for FAFSA® applicants (mobile and FAFSA.gov), Title IV aid recipients in school, and borrowers in repayment. The score is based on the American Customer Satisfaction Index surveys.

** The APG was discontinued due to Executive Order 13992, Revocation of Certain Executive Orders Concerning Federal Regulation
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 7

MANAGEMENT’S DISCUSSION AND ANALYSIS

made towards achieving APGs to a centralized website: 

Performance.gov. These APGs are intended to focus 

efforts toward achieving the priorities of the Administration 

leadership under which they were established. Consistent 

with this intention, when a Presidential election leads 

to a change in Administration, reporting on the APGs 

established by a different Administration to Performance.

gov is discontinued in a transition year (e.g., 2021) for the 

remainder of that APG cycle’s performance period (e.g., FYs 

2020–2021 APG cycle).

Goal 1. Support state and local efforts to 

improve learning outcomes for all P–12 

students in every community.

Strategic Goal 1 focused on outcomes related to 

the transition from the No Child Left Behind Act to 

implementation of the Every Student Succeeds Act (ESSA), 

which reauthorized the Elementary and Secondary 

Education Act in December 2015. The hallmark of the 

ESSA is the flexibility it provides for states to do what is 

best for children while preserving important protections 

for economically disadvantaged students, children 

with disabilities, English learners, and other vulnerable 

students. The law requires that states take steps to ensure 

all students have access to excellent teachers and positive, 

safe learning environments that equip them for college and 

career success. In FY 2021, $41.8 billion was appropriated to 

the Department in support of Strategic Goal 1.

The Department encourages families to be aware of 

educational opportunities and options so that they can 

make the best choice for their student’s needs. Access to 

high-quality educational opportunities should be afforded 

to all students. In FY 2021, the Department continued 

to support greater state and local flexibility in elementary 

and secondary education and encouraged providing school 

choice options to families. The Institute of Education 

Sciences’ (IES)-funded Research on Education Access 

and Choice (REACH) Center continued to study all 

forms of school choice and provide evidence-based 

resources through its What Works Clearinghouse

to inform and improve choice policy design and 

implementation to increase opportunities and outcomes 

for disadvantaged students.

Due to the COVID-19 pandemic, the modes and quality 

of educational instruction varied across the nation. The 

Department provided support and assistance to state 

education agencies (SEA), local educational agencies 

(LEA), families, and other stakeholders in the education 

community through various resources such as grants, 

technical assistance, and outreach activities. Resources 

included three volumes of the Department’s COVID-19 

Handbook, which focused on strategies for safely 

reopening elementary and secondary schools, roadmap 

to reopening safely and meeting all students’ needs, 

and addressing the impact of COVID-19 on higher 

education students, faculty, and staff. The Department 

published websites that shared best practices and lessons 

learned as schools reopened for in-person learning. 

Additionally, the Department provided guidance on 

the use of American Rescue Plan Act of 2021 (ARP) 

funding to include the Summer Learning & Enrichment 

Collaborative which called on states to use ARP funding 

to build effective summer programs to help address the 

lost instructional and extracurricular time students may 

have experienced as a result of the COVID-19 pandemic, 

particularly for underserved communities.

Goal 2. Expand postsecondary educational 

opportunities, improve outcomes to foster 

economic opportunity and promote an 

informed, thoughtful and productive citizenry.

Strategic Goal 2 focused on expanding the Department’s 

efforts to support innovative and accessible paths to 

postsecondary credentials and job-ready skills training. 

In addition to supporting expanded postsecondary 

opportunities, the Department has multiple initiatives 

focused on affordability. These initiatives ensure borrowers 

have the best information available to make postsecondary 

program selection and associated borrowing decisions. The 

Department also continues to help students understand 

their financial aid options and repayment obligations. 

In FY 2021, $31.9 billion was appropriated to the 

Department in support of this Strategic Goal 2. The 

Department awarded more than 6,000 discretionary 

grants designed to strengthen the capacity of colleges 

and universities to promote reform, innovation, and 

improvement in postsecondary education; promote and 

expand access to postsecondary education; and increase 

college completion rates for the nation’s students. In 

addition, funding for Strategic Goal 2 also supports the 

Department’s enhancements to FSA customer service. 

The Department continues efforts to help prepare the 

nation’s workforce of tomorrow with the right skills and 

credentials of today. In FY 2021, the Department continued 
8 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

the reTHINK Adult Ed Challenge, which targeted the 

design of 100 or more new preapprenticeship programs 

involving partnerships between adult education providers, 

sponsoring apprenticeship organizations, and employers. The 

selected finalists came from a variety of institutions including 

institutions of higher education, local education associations, 

community or faith-based organizations, and correctional 

facilities. The Department awarded one grand prize and four 

runner-up awards between $100,000 and $250,000 to fund 

model design, scale-up and program implementation. The 

Department also supported the adult education and literacy 

practitioners with online professional development to support 

them in delivering virtual instruction during the pandemic. 

FSA provides more than $120 billion annually to students 

and their families. Enhancing the service provided to 

customers and stakeholders continues to be priority. In 

FY 2021, Aidan®, the StudentAid.gov virtual assistant, 

became available to all StudentAid.gov website visitors. 

FSA will continue to improve the user experience by 

adding new content, developing new capabilities, and 

refining the artificial intelligence model.

In FY 2020, the Department successfully placed more 

than 40 million federal student loan borrowers in 

administrative forbearance status. In FY 2021, FSA has 

ensured that student loan servicers have kept borrowers in 

a suspended repayment status, without accruing interest or 

being subject to adverse credit reporting. The Department 

is preparing to successfully return federal student loan 

borrowers to repayment in February 2022.

Goal 3. Strengthen the quality, accessibility 

and use of education data through better 

management, increased privacy protections 

and transparency.

Strategic Goal 3 focuses on strengthening data-driven 

decision-making in education by focusing on the ways 

the Department manages and makes available education 

data, while protecting student privacy. The Department 

is committed to improving how staff and stakeholders 

access, use, and share meaningful data on education 

while protecting privacy. These improvements enable the 

Department to provide stakeholders in the education 

community with timely and accurate information that 

allows them to make informed decisions. Approximately 

$574 million in discretionary resources was appropriated 

to support Strategic Goal 3 in FY 2021.

In December 2020, the Department completed and 

published its inaugural Data Strategy. The Data 

Governance Board guided the development of four goals—

strengthen agencywide data governance; build human 

capacity to leverage data; advance the strategic use of data; 

and improve data access, transparency, and privacy—

with 19 objectives. This Data Strategy provides a road 

map for the agency to improve education outcomes and 

lead the nation through evidence-based policy and datadriven decisions.

The Department collected information necessary 

to facilitate clear and transparent reporting on the 

implementation of the Coronavirus Aid, Relief, and 

Economic Security Act (CARES Act); the Coronavirus 

Response and Relief Supplemental Appropriations Act of 2021 

(CRRSAA); and the American Rescue Plan Act of 2021. 

The Education Stabilization Fund (ESF) Transparency 

Portal was launched, which allows the Department 

to track performance, hold grantees accountable, and 

provide transparency to taxpayers and oversight bodies. 

Additionally, the Department completed its first collection 

of annual performance reports from organizations that 

received CARES Act grants, using capabilities within 

the ESF Public Transparency Portal to enable grantees to 

submit annual performance reports on funding authorized 

through the Higher Education Emergency Relief Fund 

(HEERF), the Elementary and Secondary School 

Emergency Relief (ESSER) funds, and the Governor’s 

Emergency Education Relief (GEER) funds. 

The Department is committed to protecting student’s 

education data both within the Department and at 

educational institutions. In support of this commitment, 

in FY 2021, the Department engaged with nearly 1,000 

schools to inform, collaborate, and improve the security of 

student financial and privacy data. This engagement has 

led to improvements in outcomes, reduction of risks, and 

enhanced cybersecurity and student data privacy. FSA’s 

postsecondary cybersecurity team conducted more than 

20 outreach activities, both in response to breach incidents 

and proactively to improve compliance with cybersecurity 

safeguards. Additionally, the Department conducted 

outreach initiatives to more than 500 IHEs in response to 

Microsoft Exchange vulnerability to ensure that IHEs were 

aware of the vulnerability and took appropriate actions to 

remediate or prevent potential exposure.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 9

MANAGEMENT’S DISCUSSION AND ANALYSIS

In FY 2021, the ESF Public Transparency Portal, 

launched in November 2020, was updated throughout 

the year to display awards made to and expenditures 

made by states, districts, and colleges authorized through 

the CARES Act, CRRSAA, and the ARP. The portal 

is used for key data collections associated with the 

ESF—specifically, the HEERF, GEER, ESSER, and 

equivalent Outlying Area funds. The Public Transparency 

Portal allows the Department to track performance, 

hold grantees accountable, and provide transparency to 

taxpayers and oversight bodies.

Goal 4. Reform the effectiveness, efficiency 

and accountability of the Department.

Strategic Goal 4 focuses in general on protecting taxpayers 

from fraud, waste, and abuse. This involves improving 

internal decision-making and operations to provide 

better delivery of services to stakeholders. In FY 2021, 

$624 million was appropriated to support Goal 4. 

Strategic Goal 4 includes the responsibility of the 

Department to implement enterprise risk management 

(ERM). The Department uses a coordinated approach 

to identify, measure, and assess challenges related to 

mission delivery and resource management. In FY 2021, 

the Department established the Office of Enterprise 

Data Analytics and Risk Management, which formally 

integrates ERM and operational internal controls 

activities and aims to provide leadership with actionable 

insights powered by data analytics. The office supports a 

culture of continuous process improvement in which data 

and awareness of enterprise risk are used to objectively 

inform strategic and operational decisions and optimize 

the Department’s performance. 

Strategic Goal 4 also includes the responsibility to ensure 

the Department’s workforce is properly trained and 

accountable. In FY 2021, the Department established the 

Department-wide National Engagement Strategy (NES), 

focusing on four key engagement areas: Leaders Lead, 

Collaborative Management, Merit Systems Principles, and 

Training and Development. Implementation of the NES 

will formalize and streamline ideas and feedback as well as 

assist in sharing best practices across the Department. 
10 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

Financial Highlights

financial statements and notes are prepared in accordance 

with accounting principles generally accepted in the 

United States for federal agencies issued by the Federal 

Accounting Standards Advisory Board and the format 

and content specified by Office of Management and 

Budget (OMB) Circular No. A-136, Financial Reporting 

Requirements. The financial statements, notes, and 

underlying business processes, systems, and controls are 

audited by an independent accounting firm with audit 

oversight provided by the Office of Inspector General 

(OIG). For 20 consecutive years, the Department has 

INTRODUCTION

This section provides summarized information and 

analyses about the Department’s assets, liabilities, net 

position, sources and uses of funds, program costs, and 

related trend data. It also provides a high-level perspective 

of the detailed information contained in the financial 

statements and related notes.

The Department consistently produces complete, accurate, 

and timely financial information. The Department’s 

Financial Statement Lines 

with Significant Changes

Amount Total Changes Changes Due to COVID-19

 FY 2021 FY 2020 Amount Percentage Amount Percentage

Balance Sheets

Fund Balance with Treasury $ 351.9 $ 136.0 $ 215.9 158.8% $ 202.4 148.8%

Loan Receivables, Net - Direct Loan Program 1,104.9 1,100.5 4.4 0.4% (49.5) -4.5%

Loan Receivables, Net - Federal Family Education 

Loan (FFEL) Program 58.2 67.4 (9.2) -13.6% (3.0) -4.5%

Debt Associated with Loans - Direct 

Loan Program 1,142.2 1,160.1 (17.9) -1.5% (49.5) -4.3%

Debt Associated with Loans - FFEL Program 78.3 89.0 (10.7) -12.0% (3.0) -3.4%

Loan Guarantee Liabilities 7.5 1.1 6.4 581.8% 0.6 54.5%

Accrued Grant Liability 7.6 1.9 5.7 300.0% 3.9 205.3%

Statements of Net Cost

Improve Learning Outcomes for All P-12 Students 60.9 40.0 20.9 52.3% 21.0 52.5%

Expand Postsecondary Opportunities, Improve 

Outcomes to Foster Economic Opportunities, and 

Promote Productive Citizenry

 178.8 149.4 29.4 19.7% 85.2 57.0%

Statements of Budgetary Resources

Unobligated Balance from Prior Year Budget 

Authority (Net) 41.4 26.9 14.5 53.9% 0.7 4.8%

Appropriations (Discretionary and Mandatory) 476.8 245.0 231.8 94.6% 235.0 95.9%

New Obligations and Upward Adjustments (Total) 627.5 430.8 196.7 45.7% 217.2 50.4%

Unobligated Balance, End of Year (Total) 62.1 42.6 19.5 45.8% 17.8 41.8%

Outlays, Net 267.1 218.0 49.1 22.5% 37.5 17.2%

Distributed Offsetting Receipts (6.6) (13.6) 7.0 -51.5% - 0.0%

Table 1.

Key Financial Statement Changes

(Dollars in Billions)
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 11

MANAGEMENT’S DISCUSSION AND ANALYSIS

earned an unmodified (or “clean”) audit opinion. The 

financial statements and notes for FY 2021 are on pages 

48–93 and the Independent Auditors’ Report begins on 

page 98.

The principal financial statements are prepared to report 

the financial position and results of operations of the 

reporting entity, pursuant to the requirements of 31 

F I N A N C I A L S TAT E M E N T I M PAC T S O F C OV I D -19 AC T I V I T I E S 

Most of the significant changes to the Department’s 

financial statements resulted from the impacts due to 

coronavirus disease 2019 (COVID-19) activities. Congress 

passed multiple COVID-19 relief bills in FY 2020 and 

FY 2021, including the following that provided a total 

of $282.5 billion of direct appropriation funding for 

educational purposes:

• Coronavirus Aid, Relief, and Economic Security Act of 

2020 (CARES Act) $31.0 billion

• Coronavirus Response and Relief Supplemental 

Appropriations Act of 2021 (CRRSAA) $82.0 billion

• American Rescue Plan Act of 2021 (ARP) $169.5 billion 

These appropriations funded a variety of programs 

administered primarily through grant programs. The 

largest component of the education funding provided 

by the COVID-19 relief appropriations established the 

Education Stabilization Fund which included (1) the 

Elementary and Secondary School Emergency Relief 

Fund, (2) the Higher Education Emergency Relief Fund, 

(3) the Governor’s Emergency Education Relief Fund, and 

(4) funds for outlying areas. 

The COVID-19 relief legislation and administrative 

actions also provided support for student loan borrowers 

primarily by suspending nearly all federal loan payments 

until January 31, 2022, interest free. The Department 

also stopped all federal wage garnishments and collection 

actions for borrowers with federally held loans in default. 

Funding for the student loan repayment deferrals was 

provided through FY 2020 and FY 2021 indefinite 

appropriations totaling $98.4 billion. 

Cost impacts of the student loan pause on interest 

and collections were recorded as loan modifications in 

FY 2020 ($41.9 billion) and FY 2021 ($53.1 billion). 

These COVID-19 loan modifications are a component 

of subsidy expense, which reduced the overall loan 

receivable balances for the Direct Loan and Federal Family 

Education Loan (FFEL) programs by $88.0 billion and 

$6.9 billion respectively over the past two years. Detailed 

explanations of the FY 2021 COVID-19 Direct Loan 

Program loan modifications are provided in the Analysis of 

Direct Loan Program Subsidy Expense section beginning 

on page 19 and in Note 5 of the financial statements 

beginning on page 62.

The direct and indirect funding stemming from the 

combined FY 2020 and FY 2021 COVID-19 relief 

legislation and administrative actions is summarized in 

Figure 1. Obligated and unobligated COVID-19 funds 

remaining to be disbursed as of the end September 30, 

2021, totaled $222.0 billion. Most of the undisbursed funds 

are for the Elementary and Secondary School Emergency 

Relief (ESSER) Fund. While states may have made 

subawards for all of their ESSER funding, subawardees may 

still be in the process of completing their obligations and 

requesting reimbursement from the states who will then in 

turn drawdown the remaining undisbursed funds.

In addition to COVID-19 relief, the Department 

provided targeted relief to thousands of borrowers 

by canceling $11.5 billion of loans using authorities 

previously provided by Congress. The targeted 

beneficiaries include those qualifying for total and 

permanent disability discharge, those who were 

defrauded by failed for-profit schools, soldiers 

deployed to war zones, and other public servants 

previously denied eligibility for forgiveness under the 

Public Service Loan Forgiveness (PSLF) program. 

Additional changes to the PSLF program that will 

increase loan forgiveness are coming in FY 2022— 

see page 91.

U.S.C. § 3515(b). The statements are prepared from 

the Department’s books and records in accordance with 

generally accepted accounting principles for federal entities 

and the formats prescribed by OMB. Reports used to 

monitor and control budgetary resources are prepared 

from the same books and records. The financial statements 

should be read with the realization that they are for a 

component of the U.S. government.
12 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

Elementary and Secondary School Emergency Relief 

(ESSER) Fund—Funds provided for state education 

agencies (SEAs) and local educational agencies (LEAs) 

to support continued learning for K-12 students whose 

educations have been disrupted by COVID-19, and 

grants for the specific needs of homeless children and 

youth to address the challenges of COVID-19.

Higher Education Emergency Relief Fund (HEERF) 

—Funds provided for institutions of higher education 

(IHEs) to address needs directly related to COVID-19, 

including transitioning courses to distance education and 

granting aid to students for educational costs such as food, 

housing, course materials, health care, and child care. 

Figure 1.

COVID-19 Funding Flow

(Dollars in Billions)

Governor’s Emergency Education Relief (GEER) 

Fund—Grants provided to state governors to ensure 

education continues for students of all ages impacted by 

the COVID-19 national emergency. 

Outlying Areas, Bureau of Indian Education (BIE), 

and Discretionary Grants—Funds provided for outlying 

areas and discretionary grants to states with the highest 

COVID-19 burdens.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 13

MANAGEMENT’S DISCUSSION AND ANALYSIS

BALANCE SHEETS

The consolidated balance sheets present, as of a specific 

point in time (the end of the fiscal year), the Department’s 

total assets, total liabilities, and net position.

The Department’s assets totaled $1,519.3 billion as of 

September 30, 2021. As shown in Figure 2, most assets 

relate to loans receivables, $1,165.1 billion, which 

comprised 76.6 percent of all assets. Direct loans comprise 

the largest share of these receivables. Analysis of the net 

change in Direct Loan Program receivable balances begins 

on page 14. All other assets totaled $354.2 billion, most 

of which was Fund Balance with Treasury which increased 

by $215.9 billion, mostly as a result of an increase in 

undisbursed COVID-19 funds as of September 30, 2021.

The Department’s liabilities totaled $1,246.2 billion 

as of September 30, 2021. As shown in Figure 3, most 

of the Department’s liabilities are also associated with 

loan programs, primarily amounts borrowed from the 

U.S. Department of the Treasury (Treasury) to fund 

student loans. Debt associated with direct loans totaled 

$1,142.2 billion as of September 30, 2021. Analysis of 

debt associated with the Direct Loan Program begins on 

page 16.

Figure 2.

Assets by Type

Figure 3.

Liabilities by Type
14 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

A N A LYS I S O F D I R EC T LO A N P R O G R A M 

R EC E I VA B L E S , N E T 

Figure 4 shows the changes in the Direct Loan Program 

receivable components over the past five years. The principal 

amount has continued to grow as the Direct Loan Program 

has originated all new federal loans since July 2010, when 

originations of new FFEL loans ended. Prior to COVID-19, 

the rate of increase in principal has slowed in recent years 

as enrollment has stagnated and sometimes declined. Also, 

accrued interest amounts had been increasing as more 

Direct Loans were moving into active repayment statuses 

and the rate of enrollment in income-driven repayment 

plans that allow for payments to be lower than interest 

accrual had increased. 

The rate of increase in principal has slowed in recent years 

as the Direct Loan program has disbursed fewer than $95 

billion in new loans each year since FY 2016 as a result of 

stagnant and in some cases declining enrollment. Even so, 

new loan disbursements continue to exceed overall loan 

principal repayments—student loan borrowers have many 

options to stretch out their repayment terms and reduce 

their monthly payments. The student loan repayment 

deferrals implemented in response to COVID-19 caused 

the rate of increase in principal to rise in FY 2021.

In accordance with the Federal Credit Reform Act of 1990, 

the Department’s financial statements report the value of 

direct loans (credit program receivables) at the net present 

value of their future cash flows, discounted at a fixed rate 

established based on Treasury securities. The difference 

between the recorded principal and interest balance and the 

net present value of the loans is referred to as the “allowance 

for subsidy,” which can be positive or negative.

A negative allowance for subsidy balance means that the 

present value of funds expected to be recovered is less than 

the principal outstanding. The increase in the negative 

allowance since FY 2017 is due primarily to higher subsidy 

costs, the main causes being high participation in incomedriven repayment (IDR) plans and the COVID-19 deferrals 

of student loan repayments (see discussion in the Analysis of 

Direct Loan Program Subsidy Expense section on page 19).

 

Figure 4.

Components of Direct Loan Receivables, Net

(Dollars in Billions)

Direct Loan 

Component 

(Dollars in 

Billions)

Fiscal Year

2017 2018 2019 2020 2021

Principal $ 998.8 $ 1,083.7 $ 1,164.9 $ 1,224.8 $ 1,292.2

Rate of Increase 

in Principal 10.6% 8.5% 7.5% 5.1% 5.5%

Accrued Interest $ 59.5 $ 72.0 $ 83.3 $ 92.1 $ 86.5

Allowance for 

Subsidy $ (16.8) $ (40.7) $ (124.4) $ (216.4) $ (273.9)

Total No. of 

Direct Loan 

Borrowers (in 

Millions)

33.0 34.2 35.1 35.9 37.0 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 15

MANAGEMENT’S DISCUSSION AND ANALYSIS

Loan Status

Fiscal Year

FY 

2017

FY 

2018

FY 

2019

FY 

2020**

FY 

2021**

Total No. of 

Direct Loan 

Borrowers (in 

Millions)

33.0 34.2 35.1 35.9 37.0

Total Dollar 

Amount of 

Direct Loans 

Outstanding

1,058.4 1,155.7 1,248.1 1,316.9 1,378.7

Current 

Repayment1 467.8 531.2 594.7 14.2 16.2

% Current 

Repayment 44.2% 46.0% 47.6% 1.1% 1.2%

In School, 

Grace Period, 

and Education 

Deferments

291.7 295.5 294.8 282.8 271.9

% In School, 

Grace Period, 

and Education 

Deferments

27.6% 25.6% 23.6% 21.5% 19.7%

Forbearance 

and 

Noneducation 

Deferments

122.5 121.5 133.2 887.5 967.8

% Forbearance 

and 

Noneducation 

Deferments

11.6% 10.5% 10.7% 67.4% 70.2%

Delinquent (Past 

Due 31-360 

Days)

79.7 92.5 90.8 0.5 0.0

% Delinquent 

(Past Due 31-

360 Days)

7.5% 8.0% 7.3% 0.0% 0.0%

Default/

Bankruptcy/

Other*

96.7 115.0 134.6 131.9 122.8

% Default/

Bankruptcy/

Other*

9.1% 10.0% 10.8% 10.0% 8.9%

1 Loans in Current Repayment status include loans that are being repaid on-time. 

However, these on-time loans can include loans for which the amount of interest 

accruing is higher than payments that are being made, which can occur in the 

case of loans on income-driven repayment plans.

*Adjusted to eliminate differences between NSLDS and FSA Total Reported DL 

Portfolio (principal and Interest)

**Student loan payment pause in effect from March 2020.

Table 2.

Payment Status of Direct Loan Principal and 

Interest Balance

(Dollars in Billions)

Table 2 shows the payment status of the direct loan 

principal and interest balances outstanding over the past 

five years. The Current Repayment category consists of 

loans that are being paid back on time, including the 

current portion of loans being repaid pursuant to IDR 

plans. Loans in the Delinquent category are past due 

anywhere from 31 to 360 days. Default/Bankruptcy/Other 

includes loans that are more than 360 days delinquent 

(default status), loans in a nondefaulted bankruptcy status, 

and loans in disability status.

While technical default is 271 days delinquent, default is 

defined as 361 days delinquent for reporting purposes. 

The balances reported for Current Repayment and 

Delinquent in FY 2020 and FY 2021 are significantly 

lower than prior years, primarily due to the COVID-19 

student loan repayment deferrals that placed loans in 

forbearance and subsequently cured delinquencies. As a 

result of the COVID-19 student loan repayment deferrals, 

the FY 2020 and FY 2021 delinquent balances are zero.

While the COVID-19 student loan repayment deferrals 

suspended payments for federally owned student loans, 

some borrowers elected to continue to make student 

loan payments. In addition to improving borrowers’ 

overall financial health, factors that may have influenced 

borrowers to continue making payments on their student 

loans during forbearance include the following: 

• Borrower flexibility to make payments or suspend 

payments as their financial circumstances permitted 

without notification to the loan servicer.

• Potential earlier loan payoff.

• Lower total cost of a loan over time to the borrower 

due to the zero percent interest rate. (Before the pause, 

an average of two-thirds of each dollar paid went to 

principal. During the pause, this quickly increased to 

above 90 percent, and now an average of 95 percent of 

each dollar goes toward principal).
16 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

Figure 5.

Direct Loan Program Cumulative Financing Activity

(Dollars in Billions)

• Potentially improving the borrower’s credit rating by 

reducing the student debt balance. The relative strength 

of FSA borrower payment activity has been driven, in 

part, by efforts of borrowers to improve their credit 

stance to purchase homes during much of 2020 and 

2021. During the pandemic, the U.S. Department 

of Housing and Urban Development and Federal 

Housing Authority implemented nontemporary policy 

changes to improve the underwriting stance of federal 

student loan borrowers.

• Potentially improved overall borrower financial health 

and reduced financial stress by reducing student debt.

A N A LYS I S O F D E B T A S S O C I AT E D W I T H 

LO A N S , D I R EC T LO A N P R O G R A M 

The Department borrows funds to disburse new loans 

and pay credit program outlays and related costs. The 

Department repays Treasury after consideration of cash 

position and the liability for future cash outflows. Figure 5 

shows the Direct Loan Program cumulative borrowing 

and repayment activity that resulted in the debt amount 

on the balance sheet. A diagram depicting the Direct Loan 

Program financing process is displayed with related trend 

data as Figure 6 on page 17 of this report.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 17

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

 

Treasury Financing and Subsidy Cost of Direct Loans (Dollars in Billions)*

Fiscal Year 2017 2018 2019 2020 2021

Net Borrowing $ 67.3 $ 89.1 $ 41.5 $ (32.0) $ (17.9)

Borrowing from Treasury 160.5 155.3 137.6 116.9 120.0 

Debt Repayments to Treasury (93.2) (66.2) (96.1) (148.9) (137.9)

Interest Expense to Treasury (31.3) (32.3) (33.8) (34.7) (33.0)

Interest Earned from Treasury 4.3 3.9 4.1 4.8 4.2 

Cumulative Taxpayer Cost / (Savings) 16.8 40.7 124.4 216.4 273.9 

Current Subsidy Expense (Revenue) 5.3 4.4 61.5 100.9 93.9 

Direct Loan Program Cash Transactions with Borrowers (Dollars in Billions)*

Fiscal Year 2017 2018 2019 2020 2021

Loan Disbursements $ 142.5 $ 134.1 $ 130.7 $ 117.4 $ 104.8 

Stafford Subsidized 23.4 20.3 20.0 19.1 18.3 

Stafford Unsubsidized 51.4 49.0 48.1 46.1 44.1 

PLUS 18.7 23.1 22.7 21.7 20.8 

Consolidation1 49.0 41.6 39.8 30.4 21.5 

Loan Collections2 82.0 84.9 91.3 69.9 37.2 

Principal 62.6 63.5 67.0 55.3 33.3 

Interest 17.6 19.5 22.4 12.9 2.3 

Fees 1.9 1.9 1.9 1.7 1.6

* Numbers may not add due to rounding.

1

 Consolidation amounts stem from a number of loan programs, including most notably the FFEL program, in addition to Direct Loans.

2

 Loan collections include prepayments, including prepayments in full due to consolidation of underlying Direct Loans. 

Figure 6.

William D. Ford Federal Direct Loan Program: Following the Funding
18 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

STATEMENTS OF NET COST

The consolidated statements of net cost report the 

Department’s components of the net cost of operations 

for a given fiscal year. Net cost of operations consists of 

the gross costs incurred less any exchange (i.e., earned) 

revenue from activities. Gross costs are composed of the 

cost of credit and grant programs, and operating costs. 

 

Figure 8.

Primary Components of Gross Costs and Earned Revenue

(Dollars in Billions)

Exchange revenue is primarily interest earned on credit 

program loans. Figure 7 shows the Department’s gross 

costs and earned revenue over the past five years. As 

shown in Table 1 and discussed in more detail below, 

significant increases in the Department’s net costs for 

FY 2021 were primarily due to loan modifications 

(subsidy expense) and grant expenses related to 

COVID-19 activities. 

G R O S S C O S T S A N D E A R N E D R E V E N U E 

BY T Y P E 

As shown in Figure 8, the Department’s gross costs and 

earned revenue include three primary components:

• Credit program interest expense offset by credit 

program interest revenue and administrative fees as the 

result of subsidy amortization. 

• Credit program subsidy expense (see Analysis of Direct 

Loan Program Subsidy Expense below).

• Grant expenses (see Figure 10).

 

Figure 7.

Gross Costs & Earned Revenue

(Dollars in Billions)
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 19

MANAGEMENT’S DISCUSSION AND ANALYSIS

A N A LYS I S O F D I R EC T LO A N P R O G R A M 

S U B S I DY E X P E N S E 

The Department’s gross costs can fluctuate significantly 

each year as a result of changes in estimated subsidy 

expenses—primarily subsidy expenses for direct loans. The 

primary components of subsidy expenses include year-end 

subsidy re-estimates and loan modifications. 

Subsidy expenses are estimates of the present value cost 

of providing direct loans but excludes the administrative 

costs of issuing and servicing the loans. The Department 

estimates subsidy expenses using a set of econometric and 

financial models as well as cash flow models. 

The Department estimates subsidy expenses annually for 

new loans disbursed in the current year and updates the 

previous cost estimates for outstanding loans disbursed in 

prior years based on various updated assumptions (subsidy 

re-estimates). The Department also updates subsidy 

expenses due to changes to terms of existing loans (subsidy 

modifications). Figure 9 shows these three components of 

the Direct Loan Program subsidy expense for the past five 

years. Factors such as interest rates charged to the borrower, 

interest rates on Treasury debt, default rates, fees and other 

costs, and assumptions concerning borrowers’ selection of 

repayment plans impact the estimated cost calculation and 

determine whether the individual components and overall 

subsidy expense is positive or negative.

The Direct Loan Program subsidy expense for new loans 

disbursed in the current year was negative from FY 2017 

through FY 2019 primarily because lending interest 

rates charged were greater than the historically low rates 

at which the Department borrowed from Treasury. In 

practical terms, a negative subsidy occurs when the 

interest and/or fees charged to the borrower are more than 

sufficient to cover the interest on Treasury borrowings and 

the costs of borrower default. Subsidy expense for new 

loans disbursed in FY 2020 and FY 2021 was positive 

due to rising enrollment in IDR plans and a reduction 

in projected future income of borrowers in IDR plans, 

both of which contribute to a higher expected cost to 

the government for issuing student loans by reducing 

the amount that many borrowers will repay over the life 

of their loans and/or creating a student loan forgiveness 

benefit for amounts remaining after 20 or 25 years, 

particularly common among high-debt borrowers.

The components of the Direct Loan Program subsidy 

re-estimates and loan modification costs are summarized 

below. More detail about these components can be found in 

the notes to the financial statements beginning on page 64.

Figure 9.

Direct Loan Program Subsidy

(Dollars in Billions)

2017 2018 2019 2020 2021

Subsidy Expense for 

New Loans Disbursed in 

the Current Year $ (2.6) $ (3.1) $ (3.0) $ 5.1 $ 1.6 

Subsidy Re-estimates 7.9 7.4 64.5 56.1 24.0 

Loan Modifications - 0.1 - 39.7 68.3 

Total Subsidy $ 5.3 $ 4.4 $ 61.5 $ 100.9 $ 93.9 

Subsidy Re-estimate Components 2021 2020

Income Driven Repayment (IDR) 

Model Changes $ 22.4 $ 35.5 

Prior Year's Cohort Assumption Changes 15.5 4.8 

Interest on the Re-Estimate 5.0 5.9 

Default (6.4) 1.8 

Repayment Plan Selection 0.7 6.5 

Discount Rates (11.5) - 

Death, Disability, and Bankruptcy (DDB) 3.2 - 

Deferment And Forbearance (4.8) - 

Collections 1.5 - 

Interactive Effects (1.6) 1.5 

Other Assumptions - 0.1 

Total Direct Loan Program Subsidy 

Re-estimates $ 24.0 $ 56.1 

Loan Modification Components 2021 2020

Student Loan Repayment Deferrals $ 49.5 $ 38.6 

Total and Permanent Disability 18.7 1.1 

Faith-Based Final Rule 0.1 - 

Total Direct Loan Program 

Loan Modifications $ 68.3 $ 39.7 
20 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

GRANT EXPENSES

As shown in Figure 10, overall grant expenses increased 

primarily because of COVID-19 grants. More detail 

concerning COVID-19 grants can be found in Note 11 of 

the financial statements beginning on page 81. In addition 

to COVID-19 funded grants, the Department has more 

than 100 other grant and loan programs. The three largest 

of these grant program areas are:

• Pell Grants—Provides need-based grants to students 

to promote access to postsecondary education. 

Grant amounts are dependent on the student’s 

expected family contribution, the cost of attendance 

(as determined by the institution), the student’s 

enrollment status (full-time or part-time), and whether 

the student attends for a full academic year or less. 

Pell Grants are the single largest source of grant aid for 

postsecondary education.

• Education for the Disadvantaged—Primarily consists 

of grants that provide financial assistance through 

SEAs to LEAs and public schools with high numbers 

or percentages of poor children to help ensure that all 

children meet challenging state academic content and 

student academic achievement standards. The program 

also provides funds to states to support educational 

services to children of migratory farmworkers and 

fishers and to neglected or delinquent children and 

youth in state-run institutions, attending community 

day programs, and in correctional facilities.

• Special Education—Primarily consists of Individuals 

with Disabilities Education Act grants that provide 

funds by formula to states to assist them in providing 

a free appropriate public education in the least 

restrictive environment for children with disabilities 

ages 3 through 21 and assists states in providing early 

intervention services for infants and toddlers from 

birth through age 2 and their families. Also provides 

discretionary grants to IHEs and other nonprofit 

organizations to support research, demonstrations, 

technical assistance and dissemination, technology, 

personnel development and parent-training, and 

information centers.

In addition to student loans and grants, the Department 

offers other discretionary grants under a variety of 

authorizing legislation, with approximately 90 percent of 

nonstudent aid funds awarded by formula and 10 percent 

through competitive processes.

 

Figure 10.

Grant Expenses by Program Areas

(Dollars in Billions)

COVID-19 Grant Expenses

(Dollars in Millions)

COVID-19 Grants FY 2021 FY 2020

Education Stabilization Fund:

Elementary and Secondary School 

Emergency Relief Fund

$ 20,036 $ 1,552 

Higher Education Emergency 

Relief Fund

 31,407 9,135 

Governor’s Emergency Education 

Relief Fund

 1,341 536 

Outlying Areas & Discretionary Grants 130 21 

Total Education Stabilization Fund 52,914 11,244 

Other COVID-19 Grants 66 15 

Total COVID-19 Grants $ 52,980 $ 11,259 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 21

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

Figure 11.

Components of Budgetary Resources 

(Dollars in Billions)

S TAT E M E N T S O F C H A N G E S I N 

NET POSITION

The consolidated statements of changes in net position 

report the beginning net position, the summary effect 

of transactions that affect net position during the fiscal 

year, and the ending net position. Net position consists 

of unexpended appropriations and cumulative results 

of operations. Unexpended appropriations include 

undelivered orders and unobligated balances for grant and 

administrative operations. Cumulative results of operations 

represent the net difference since inception between 

(1) expenses and (2) revenues and financing sources.

STATEMENTS OF BUDGETARY RESOURCES

The combined statements of budgetary resources present 

information on how budgetary resources were made 

available and their status at the end of the fiscal year. 

Information in the statements is based on budgetary 

transactions as prescribed by OMB and Treasury.

Figure 11 shows the components of the Department’s 

budgetary resources, which totaled $689.6 billion 

for FY 2021, increasing from $473.4 billion, or 

45.7 percent from the prior year. This increase was 

primarily due to increases in appropriations received 

totaling $231.8 billion, of which $235.0 billion was 

for increases in direct and indirect appropriations for 

COVID-19 activity.

Other significant changes to the Department’s combined 

statements of budgetary resources include the following:

• Unobligated Balances from Prior Year Budget 

Authority (Net) increased by $14.6 billion, or 

54.4 percent. Of this increase, $0.7 billion was due 

to COVID-19-funded balances and the remaining 

increase was due primarily to an increase in Direct 

Loan Program unapportioned authority from FY 2019 

to FY 2020 and repayment of Direct Loan Program 

debt in FY 2021 for prior year balances.

• New Obligations and Upward Adjustments (Total) 

increased by $196.7 billion, or 45.7 percent due 

primarily to an increase of $203.0 billion for grant 

obligations funded by the COVID-19 appropriations 

and an increase of $14.0 billion in obligations 

associated with loan modifications for COVID-19 

student loan deferrals.

• Unobligated Balance, End of Year increased 

$19.3 billion or 45.3 percent. Of this increase, 

$17.8 billion was due to COVID-19-funded balances.
22 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

Table 3.

Outlays, Distributed Offsetting Receipts, and 

Disbursements, Net

(Dollars in Billions)

FY 2021 FY 2020

Outlays, Net

Credit Programs $ 141.7 $ 129.8 

Grants 122.4 85.5 

Contractual Services 2.3 2.0 

Personnel Compensation and Benefits 0.7 0.7 

Total Outlays, Net $ 267.1 $ 218.0 

Distributed Offsetting Receipts

Subsidies (5.6) (12.3)

Repayment of Perkins Loans and 

Capital Contributions (0.9) (1.3)

Other (0.1) - 

Total Distributed Offsetting Receipts $ (6.6) $ (13.6)

Disbursements, Net

Direct Loan Program

Gross Disbursements $ 143.8 $ 158.2 

Offsetting Collections (171.5) (188.1)

Total Direct Loan Program 

Disbursements, Net (27.7) (29.9)

FFEL Program

Gross Disbursements 8.3 17.5 

Offsetting Collections (19.2) (30.6)

Total FFEL Program Disbursements, Net (10.9) (13.1)

Other Loan Programs

Gross Disbursements 0.7 0.5 

Offsetting Collections (2.0) (0.4)

Total Other Loan Program 

Disbursements, Net (1.3) 0.1 

Total Disbursements, Net $ (39.9) $ (42.9)

The combined statements of budgetary resources also 

present the Department’s summary disbursement and 

collection amounts shown in Table 3.

Outlays, Net is comprised of gross outlays and offsetting 

collections in the Department’s budgetary funds. Outlays, 

net increased $49.1 billion (22.5 percent) due primarily to 

an increase of $37.5 billion in COVID-19 grant outlays. 

Distributed Offsetting Receipts primarily represents 

amounts paid from the Direct Loan Program and 

FFEL Program financing accounts to Treasury General 

Fund receipt accounts for downward current fiscal year 

executed subsidy re-estimates and negative subsidies. Of 

the $7.0 billion decrease in FY 2021 versus FY 2020, 

$6.3 billion was attributed to the FFEL Program. 

Disbursements, Net is comprised of gross outlays and 

offsetting collections in the Department’s credit program 

nonbudgetary financing funds.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 23

MANAGEMENT’S DISCUSSION AND ANALYSIS

Analysis of Systems, Controls, 

and Legal Compliance

MANAGEMENT ASSURANCES

The Secretary of the Department of Education’s Fiscal Year 2021 Statement of Assurance provided below is the final report 

produced by the Department’s annual assurance process.

STATEMENT OF ASSURANCE 

FISCAL YEAR 2021

November 19, 2021

The Department of Education’s (the Department) management is responsible for managing 

risks and maintaining effective internal control to meet the objectives of the Federal 

Managers’ Financial Integrity Act of 1982 (FMFIA).

In accordance with Section 2 of FMFIA and Office of Management and Budget (OMB) 

Circular A-123, Management’s Responsibility for Enterprise Risk Management and Internal 

Control, management assessed risk and evaluated the effectiveness of the Department’s 

internal controls to support effective and efficient operations, reliable reporting, and 

compliance with applicable laws and regulations.

Section 4 of FMFIA and the Federal Financial Management Improvement Act of 1996

(FFMIA) require management to ensure the Department’s financial management systems 

provide reliable, consistent disclosure of financial data. Management evaluated the 

Department’s financial management systems for substantial compliance with FFMIA 

requirements. The Department also conducted a separate assessment of the effectiveness of 

its internal control over reporting with consideration of its Data Quality Plan (DQP) in 

accordance with Appendix A of OMB Circular A-123.

With the exception of a material weakness in financial reporting in the Independent 

Auditors’ Report, the Department has not identified any material weaknesses in internal 

controls: operations, reporting, or compliance with applicable laws and regulations. The 

Department considers the applicable internal controls to be working effectively. 

Based on the results of the Department’s assessments described above, our system of 

internal controls provides the Department’s management with reasonable assurance that 

the objectives of Sections 2 and 4 of the FMFIA were achieved as of September 30, 2021.

Miguel A. Cardona, Ed.D.
24 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

INTRODUCTION

Strong risk management practices and internal control help the Department run its operations efficiently and effectively, 

report reliable information about its operations and financial position, and comply with applicable laws and regulations. The 

FMFIA requires federal agencies to establish internal controls that provide reasonable assurance that agency objectives will 

be achieved. OMB Circular A-123, Management’s Responsibility for Enterprise Risk Management (ERM) and Internal 

Control implements FMFIA and defines management’s responsibilities for ERM and internal control. The circular provides 

guidance to federal managers to improve accountability and effectiveness of federal programs as well as mission-support 

operations through implementation of ERM practices and by establishing, maintaining, and assessing internal control 

effectiveness. The guidance requires federal agencies to provide reasonable assurance that it has met the three objectives of 

internal control:

• Operations—Effectiveness and efficiency of operations. 

• Reporting—Reliability of reporting for internal and external use. 

• Compliance—Compliance with applicable laws and regulations. 

This section describes the Department’s internal control framework, offers an analysis of the effectiveness of its internal 

controls, and explains assurances provided by the Department’s leadership that internal controls were in place and working 

as intended during FY 2021 to meet the three objectives.

Internal Control Framework

The Department’s internal control framework helps to ensure that the Department achieves its strategic goals and objectives 

related to delivering education services effectively and efficiently, complies with applicable laws and regulations, and prepares 

accurate reports. The Department maintains a comprehensive internal control framework and assurance process as depicted 

in the following diagram.

 

 

Figure 12

Department of Education Internal Control Framework
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 25

MANAGEMENT’S DISCUSSION AND ANALYSIS

gram performance and inform management decisions. The 

establishment of a DQP integrated into testing of controls 

is helping to address this challenge identified by the OIG.

In accordance with OMB Circular A-123, the Department 

also conducted a separate assessment of the effectiveness 

of the Department’s internal control over reporting and 

compliance with key financial management laws and 

regulations, as described below. 

Internal Control Over Reporting 

The Department maintains processes and procedures 

to identify, document, and assess internal control over 

reporting. Key activities include: 

• Maintaining process documentation for the 

Department’s significant business processes and 

subprocesses.

• Maintaining an extensive library of key financial, 

operational, and information technology (IT) controls.

• Providing technical assistance to principal offices to 

help them understand and monitor key controls.

• Refining the DQP to improve reporting controls and 

data quality.

• Implementing a risk-based control testing strategy.

• Developing corrective action plans when internal 

control deficiencies are found and tracking progress 

against those plans.

In FY 2021, the Department tested a proportionate number 

of key financial controls for both grant and non-grant 

areas based on qualitative risk assessments and rotational 

test plans. The internal controls assessment detected some 

control deficiencies but none that would rise to the level of 

material weakness. Corrective actions have been initiated 

for the deficiencies identified. In addition, numerous 

recommendations have been provided to process owners to 

strengthen internal controls, such as verifying immaterial 

differences, obtaining electronic signatures, and updating 

policies and procedures.

The Department continues to focus on streamlining 

and coordinating internal control activities to ensure 

efficiency of operations, recognizing the connection 

points across areas, and enabling transparency of 

information across the Department. This framework 

enables increased compliance process oversight and 

more informed monitoring of internal controls and 

risk management by all offices and governance bodies, 

including the Department’s Senior Management Council. 

This framework also allows for the Department to obtain 

the outcomes of a better control system and a reduced 

risk landscape. Furthermore, this streamlined approach 

helps the Department provide reasonable assurance to 

internal and external stakeholders that the data produced 

by the Department is complete, accurate, and reliable; 

internal controls are in place and working as intended; 

and operations are efficient and effective.

ANALYSIS OF CONTROLS

Overall, the Department relies on annual assurances 

provided by the heads of its principal offices, supported 

by risk-based internal control evaluations and testing as 

well as annual internal control training for all employees, 

to provide reasonable, but not absolute, assurance that 

its internal controls are well-designed, in place, and 

working as intended. The Department’s annual assurance 

process conforms to the requirements contained in the 

revised U.S. Government Accountability Office (GAO) 

publication, Standards for Internal Control in the Federal 

Government (commonly referred to as the “Green Book”) 

and OMB Circular A-123, Management’s Responsibility for 

Enterprise Risk Management and Internal Control. 

In FY 2021, the Department and FSA did not self-identify 

any material weaknesses related to the effectiveness and 

efficiency of its operations. However, an area of noncompliance with laws and regulations is noted in the Analysis 

of Legal Compliance section below. The Department 

acknowledges that it has areas of control that need further 

strengthening, such as those identified elsewhere in this 

report, as well as the major challenges identified by the 

Department’s OIG in its FY 2021 Management Challenges report. As an example, data quality and reporting are 

a challenge identified by the OIG. The Department, its 

grantees, and its subrecipients must have effective controls 

to ensure that reported data are accurate and complete. 

The Department relies on program data to evaluate pro-
26 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

EDCAPS is composed of four main integrated 

components: 

• Financial Management Support System (FMSS).

• Contracts and Purchasing Support System (CPSS).

• Grants Management System (G5).

• E2 Travel System.

Across all its components, EDCAPS is serving 

approximately 2,800 Departmental internal users in 

Washington, D.C., and 10 regional offices throughout 

the United States and territories. EDCAPS is serving 

approximately 40,970 external users, mostly users of the 

G5. In FY 2021, the Department conducted an annual risk 

assessment of EDCAPS and tested 104 IT security controls 

out of a baseline of 630 IT security controls. No significant 

deficiencies or material weaknesses were identified.

The Department designated the FMSS as a mission-critical 

system that provides core financial management services 

and focused its system strategy on the following areas 

during FY 2021: 

• Managing and implementing cross-validation rules 

throughout the fiscal year to prevent invalid accounting 

transactions from being processed.

• Transmitting the Department’s spending data related to 

contracts, grants, loans, and other financial assistance 

awards for the USASpending.gov initiative as part of 

the Federal Funding Accountability and Transparency 

Act of 2006 (FFATA) and Digital Accountability and 

Transparency Act of 2014 (DATA Act).

• Transmitting the entire Department’s payments through 

the Department of Treasury Secure Payment System.

The FMSS Oracle E-Business Suite application is behind 

the Department firewall and not external-facing. FMSS 

includes the following interfaces to multiple applications 

which are either not part of the Oracle suite of applications 

in the Enterprise Resource Plan or are external systems:

• Department Systems:

 Oracle Enterprise Performance Management 

Cloud Planning (formerly Hyperion).

 Frontier.

A N A LYS I S O F F I N A N C I A L 

MANAGEMENT SYSTEMS

The FFMIA requires management to ensure that the 

Department’s financial management systems consistently 

provide reliable data that comply with federal financial 

management system requirements, applicable federal 

accounting standards, and the U.S. Standard General 

Ledger at the transaction level. Appendix D to OMB 

Circular A-123, Compliance with the FFMIA, and 

OMB Circular A-130, Managing Federal Information 

as a Strategic Resource, provide specific guidance to 

agency managers when assessing conformance to 

FFMIA requirements. 

The Department’s vision for its financial management 

systems is to provide objective financial information to 

stakeholders to support data-driven decision-making, 

promote sound financial management, and enhance 

financial reporting and compliance activities. The 

Department’s core financial applications are integrated 

under common management control as part of the 

Education Central Automated Processing System 

(EDCAPS). EDCAPS is a suite of financial applications 

(subsystems), including commercial off-the-shelf, custom 

code, and interfaces that encompass the Department’s core 

financial management processes. Specifically, EDCAPS 

provides the following functions:

• General ledger—Preparation of financial statements 

and reconciliation of general ledger balances with 

subsystems maintained in program areas and Treasury.

• Funds management—Budget formulation, budget 

execution, and funds control.

• Grants pre- and post-award processing, including grant 

payment processing.

• Contract pre- and post-award processing.

• Receivable management.

• Cost management.

• Recipient management.

• Administrative processes (e.g., purchasing, travel, and 

miscellaneous payments).
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 27

MANAGEMENT’S DISCUSSION AND ANALYSIS

accompanying materials, and to determine whether the 

agency has met six compliance requirements. 

In its annual improper payment compliance audit for 

FY 2020, the OIG concluded that the Department 

was not compliant with PIIA because it did not meet 

two of the six compliance requirements, as described 

in Finding 1. Specifically, the Department did not 

demonstrate improvement in reducing improper payments 

in the William D. Ford Federal Direct Loan (Direct 

Loan) Program. In addition, the Department reported 

improper payment rates that exceed 10 percent for the 

Temporary Emergency Impact Aid for Displaced Students 

(Emergency Impact Aid) and Immediate Aid to Restart 

School Operations (Restart) programs. 

This determination of noncompliance with PIIA does 

not represent a material weakness in the Department’s 

internal controls. 

Debt Collection Improvement Act of 1996

The Debt Collection Improvement Act of 1996 (DCIA), 

Pub. L. 104-134, 110 Stat. 1321-358, was enacted into 

law as part of the Omnibus Consolidated Rescissions and 

Appropriations Act of 1996, Pub. L. 104-134, 110 Stat. 

1321. The primary purpose of the DCIA is to increase the 

collection of nontax debts owed to the federal government. 

Additionally, the DATA Act, Pub. L. 113-101, 128 Stat. 

1146, amended Section 3716(c)(6) of the DCIA to 

require notification of a legally enforceable nontax debt 

that is over 120 days delinquent to the Department of the 

Treasury for purposes of administrative offset. 

Due to unique program requirements of the Higher 

Education Act of 1965 (HEA), in 2015 the Department 

requested guidance from the chief counsel of the 

Department of the Treasury’s Bureau of the Fiscal 

Service to interpret the impact of the revised DATA Act’s 

delinquent debt referral requirement on Title IV debt. In 

July 2015, the Fiscal Service’s chief counsel determined 

compliance for Title IV debt requires that the Title IV 

debt be: 1) in technical default (i.e., 271 days delinquent 

per Title IV aging) and 2) a receivable of the federal 

government. Therefore, the Treasury Offset Program 

(TOP) referral requirement for Title IV debt owned by 

FSA at the time of delinquency is 271 days delinquent, 

and the requirement for debt acquired via a FFEL 

guarantee default claim or default Perkins Loan assignment 

is 120 days delinquent (per DCIA aging, which begins 

upon acceptance of a defaulted debt). As of September 

30, 2021, FSA’s current business process requires loans to 

 G5 Grants

 CPSS Contracts Purchasing Support

• External Systems:

 Treasury systems (Invoice Processing Platform (IPP) 

invoices/receipts/obligation data, IPP invoice status; 

payment files, debt referrals, CRS invoices, warrants, 

treasury confirmations, CIR collections and admin 

return, collections/payments).

 Department of Interior systems (Payroll). 

 E2 Travel System.

The Department’s financial management systems are 

designed to support effective internal control and 

produce accurate, reliable, and timely financial data 

and information. Based on self-assessments, systemlevel general controls tests, and the results of internal 

and external audits, the Department has not identified 

any material weaknesses in controls over these systems. 

The Department has also determined that its financial 

management systems substantially comply with FFMIA 

requirements. However, as noted below in the Analysis of 

Legal Compliance section, the Department continues to 

address issues and improve its controls over systems.

ANALYSIS OF LEGAL COMPLIANCE

The Department is committed to maintaining compliance 

with applicable laws and regulations. Below are 

some examples:

Payment Integrity Information Act of 2019 (PIIA)

The Payment Integrity Information Act of 2019 (PIIA), 

Pub. L. 116-117, 134 Stat. 113, was enacted into law 

on March 2, 2020. The primary purpose of the PIIA 

is to reorganize and revise several existing improper 

payments statutes1

, which establish requirements for 

federal agencies to cut down on improper payments made 

by the federal government. PIIA requires federal agencies 

to report improper payments annually for programs that 

are deemed susceptible to significant improper payments. 

PIIA also requires each agency’s OIG to review the 

agency’s improper payment reporting in its AFR and 

1 Improper Payments Information Act of 2002 (IPIA), Pub.L. 107-300, 116 Stat. 

2350, as amended by the Improper Payments Elimination and Recovery Act of 

2010 (IPERA), Pub. L. 111-204, 124 Stat. 2224, and the Improper Payments 

Elimination and Recovery Improvement Act of 2012 (IPERIA), Pub. L. 112-248, 

126 Stat. 2390.
28 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

• Office of the Chief Information Officer (OCIO) 

refined and used the Department’s cybersecurity risk 

tolerance and appetite, which integrates with the 

Department’s overall enterprise risk management 

(ERM) program. Key performance indicators (KPI) 

and key risk indicators (KRI) have been established to 

support tracking and reporting progress made towards 

the Department’s OCIO ERM target profile. OCIO 

continues membership and participation in ERM 

Working Groups and mini working groups (ERMWG) 

to continue to mature integration of Cyber Risk 

Management with ERM:

 ERM maturity model metric refinement.

 ERM digital tools risk reporting and analysis.

 ERM training for leaders and staff.

 ERM knowledge management.

OCIO publishes monthly Department Cyber Security 

Framework (CSF) Risk Scorecards as part of the 

Department’s Information Security Continuous 

Monitoring efforts to identify cybersecurity risks, issues, 

and opportunities for improvements in its cybersecurity 

protections. The Department CSF Risk Scorecard provides 

a detailed analysis tool for authorizing officials, information 

system owners, and information system security officers 

to prioritize and mitigate risks to the Department’s 

information systems. In FY 2021, the Department 

continued to mature its risk management processes through 

enhancements made to the CSF Risk Scorecard. These 

enhancements have improved the accuracy and timeliness 

of the Department’s risk reporting and continuous 

monitoring. System stakeholders are now provided daily 

visibility of their system’s risk and data quality. Additional 

views were established to augment and consolidate risk 

reporting to allow the Department’s authorizing officials 

to quickly identify which systems require attention and 

prioritization of authorization and risk reduction activities. 

These enhancements are targeted to result in a reduced 

number of past due Plan of Actions and Milestones 

(POA&M) and data quality issues. With near-real time 

risk scoring and reporting in place, executive and system 

level stakeholders can effectively prioritize and manage the 

Department’s cybersecurity risk daily.

OCIO disseminated monthly State of IT principal 

office-level reports for continued outreach to executive 

stakeholders to take the appropriate actions as necessary 

be transferred to the default loan servicer after 360 days 

of delinquency. FSA refers debt to TOP after exhausting 

due process with each borrower, which extends beyond 

the delinquency period in the DATA Act. Further, due to 

the number of entities and systems involved in handling 

student loan debts and the decentralized nature of such 

processes, FSA is not yet capable of meeting an accelerated 

time line. Accelerating the timeline requires substantial 

changes to servicing legacy systems. Rather than making 

changes to these legacy systems, FSA plans to build 

new TOP referral requirements into the NextGen FSA 

servicing platform. FSA has developed a long-term project 

plan to incorporate the referral requirements into servicer 

contracts and guaranty agency agreements to initiate the 

required system programming changes. This determination 

that the Department does not have a process in place to 

enable the referral of FSA owned Title IV debts on the 

271st day of delinquency and referral of relevant FFEL 

claims and delinquent Perkins Loan debt on the 121st day 

of delinquency does not represent a material weakness in 

the Department’s internal controls.

While the Department continues to work on an 

accelerated process to refer debt to Treasury, the 

Coronavirus Aid, Relief, and Economic Security Act (CARES 

Act) affords administrative forbearance for eligible loans. 

Beginning in March 2020 and continuing throughout 

FY 2021, the CARES Act suspended involuntary 

collection through TOP. This suspension of involuntary 

collections will continue to apply at least through 

January 31, 2022. Pursuant to the CARES Act and related 

authorities, no loans were required to be transferred to 

Treasury during FY 2021. Accordingly, the Department 

was and is compliant with DCIA as amended by the 

DATA Act.

Federal Information Security Modernization 

Act of 2014

The Federal Information Security Modernization Act of 

2014 (FISMA 2014) requires federal agencies to develop, 

document, and implement an agencywide program to 

provide security for the information and information 

systems that support the operations and assets of the 

agency and to ensure the confidentiality, integrity, and 

availability of system-related information.

The Department’s and FSA’s information security 

programs completed numerous significant activities 

in FY 2021 to improve cybersecurity capabilities and 

functions, some of which include:
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 29

MANAGEMENT’S DISCUSSION AND ANALYSIS

DLP solution identified and blocked 9,562 emails 

which prevented potential sensitive personally 

identifiable information security incidents. 

• Through enhanced reporting of email and web security 

posture, the Department was able to maintain U.S. 

Department of Homeland Security (DHS) Binding 

Operational Directive (BOD) 18-01 compliance of 

100 percent for email security and 97 percent for 

Hypertext Transfer Protocol Secure (HTTPS) tracking. 

Additionally, there were no overdue critical or high 

vulnerabilities in FY 2021 for the Department’s public 

facing assets reported in accordance with DHS BOD 

19-02 Cyber Hygiene.

• Cybersecurity and personnel security requirements 

were incorporated into the Department’s acquisition 

regulations in December 2019. The Office of 

Acquisition Management issued Acquisition Alert 2020-

01, Education Acquisition Regulation Class Deviation: 

Cyber and Personnel Security Requirements for Contractors. 

This deviation ensures active contracts, solicitations, 

and future contracts communicate the Department’s 

cybersecurity and personnel security requirements to 

contractors and prospective contractors.

• OCIO continued conducting quarterly Departmentlevel, system-tailored Incident Response and Contingency 

Plan testing tabletop exercises virtually, which focused on 

contingency planning in the event of a cyber incident. 

As of September 2021, 98 percent of the Department’s 

FISMA 2014-reportable systems had a valid contingency 

plan test. Feedback reports were provided to system 

stakeholders on weaknesses and opportunities for 

improvement to their contingency plans.

• OCIO continued supporting the Scholarship for 

Service (SFS) program which is managed by the 

National Science Foundation in collaboration with 

the U.S. Office of Personnel Management (OPM) 

and DHS. This initiative reflects the critical need for 

IT professionals; industrial control system security 

professionals; and security managers in federal, state, 

local, and tribal governments. Upon graduation, 

scholarship recipients are required to work for a federal, 

state, local, or tribal government in a position related to 

cybersecurity. In July 2021, the Department spoke to 

students from SFS about the Department’s internship 

and upcoming employment opportunities 

• OCIO established a roadmap for migrating 

the Department’s policies and security control 

based on cyber data, trends, metrics, and key insights 

specific to their organization offered through cybersecurity 

data visualizations.

OCIO established initial operating capabilities for the 

Department’s cybersecurity data lake and continued 

to enhance configuration for ingestion of Continuous 

Diagnostics and Mitigation and continuous monitoring 

data. Currently, 10 data sources have been identified 

for initial operational capabilities. These enhancements 

allow for better cyber risk visibility and monitoring of 

Department information systems to enable prompt datadriven decisions.

• To mitigate operational impacts of the COVID-19 

pandemic, OCIO delivered Personal Identity 

Verification Alternative Solution (PIV-A) as an 

alternative multifactor authentication solution 

providing continuity of critical business functions. 

Additionally, OCIO identified, analyzed, and 

recommended a cloud-based solution to provide rapid 

expansion of the Department’s virtual private network 

(VPN) capacity supporting the workforce during the 

COVID-19 telework phase. OCIO also performed 

outreach for increased vigilance during the COVID-19 

telework phase. OCIO implemented proactive security 

monitoring of PIV-A VPN connections by using a 

new data-lake-based security information and event 

management (SIEM) software solution. Department 

employees have also been educated regarding increased 

phishing and other cybercriminal scams targeting a 

largely at-home workforce (stimulus checks, spoofing 

legitimate government health organizations, etc.).

• OCIO completed the enhancement of the Department’s 

network access control capability for nongovernmentfurnished equipment within the Department’s new 

IT environment that is superior to capabilities that 

existed before the FY 2019 transition. This provides a 

foundation to further implement the Department’s Zero 

Trust architecture.

• To bolster the Department’s email security, OCIO 

fully deployed and monitored the Office 365 email 

Data Loss Prevention (DLP) capability. This capability 

enhances the Department’s overall DLP capabilities 

and works in concert with network and desktop DLP 

solutions. OCIO also deployed DLP desktop agents 

on nearly 100 percent of Department endpoint devices 

to further enhance the identification of personally 

identifiable information such as Social Security and 

credit card numbers. In FY 2021, the Department’s 
30 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

Department immediately disconnected impacted 

exchange servers from the Department’s network and 

notified CISA on March 5, 2021. All impacted assets 

were updated to the latest version required by CISA by 

March 9, 2021.

• The Department, including the FSA Zero Trust 

strategic implementation plan, addresses current 

issues with access, including unauthorized, and 

siloed single-point solutions for data protection. This 

initiative establishes an architectural plan; a solution 

design; an accompanying process; and implements 

a secure framework to address access, verification, 

and integration issues across all information systems 

hosted at multiple independent data centers and 

within numerous cloud service providers. The 

Department and FSA will leverage Zero Trust concepts 

to move to a data-centric access and protection 

model versus the traditional network-based perimeter 

protection concepts. The submitted plan outlines the 

development, modernization, and enhancement of 

the program:

 Establish and fully implement a Zero Trust Program 

that includes strategy, architecture, design, and an 

implementation road map.

 Develop Zero Trust workbooks and standards 

to support adaptation of Zero Trust for 

the Department.

 Establish a catalog of Zero Trust services 

and capabilities.

 Adopt Zero Trust across cloud-computing 

environments in accordance with the developed 

road map.

 Establish a Zero Trust-specific section in the 

cybersecurity training program.

 Adopt multifactor authentication and encryption 

for data at rest and in transit, to the maximum 

extent consistent with federal records laws and other 

applicable laws.

• To mitigate impacts of the COVID-19 pandemic 

on remote stakeholders, the Department identified, 

analyzed, and implemented a cloud-based solution 

to provide rapid expansion of the Department’s VPN 

capacity to support extensive teleworking capabilities. 

As a result of these efforts, the Department was able 

improve the availability and continuity of operations 

implementation from National Institute of Standards 

and Technology SP 800-53, Security and Privacy Controls 

for Information Systems and Organizations, Revision 4 to 

Revision 5. This road map will allow the Department 

to better understand, plan, and prepare as it begins to 

update key security controls in accordance with the new 

Revision 5 guidance. The Department also participated 

in a cross-agency working group with GSA, HHS, and 

other agencies to collaborate on the development and 

standardization of organizational parameters for the 

NIST 800-53 Revision 5 security controls. 

• OCIO has implemented an ACS Directive, OCIO: 

3-114, Cybersecurity Awareness Simulated Phishing 

Exercise Behavioral Based Escalations, which establishes 

the Department standards for acceptable behaviors in 

response to an authorized simulated phishing exercise 

as well as behavioral-based escalations for federal 

employees and contractors based upon identification 

of a pattern of unacceptable behaviors (e.g., repeatrisk email users) that puts the network and data at 

risk. This directive also documents actions required to 

reduce Departmental risk from end users who exhibit 

unacceptable behaviors in response to one or more 

exercise(s). In support of this new directive, OCIO 

established enhanced reporting and retraining support 

for privileged users and repeat risk users. All privileged 

users who had unacceptable behavior as a result of the 

first exercise conducted, were required to and have 

completed the necessary training courses.

• OCIO supported all required actions from DHS 

Emergency Directive 21-01, Mitigate SolarWinds 

Orion Code Compromise. The Department immediately 

disconnected/powered down SolarWinds Orion 

products, versions 2019.4 through 2020.2.1 HF1, from 

the Department network and notified the Cybersecurity 

and Infrastructure Security Agency (CISA) on December 

14, 2020, as required. The Department continues 

to analyze forensic images of system memory and/or 

host operating systems for all impacted assets. OCIO 

completed a forensics analysis and an independent, 

external, third-party, certified forensics examiner 

determined no threat actor was present in the system 

and no malicious activity has taken place. Additionally, 

OCIO also provided both the Senate and U.S. House of 

Representatives formal responses to inquiries regarding 

this emergency directive.

• OCIO supported all required actions from DHS 

Emergency Directive 21-02, Mitigate Microsoft 

Exchange On-Premises Product Vulnerabilities. The 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 31

MANAGEMENT’S DISCUSSION AND ANALYSIS

March 1, 2021, in accordance with DHS BOD 20-01. 

The Department’s VDP provides an open channel and 

legal safe harbor for the discoverer of vulnerabilities 

to report them to the Department. Version 2.0 of the 

VDP, released June 1, 2021, expanded the scope of the 

policy to include all internet-accessible, public-facing 

systems or services of the Department, more than a 

year ahead of schedule.

• Leveraging lessons learned with the Department 

of Energy, the Department formally established an 

Information Communications Technology (ICT) 

Supply Chain Risk Management (SCRM) program 

and released a strategic road map designed to provide 

a vision and action plan for the planning, preparation, 

implementation, and execution of the Department’s 

ICT SCRM program. Following this road map and 

plan will allow the Department to move from a pointin-time compliance model to a near real-time detection, 

analysis, and correction model, resulting in improved 

ICT SCRM and more accurate and frequent assessments 

of ICT SCRM security control effectiveness. The 

Department’s ICT SCRM program ensures that the 

Department and its contractors are assessing, protecting, 

and measuring risks involved with their selection of 

suppliers and not accepting unnecessary risks.

• The Oracle Enclave has been created for integrating all 

Oracle license usage into one cluster for cost avoidance. 

An approximate $7 million in savings is estimated 

for the Department over three years, beginning in 

2022. Currently, the Department is using this enclave 

for several systems, including EDCAPS, EDFacts, 

and PIVOT-I. 

• OCIO, via the Information Technology Program 

Services Division, recently activated the Technology 

Business Management Solutions (TMBS) to provide 

cost transparency through a single, integrated view 

of IT costs by service, office, line item, and project. 

TBMS will empower Department leaders with 

information to improve financial performance.

• During FY 2021, OCIO successfully completed a 

major infrastructure upgrade in the Department’s 

disaster recovery environment in Raleigh, NC. 

Enterprise improvements included an increase to 

overall infrastructure performance, dependability, 

capacity, and security. This upgrade provides the 

Department with a significant increase to the network 

bandwidth from 10GB to 40GB, increased cloud 

computing resources (the number of hosts increased 

for its networks. The Department also provided 

targeted outreach to proactively address threats to 

teleworking employees (e.g., warning them of increased 

phishing attempts and other cybercriminal scams that 

target largely at-home workers). As a result of this 

increased outreach, the Department has benefitted 

from an improved average reporting rate (+7 percent) 

for its phishing exercises across its user base in FY 2021 

from FY 2020. 

• The Department issued an amendment to Acquisition 

Alert (AA) 2020-01, Education Acquisition Regulation 

(EDAR) Class Deviation: Cyber and Personnel Security 

Requirements for Contractors. This amendment 

implements deviated EDAR clauses to accurately 

reflect the Department’s updated cybersecurity and 

privacy requirements. Below are the requirements 

added/updated: 

 DHS Binding Operation Directives.

 Continuous Monitoring / Ongoing Security 

Assessment & Authorization.

 Identity, Credential, and Access Management and 

Personal Identify Verification (PIV) Systems.

 National Institute of Standards and Technology 

(NIST) Zero Trust Architecture/Zero 

Trust Network. 

 Department Cyber Data Lake.

 Office of Management and Budget (OMB) Trusted 

Internet Connections 3.0.

 National Defense Authorization Act Section 889 

Compliance. 

• The Department’s cybersecurity risk exposure has 

been directly reduced due to the amendment to this 

alert that allows the Department to enforce all the 

newly updated cybersecurity requirements articulated 

in the revised cybersecurity clause (which became 

effective September 28, 2020) with the amendment to 

Acquisition Alert 2020-01. The OCIO Information 

Assurance Services Division reviews all new IT 

contracts as a part of the ERM review process ensuring 

the updated clause inclusion before contract award.

• To allow the research community and others to alert 

the Department about vulnerabilities in its systems 

through a clearly established program, the Department 

Vulnerability Disclosure Policy (VDP) was published on 
32 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

 The Central Information Technology (CIT)-focused 

dashboard improves financial transparency and 

accountability for OCIO’s leadership, division 

branch chiefs and program/project managers by 

increasing visibility into quantitative and qualitative 

key metrics. The key metrics reported include 

annual allocations, allotments, year-to-datespending for both CIT and non-CIT budget line 

items, as well as late Acquisition Plan (AP) actions. 

Division chiefs and programs can visually and 

quickly identify areas that require their attention, 

such as projects still having the most remaining 

funding, late AP actions, and AP actions due in 

30/60/90 days. Divisions are then held accountable 

for executing their plans accordingly.

 The non-CIT dashboard focuses on pay and nonpay 

budgets and has been essential in driving critical 

decisions throughout the year, including pay and 

training availability for OCIO’s employees. 

 While the OCIO Financial Executive Dashboard 

was primarily developed with the executive 

leadership audience in mind, it has served a 

multifaceted purpose as the basis for numerous 

tactical actions at the next level of leadership in both 

CIT and non-CIT.

• OCIO launched standard operating procedures for the 

proper alignment and retention of records inventories. 

These procedures enable principal offices to strengthen 

the protection of controlled unclassified information.

• In FY 2021, the Department’s High Value Asset (HVA) 

program, in partnership with FSA, was presented 

as a “Best in Government” for its engagement with 

the DHS assessment team. DHS senior leadership 

noted how the Department and its components 

were outstanding in their planning, coordination, 

execution, and timeliness of its Risk and Vulnerability 

Assessments. Highlights of the program expressed 

how the Department worked with DHS to ensure a 

seamless process was executed for HVA assessment. 

This was presented at the federal CISO Council 

HVA Subcommittee as the gold standard for 

HVA engagement.

by 30 percent, RAM by 100 percent, and cores by 

25 percent) resulting in overall improved performance, 

resolution of several existing vulnerabilities and 

POA&Ms that enhance the security posture of the 

Raleigh datacenter.

• OCIO implemented a Human Capital, Financial and 

Resource Management tool, comprised of a suite of 

dashboards, that provides an on-demand, interactive, 

and consolidated view of critical management 

areas. The tool is designed with a primary focus on 

providing executive-level status views of human capital 

management, financial management, budgetary 

execution and procurement to OCIO’s senior 

leadership and leaders at the division and branch levels. 

The critical data points that leaders need to make 

informed business decisions are updated throughout 

the day to ensure that OCIO is proactively able to 

meets its strategic objectives and goals. These unique 

dashboards are discussed below:

 The Human Resources Hiring Dashboard provides 

leadership with an up-to-the-minute aggregate 

or divisional snapshot view reflecting the status 

of current hiring actions. It lists the number of 

positions that have received agency approval to be 

encumbered, the number of positions presently 

encumbered, hiring actions that are not yet 

complete, and the number of new hires that have 

begun their employment with OCIO during 

the current fiscal year. In addition, updates are 

incorporated to identify the stage of each hiring 

action within the recruitment process. The Office 

of Human Resources has created a service-level 

agreement (SLA) identifying the number of days for 

each phase of the recruitment process in alignment 

with the OPM’s 80-day hiring model. Those time 

lines are listed within the dashboard along with 

averaged quarterly variances that have occurred. 

In addition, current actions where SLAs have been 

missed are labeled as such, and viewers are able to 

specifically see the exact SLAs that have deviated 

from the prescribed time lines. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 33

MANAGEMENT’S DISCUSSION AND ANALYSIS

• In FY 2021, the Department’s Cybersecurity and 

Awareness Program Manager was awarded the 2021 

Federal Information Security Educators Cybersecurity 

Awareness and Training Innovator Award. The 

Department Cybersecurity and Awareness Program 

Manager oversees the Department’s Phishing Program, 

Cybersecurity and Privacy Awareness Training, 

Role-Based Training, Workforce Development, and 

Continuous Outreach Activities.

• The Department developed and implemented a new 

FISMA 2014 reporting dashboard through Microsoft 

Power BI. The new dashboard allows leadership to 

visualize all data collected across the Department in 

support of its quarterly reporting requirements to 

DHS and OMB. The dashboard provides the ability 

to proactively identify discrepancies or potential risks 

as a result of data captured and presented to both 

leadership and FISMA 2014 metric owners for action. 

The first quarter submission provided favorable Risk 

Management Assessment results across all FISMA 2014 

security domains. 
34 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

Forward-Looking Information

This section summarizes information pertinent to the 

Department’s future progress and success.

ENTERPRISE RISK MANAGEMENT

The Department’s enterprise risk management (ERM) 

program supports agencywide efforts to maximize the 

Department’s value to students and taxpayers through 

achievement of strategic goals and objectives. The 

Department’s ERM program strategically focuses on the 

complete spectrum of the organization’s significant risks 

and the combined impact of those risks as an interrelated 

portfolio rather than simply addressing risks within silos. 

This coordinated approach leverages data and analytical 

solutions to identify, measure, and assess challenges related 

to mission delivery and resource management. Through 

ERM, the Department seeks to embed a systematic and 

deliberate view of risk into key management practices, 

yielding more effective performance and operational 

outcomes. The Department’s implementation of ERM 

includes three critical strategies that are more fully 

described under Strategic Objective 4.2, Identify, assess, 

monitor and manage enterprise risks:

• Creating a risk-aware culture that includes transparent 

discussions of risks.

• Implementing an ERM framework and capability 

that leverages existing risk management activities and 

governance bodies.

• Managing risks in a more coordinated and 

strategic manner.

The Office of Enterprise Data Analytics and Risk 

Management (OEDARM), within the Office of Finance 

and Operations (OFO), leads the agency’s overall ERM 

strategy and formally aligns ERM and internal controls 

processes. OEDARM leadership established a formal 

ERM Working Group (ERMWG) in FY 2020 with 

senior representation across the agency to further solidify 

the Department’s ERM governance structure. Since 

its formation, the ERMWG has been instrumental in 

conducting coordinated risk assessments and further 

incorporating the risks highlighted or exacerbated by the 

COVID-19 pandemic into short- and long-term risk 

planning. In addition to the representation of offices in 

the working group, OEDARM leverages partnerships with 

agency leaders (e.g., the Senior Management Council, the 

Senior Executive Cadre, political leadership) to identify, 

measure, and assess challenges related to mission delivery, 

policy development, and operations to develop coordinated, 

actionable response plans.

OEDARM leadership actively sought to enhance strategic 

partnerships with ERM colleagues across the government 

as well as with Department’s own OIG. Initiatives in FY 

2021 included: identifying metrics to inform the maturity 

of the Department’s risk program; creation of a Knowledge 

Management Action Plan to develop a streamlined 

process of defining, structuring, retaining. and sharing the 

knowledge of Department employees; and the creation of 

digital tools for collecting, analyzing, and reporting risk 

data to promote transparency and accountability across 

the Department. OEDARM additionally established an 

informal, yet crucial, conversation series to bring awareness 

to various risk topics at the Department and to provide an 

open forum for discussion of risk in a safe, comfortable, 

setting. OEDARM’s newly launched ERM internalfacing website contains useful tools, resources, and data 

to better educate and promote healthy risk culture for the 

entire Department.

OEDARM will continue the above and additional 

strategic efforts during FY 2022 to foster a culture of 

continuous improvement within the Department—

where data and awareness of enterprise risk are used to 

objectively inform strategic and operational decisions 

and optimize agency performance. Throughout FY 2022, 

the Department plans to further integrate ERM with 

key management processes—leveraging objective data 

analytics, key performance indicators and key risk 

indicators and considerations inform budget formulation, 

strategic planning, and performance management. In light 

of the current COVID-19 pandemic, the Department has 

intentionally shifted to an even more comprehensive and 

collaborative approach to risk management—to embed 

consideration of externally driven risks related to national 

health emergencies, natural disasters, potential terrorist 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 35

MANAGEMENT’S DISCUSSION AND ANALYSIS

threats, and other significant crises that could adversely 

impact continuity of operations and mission delivery.

DIRECT LOAN PROGRAM

The Department’s largest program, the William D. Ford 

Federal Direct Loan (Direct Loan) Program, provides 

students and their families with funds to help pay for their 

postsecondary education costs. The following describes (1) 

the steps the Department has taken to help make student 

debt more manageable and (2) the risks inherent in estimating the cost of the program.

Managing Student Loan Debt

Each year, federal student loans help millions of Americans 

obtain a college education—an investment that, on 

average, has high returns. While the average return to 

having a college degree remains high,1

 some students leave 

school poorly equipped to manage their debt.

Traditionally, federal student loans had fixed-payment 10-

year repayment schedules, making it difficult for borrowers 

to begin repaying at the start of their career when their 

salaries are low. The recent expansion of income-driven 

repayment (IDR) plans allows students the opportunity 

for greater financial flexibility as it pertains to their 

monthly repayment. For more details on these plans, visit 

FSA’s How to Repay Your Loans Portal.

Recent trends in student loan repayment data show that:

• More than 70 percent of the direct loan portfolio is in

administrative forbearance—the suspended payment

status provided to students through the extension of

the student loan repayment deferrals.

• As of June 2021, nearly 8.3 million direct loan

recipients were enrolled in IDR plans, representing a

1 percent increase from June 2020 and an 8 percent

increase from June 2019. Overall, more than

47 percent of direct loan dollars and 32 percent of

borrowers in repayment are enrolled in an IDR plan.

The Department continues to work relentlessly to make 

student loan debt more manageable. Looking to the 

future, the Department will:

• Continue conducting outreach efforts to inform

student loan borrowers of their repayment options

before the emergency loan relief measures expire on

January 31, 2022.

1 https://cew.georgetown.edu/cew-reports/collegepayoff2021/

• Work to improve customer service and student aid

systems and processes by implementing FSA’s Next

Gen FSA, see page 39.

• Continue to support the development of additional

tools, such as the College Scorecard and College

Financing Plan, to increase transparency around

higher education costs and outcomes that may help

students and families make informed decisions before

college enrollment.

Managing Risks and Uncertainty Facing the Direct 

Loan Program’s Cost Estimates

Direct Loan Program costs are estimated consistent with the 

requirements of the Federal Credit Reform Act of 1990. Under 

the act, the future disbursements and collections associated 

with a cohort of loans are estimated for the entire life of the 

loan, up to 40 years in this case. The actual performance of a 

loan cohort tends to deviate from the estimated performance 

during that time, which is not unexpected given the 

inherent uncertainty involved in developing estimates. 

Estimation of Federal credit programs involves inherent 

risk. The Department utilizes the best data available with 

modeling techniques that have been examined over time by 

several outside entities. Management has confidence over 

the estimates by using several different tools to analyze cost 

estimates. Re-estimates on the loan portfolio are performed 

twice a year ensuring that the most up to date data and 

models are used. The four types of inherent risk, described 

below, that make estimating lifetime program costs a 

difficult task.

Legislative, Regulatory, and Policy Risk

There are inherent risks to estimating future lifetime 

disbursements and collections for a cohort stemming 

from legislative, regulatory, or administrative actions. 

For instance, the cost structure of the Direct Loan 

Program may be significantly altered if policies around 

loan forgiveness are expanded. In addition, the effects on 

financial modeling and estimation associated with recent 

legislative, regulatory, and policy action is difficult to 

interpret given the lack of actual trend data availability. 

Some examples of current risks include the following:

Extension of Student Loan Payment Relief During the 

COVID-19 Pandemic: The emergency relief measures 

in the Direct Loan Program, including suspending loan 

payments, halting collections on defaulted loans, and 

setting interest rates to 0 percent have been extended 

through January 31, 2022. These actions have insulated 
36 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

federal student loan performance from economic 

disruption caused by the COVID-19 pandemic, while at 

the same time reducing the amount of loan repayments 

being remitted to the Department. As the pandemic is 

ongoing, there is uncertainty regarding cost estimates as 

future actions to support borrowers during the return to 

repayment in 2022 could affect those received payments. 

Income-Driven Repayment Plans: Without 

consideration of impacts from the pandemic, IDR plans 

tend to be more costly to the government than nonIDR plans. For the 2021 loan cohort, it is estimated that 

the government will recover 44 percent less for loans in 

IDR plans as compared to loans in standard plans. It is 

important to be careful in making such comparisons, 

however, as the underlying characteristics of borrowers 

(and the corresponding behavioral dynamics driving 

selection of plans) also impact the overall cost of loans 

under each plan. Also, having more repayment plan 

options complicates repayment plan selection, since 

the tradeoff decisions when selecting the plans vary by 

borrower and may not always be entirely clear. In general, 

however, the proliferation of IDR plans has made IDR 

terms more generous and made the plans available to a 

greater number of borrowers; these plans are traditionally 

more costly to the government. Selected comparisons 

between projected originations and borrower repayments 

under the different IDR plans are available on the 

Department’s website. Future commitment to promote 

these programs, and potential increased participation in 

these plans, are areas of uncertainty. Future legislative and/

or regulatory activity could also affect the underlying cost 

of IDR plans.

Public Service Loan Forgiveness: Enacted in 2007, the 

Public Service Loan Forgiveness (PSLF) program allows 

a direct loan borrower to have the balance of their direct 

loans forgiven after having made 120 qualifying monthly 

payments under a qualifying repayment plan, while 

working full time for a qualifying public service employer 

(such as government or certain types of nonprofit 

organizations). In general, forgiveness provided via PSLF 

raises the cost of the Direct Loan Program; however, 

there is still uncertainty as to how many borrowers will 

take advantage of the program. Much of this uncertainty 

arises because borrowers are not required to apply for 

the program or provide any supporting documentation 

on their employment until after having made the 120 

qualifying monthly payments, and data on actual PSLF 

forgiveness remains limited, as borrowers first became 

eligible in FY 2018.

Data on approved PSLF applications first became available 

in FY 2018 since borrowers first became eligible for 

PSLF loan forgiveness starting October 1, 2017, after 

having made 120 qualifying payments. The Consolidated 

Appropriations Act, FY 2018, and the Department of 

Education Appropriations Act, FY 2019, each provided 

$350 million toward Temporary Expanded Public Service 

Loan Forgiveness (TEPSLF) for borrowers who met 

eligibility for public service employment but were not 

enrolled in a qualified repayment plan. The Consolidated 

Appropriations Act, FY 2020, and the Consolidated 

Appropriations Act, FY 2021 each provided $50 million 

for TEPSLF. As of September 30, 2021, the total number 

of borrowers who received forgiveness from PSLF and 

TEPSLF exceeded 16,000. The value of this forgiveness 

totaled nearly $1.26 billion. Despite the relatively modest 

numbers of approved applications to date, the number 

of borrowers who have certified their employment in a 

public service organization continues to increase steadily. 

As of September 30, 2021, the number of borrowers with 

certified employment totaled nearly 1.33 million. The 

low number of approved PSLF applications in relation 

to employment certifications may be partially due to 

the complicated nature of the program, in particular the 

determination of what constitutes a qualifying payment. 

In addition, many borrowers who file employment 

certification forms early in their careers may also move 

into private sector employment before completing the 10 

years of qualifying payments and thus may (a) never apply 

for forgiveness or (b) apply for forgiveness much later after 

returning to public service work.

On October 5, 2021, the Department announced 

a temporary change to the PSLF program to allow 

previously ineligible loans to be immediately eligible for 

forgiveness, or additional progress toward forgiveness, 

with no further action on their part. The changes include 

a limited PSLF waiver that allows all payments by student 

borrowers to count toward PSLF, regardless of loan 

program or payment plan and review of denied PSLF 

applications for errors, giving borrowers the ability to 

have their PSLF determinations reconsidered. Borrowers 

who have not previously certified employment will also 

be able to apply for the waiver. Two permanent changes 

to military borrowers working toward PSLF were also 

implemented. Any future congressional or regulatory 

action that may affect eligibility for PSLF continues to be 

an area of uncertainty. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 37

MANAGEMENT’S DISCUSSION AND ANALYSIS

Estimation Risk

Actual student loan outcomes may deviate from estimated 

student loan outcomes, which is not unexpected given 

the long projection window of up to 40 years. The Direct 

Loan Program is subject to a significantly large number 

of borrower-level events and future economic factors that 

heavily impact the ultimate cost of student loans. For 

example, assumptions that need to be estimated for loans 

originating in FY 2021 include how long students will 

remain in school; what repayment plan will be chosen; 

whether the loan will be consolidated; whether the borrower will die prior to completing repayment, become 

disabled, bankrupt, or have another claim for discharge or 

forgiveness (closed school loan discharge, borrower defense 

to repayment, etc.); whether the loan will go into deferment or forbearance; whether the loan will go into default 

and, if so, what collections will be received on the defaulted loan; and, if the loan is in an IDR plan, what the borrower’s employment (public sector or not) and income and 

family size will be over the next 25 years. These projections 

are generally made based on historical data about borrower 

characteristics and behavior, which are more difficult to 

estimate during times of unprecedented uncertainty facing 

students and borrowers in repayment plans today. Lastly, 

the direct loan portfolio has grown from approximately 

$356 billion in FY 2011 to nearly $1.3 trillion as of the 

end of FY 2021. This growth naturally results in larger 

re-estimates, since a re-estimate worth 1 percent of the 

portfolio today would be more than three times as large as 

a similar re-estimate in FY 2011.

Macroeconomic Risk

The ultimate amount, timing, and total value of future 

borrower repayments under the Direct Loan Program are 

heavily affected by certain economic factors, especially 

since the introduction of IDR plans.

In 2021, the COVID-19 pandemic continued to cause 

widespread disruption to the American economy. The 

emergency relief measures provided by Congress and the 

President resulted in flexibilities for federal student loan 

borrowers, continuing to prevent spikes in delinquency 

and default rates. Involuntary loan collections from wage 

garnishment, tax refund reductions, and reductions of 

federal benefits such as Social Security are also suspended. 

However, the ultimate impact of the pandemic on longterm Direct Loan Program costs is subject to significant 

uncertainty and will depend on, among other things, 

short- and long-term unemployment, economic growth 

trends, and potential structural changes in the overall 

economy and job markets. Some types of macroeconomic 

risk are inherent to student loan cost estimation, and the 

Department analyzes them regularly—though some of 

these risks have been exacerbated by the unprecedented 

worldwide pandemic. New risks have also developed due 

to the conditions surrounding the pandemic. Specific 

examples of macroeconomic risk include:

Interest Rates: Direct Loan Program cost estimates are 

very sensitive to changes in interest rates. Under the 

current program terms, the fixed borrower rates for 

direct loans are established in advance of the upcoming 

school year, while the Treasury fixed interest rate on the 

Department’s borrowings to fund those loans is not set 

until after those awards are fully disbursed, which can 

be as much as 18 months later. Unexpected changes in 

interest rates during this time can significantly impact 

Direct Loan Program cost.

Unemployment: Unemployment rates have been shown 

to affect both student loan volume and student loan 

repayment decisions and behavior. During periods of 

economic downturn, displaced workers have tended to 

pursue higher education opportunities in high numbers 

to strengthen their credentials, change career paths, or 

improve future employment opportunities. While the 

COVID-19 pandemic has been accompanied by a spike 

in unemployment (at least in the short term), the impact 

on student loan volume has been more mixed, as higher 

education has struggled to provide students the level of 

instruction they were receiving prepandemic. The exact 

impact on the cost estimates from the current recession 

remains a significant area of uncertainty. For instance, 

higher short-term unemployment rates could have an 

impact on future collections of already defaulted loans 

by increasing the risk of fewer collections from wage 

garnishment and tax refund reductions. A sensitivity 

analysis examining the impact of a 5 percent reduction in 

default collections, limited to cohorts 2016–20, resulted in 

a projected increase in the re-estimate of $2.4 billion.

Wage Growth: The estimated costs of IDR plans are 

largely dependent on trends in observed wage growth. To 

the extent that future wage growth deviates significantly 

from prior wage growth, actual costs of IDR plans may 

deviate from estimated costs. The Department will closely 

monitor impacts to wage growth because of the pandemic. 

Data is not available for the FY 2021 financial statements, 

and the ultimate cost may not be known for some time. 

The estimates are sensitive to slight changes in model 
38 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

assumptions. The Department continues to manage risks in 

this area by building its knowledge about its borrower base 

and remaining informed of labor market statistics.

Operational Risk

Unforeseen issues in administering and servicing student 

loans may impact the cost estimates. For example, in 

December 2019, the President signed the Fostering 

Undergraduate Talent by Unlocking Resources for Education 

Act (FUTURE Act), which amends Section 6103 of the 

Internal Revenue Code to allow the IRS to share taxpayer 

data directly with the Department. Once implemented, this 

will make it easier for borrowers to stay enrolled in an IDR 

plan by allowing automated data sharing between federal 

agencies and eliminating the need for borrowers to annually 

recertify their income. A time line for implementation of 

the FUTURE Act is uncertain, which can make predicting 

the impact on student loan cost estimates a challenge. 

Similarly, the Department is working to implement 

the FAFSA Simplification Act, which makes significant 

changes to the need analysis formula that will also 

introduce operational challenges. The Department invests 

significant resources to ensure continuous improvements 

in cybersecurity defenses based on current and emerging 

threats. Despite this investment, security threats to 

operations are ongoing and incidents may happen without 

warning, potentially disrupting student loan administration 

and ultimately borrower cash flows, which can be impacted 

by the timing of when collections or disbursements are 

processed. Hence, there is an inherent risk that future, 

unpredictable disruptions in the administrative status quo 

may impact student loan cost estimates.

On September 30, 2021, the Department was awarded 

$20 million from the Technology Modernization Fund 

board. The Department will use the money to implement 

a Zero Trust architecture to improve the protections of 

student data it manages. By improving and modernizing 

cybersecurity technologies the Department will provide 

more secure and less burdensome user experiences both for 

employees and the public. 

Another potentially unforeseen issue that may impact cost 

estimates is when federal loan servicers or private collection 

agencies exit the student loan servicing program, as several 

have over the last year. The Department remains committed 

to ensuring that borrowers receive high-quality service that 

helps them access the benefits granted by law.

NEXT GEN FSA

About FSA

As the nation’s largest provider of financial aid for 

education beyond high school, FSA delivers more than 

$112 billion in aid each year to students and their families. 

Through programs authorized under the Higher Education 

Act of 1965, as amended, FSA provides grants, loans, 

and work-study funds for college or career school. FSA 

also oversees the approximately 5,600 postsecondary 

institutions that participate in the federal student aid 

programs. In every interaction with students and their 

families, FSA strives to be the most trusted and reliable 

source of student financial aid information and services in 

the nation.

The Vision

FSA manages one of the largest consumer loan portfolios 

in the country, valued at $1.6 trillion. It is critical that 

the Department provides an environment that provides 

customers with the services and experiences that they 

expect and the outcomes that they deserve. The Next Gen 

FSA initiative is enabling FSA to realize this vision by 

modernizing the way connections are made with customers 

and streamlining the student aid systems and processes. This 

broad effort will deliver an improved customer experience 

for millions of Americans across the entire student aid life 

cycle, from fostering greater awareness about the availability 

of financial aid, to applying for aid, to repaying loans, to 

improving the participation experiences and oversight of 

FSA partners at postsecondary institutions.

Legacy Environment

In the current federal financial aid process, students 

and families must navigate a complex and fragmented 

landscape, interacting with multiple systems, vendors, 

processes, and interfaces across a multitude of brands 

and user experiences. Too often, this poor customer 

experience creates confusion, resulting in borrowers 

failing to understand how to apply for and maintain 

their aid eligibility, which repayment options they qualify 

for, and the financial implications of their student debt. 

Additionally, operational complexities and out-of-date 

contracts result in higher administrative costs and hinder 

effective oversight of the Department’s vendors. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 39

MANAGEMENT’S DISCUSSION AND ANALYSIS

Next Gen FSA Environment

Multiple websites, mobile applications, contact centers, 

and other customer interfaces have been combined into a 

simplified, consistent, and engaging customer experience, 

which will be enhanced by standardized training and 

tools. Since December 2019, FSA has launched a single 

front door on the web, Studentaid.gov, and has launched 

multiple modern self-service and consumer information 

tools that help customers understand the aid they have 

received, their remaining eligibility, and how they can 

manage loan repayment in a way that meets their goals. 

Some of these Digital and Customer Care (DCC) 

tools include the Federal Student Aid Estimator, Loan 

Simulator, and Public Service Loan Forgiveness Help Tool. 

In FY 2022 Next Gen DCC will continue to create and 

enhance tools and products for customers on StudentAid.

gov and the myStudentAid mobile app. For example, in 

FY 2022, FSA plans to launch Medallia, a new customer 

feedback tool, while also making improvements to 

other tools, like the PSLF Help Tool and the Incomedriven repayment plan application—which will allow 

for borrowers to move more quickly through the process 

when they cannot match with the IRS for providing 

income information. While not as eye-catching, FSA 

is working on technical integrations and cybersecurity 

updates that will be less visible to customers, but are 

significant improvements nonetheless. DCC’s integration 

with the new NSLDS will allow the Department to be 

more flexible in what data is shown to customers, and 

multifactor authentication will keep bad actors from 

breaching the site. 

While FSA’s digital platform helps customers cut through 

the information clutter and access robust self-service, other 

components of Next Gen will bring onboard multiple 

contact centers that provide customers and partners with 

support across the entire student aid lifecycle, all under the 

FSA brand. 

In early FY 2022, FSA will launch the Business Process 

Operations (BPO) initiative. BPO is the personnel 

component of the Next Gen FSA’s vision. BPO vendors 

will provide customers and partners across all FSA 

programs and operations with support via contact centers 

and manual processing. Contact center work includes, but 

is not limited to, providing general assistance to students, 

parents, and borrowers as they navigate processes to 

learn about, apply for, receive, and repay federal student 

aid. BPO’s will manage key back-office activities that 

encompass the full lifecycle of federal student financing 

in a manner consistent with leading financial services 

providers and other industry leaders recognized for highquality customer service. While managing customer and 

partner relations, FSA’s BPO’s will:

• Deliver an efficient and effective customer and 

partner experience.

• Improve customer outcomes. 

• Ensure compliance with consumer 

protections standards.

• Establish greater operational flexibility. 

• Reduce operational complexity. 

Next Gen remains deeply committed to improving 

the FSA experience for partners. In March 2021, FSA 

launched the FSA Partner Connect website, fsapartners.

ed.gov. Before the launch, FSA’s partners used several 

different systems to access tools and resources to support 

students during their educational journey. This new 

interface consolidates the tools that partners use regularly 

onto a single digital platform that streamlines operational 

information by award year, provides notifications related 

to a partner’s specific school activities, tracks scheduled 

system outages, and more. FSA Partner Connect also 

reduces the administrative burden on financial aid 

professionals at more than 5,600 postsecondary schools 

around the globe, allowing them more time to serve 

students. In FY 2022, FSA will continue to develop 

and enhance the tools and systems used by partners and 

financial aid professionals.

The contracts that bring onboard these new tools, systems, 

and platforms include objective performance standards and 

accountability measures to ensure customers receive accurate, 

timely responses to their inquiries. These new technologies 

will also integrate modern cybersecurity protections, and 

a new enterprise wide data analytics platform will drive 

improved data and governance standards.

Solicitation and Procurement Process

FSA is strategically planning its future solicitation strategy, 

with the priority being to ensure that its customers and 

partners have stable, reliable, and accountable solutions 

that meet their needs.

As the Next Gen vision evolves, FSA will ensure that the 

appropriate contractual actions will be taken to maintain 

or improve servicing capabilities. FSA aims to modernize 
40 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

all back-end systems and infrastructure to pave the 

way for improved loan processing and management of 

customer accounts.

As FSA develops long-term plans for federal loan 

servicing, the goal will be to improve accountability, 

enhance service for at-risk borrowers, and establish 

performance benchmarks.

LEVERAGING DATA AS A STRATEGIC ASSET

The Department continues to focus on leveraging its data 

as a strategic asset by further implementing requirements 

in the Foundations for Evidence-Based Policymaking Act 

(Evidence Act; P.L. 115-435) and the Federal Data 

Strategy. Throughout the COVID-19 pandemic, 

the Department continued its efforts to strengthen 

data governance while overseeing the unprecedented 

investment in students and schools. This section highlights 

five areas guiding the Department towards realizing the 

power of data in daily operations and national policy: (1) 

the ED Data Strategy; (2) Open Data; (3) the Education 

Stabilization Fund Transparency Portal; (4) Data Quality; 

and (5) the ED Learning Agenda.

The Department’s Data Strategy

The FY 2020 Action Plan for the Federal Data Strategy 

called for agencies to “put in place a data strategy or 

road map,” and in December 2020, the Department 

subsequently completed and published its inaugural 

Data Strategy. The Department’s Data Governance 

Board (DGB) guided the development of four goals—to 

strengthen agencywide data governance; build human 

capacity to leverage data; advance the strategic use of data; 

and to improve data access, transparency, and privacy. The 

Department’s Data Strategy provides a road map for the 

agency to improve education outcomes and lead the nation 

through evidence-based policy and data-driven decisions. 

The Office of the Chief Data Officer led agencywide 

working groups composed of representatives of each 

principal office to develop objectives and action plans for 

implementation throughout FY 2021 and FY 2022. Key 

Data Strategy implementation efforts include integrating 

existing data governance initiatives into agencywide efforts, 

the implementation of agencywide data governance policies 

for program office data life cycle and data management 

functions, launching an agencywide data literacy program, 

and establishing data quality guidelines.

Open Data

The Evidence Act requires agencies to make data “open by 

default,” and the Department is planning to develop, release, 

and execute the Act’s required open data plan consistent 

with OMB guidance. The Department will balance privacy 

and security with the open data mandate while prioritizing 

a broader public use of data paid for by its citizens. The 

Department’s Open Data Platform (ODP) (https://data.

ed.gov/)was publicly launched December 2020, with an 

initial population of public data profiles. A central repository 

for data assets, ODP is a fully featured, robust, and highly 

scalable data repository that maintains all data assets in a 

fully searchable catalog. As required by the Evidence Act 

and guided by Data Strategy Goal 4, the Department will 

build towards a comprehensive data inventory by expanding 

on the ODP; increasing its catalogued data assets for both 

externally available open data and internal sources subject 

to open data priorities, reviewing all data assets for release, 

and expanding the number of Department open data assets 

listed in in the Federal Data Catalog. The ODP improves 

the Department’s ability to grow and operationalize its 

comprehensive data inventory while progressing on open 

data requirements. The Department is at the forefront of 

federal agencies in realizing the requirements of the Open, 

Public, Electronic and Necessary Government Data Act (OPEN 

Government Data Act) (Title II of the Evidence Act) and the 

ODP is yet another way the Department is seeking to make 

data open by default.

Education Stabilization Fund Public 

Transparency Portal

The ESF Transparency Portal, located at covid-reliefdata.ed.gov, is the Department’s website dedicated 

to collecting and disseminating data and information 

about the ESF programs managed by the Department 

and authorized through the Coronavirus Aid, Relief, and 

Economic Security Act (CARES Act), Coronavirus Response 

and Relief Supplemental Appropriations Act (CRRSAA), 

and the American Rescue Plan Act of 2021 (ARP). The 

ESF Portal empowers decision-makers, parents, students, 

teachers, education leaders, and taxpayers with information 

about ESF programs and discloses how states, districts, and 

institutions of higher education (IHE) spent COVID-19 

relief funds. The funding data is from public data sources 

and reflects data collected by the Department and data 

released or shared by other federal agencies, including the 

General Services Administration, and the Department of 

the Treasury. The Portal enables state and IHE grantees to 

submit annual performance reports on funding authorized 

through the HEERF, ESSER, and GEER funds, providing 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 41

MANAGEMENT’S DISCUSSION AND ANALYSIS

the public and decision-makers fuller insight into the 

expenditures and usage of ESF program funds. The Portal 

currently displays the CARES Act Annual Performance 

Report 2020 data by grantee and includes downloadable 

data files for decision-makers and the public detailing 

how ESF funds were spent on allowable activities such as 

distance-learning, ensuring student health and safety, and 

emergency aid to college students. An exemplar of open, 

transparent data, the Portal is responsive to the mandate in 

the OPEN Government Data Act (Title II of the Evidence 

Act) to make public data open and accessible.  

Data Quality

The Department’s program offices have historically had 

varying levels of data quality control among its datasets. 

The Evidence Act calls for agencies to make greater use of 

administrative and program data, but there are limitations 

on enforcing remission of complete and accurate data 

from grantees. Current control processes address data 

quality only at the point when data are submitted, and, 

commencing initially in FY 2020, the Department identified 

a multipronged approach to address root causes and 

improve data quality. The ED Data Strategy Objective 1.5 

calls for the Department to “Implement a cohesive data 

quality approach for the agency, leveraging best practices, 

technical assistance, and controls.” Efforts include ensuring 

grantees are aware of their data responsibilities under the 

conditions of their grants and of the credible consequences 

for noncompliance, ranging from additional informal 

monitoring through termination of the grant. It also includes 

provisions to improve the varying capacity of grantees in 

reporting data and varying capacity among Department staff 

in reviewing grantee-reported data. When fully deployed, 

this is expected to take the form of technical assistance to 

grantees, additional resources for the Department for data 

quality review, and expanded use of technological solutions 

to automate and reduce for manual reporting and review.

In late FY 2020, exigent circumstances, volume of new 

grant funds, and other challenging environmental factors 

led the Department to immediately deploy a variation 

of this strategy for key data collections associated with 

the ESF—specifically, the HEERF, GEER, ESSER, and 

equivalent Outlying Area funds. The Department executed 

a contract to develop a data collection portal, implement a 

data management solution to support internal and external 

reporting, and launch a public transparency website. 

In addition to early communications to grantees about 

expectations for data quality, several components of the data 

collection process include explicit data quality components. 

This includes auto-population of known data values in 

the collection instrument; help desk services for grantees 

submitting performance data; a data management platform 

that imposes business rules to improve data quality; and 

established phases for opening, closing, and reopening the 

tool for grantees to submit data quality corrections. 

Throughout FY 2021, the Department continued to 

work on developing data quality controls for each stage of 

the data lifecycle, including mechanisms for evaluating, 

preventing, and remediating data irregularities to assure 

higher quality data for the agency to use in meeting its 

mission and strategic objectives. Future efforts coordinated 

through the ED Data Strategy include the development 

of a data quality playbook to clarify data quality roles 

and responsibilities and build staff capacity to understand 

and address quality issues. The playbook will address how 

to help grantees assess and improve data quality before 

submission, propose meaningful incentives for data 

submitters, strengthen communication strategies, and 

propose ways to reduce the burden on both Department 

staff and grantees.

The Department’s Learning Agenda 

The Department’s FY 2022–FY 2026 Learning Agenda 

will be published in February 2022, in conjunction 

with the release of the FY 2023 President’s Budget. The 

Learning Agenda is aligned to the Department’s Strategic 

Plan, reflecting the secretary’s goals and objectives for 

the Department over the next four years. The Learning 

Agenda is complemented by an Annual Evaluation Plan. 

The Annual Evaluation Plan includes a listing of the 

Department’s most significant evaluation activities in a 

given fiscal year. All Evidence Act deliverables are located at 

https://www.ed.gov/data.

The Learning Agenda was developed in consultation with the 

Department’s Evidence Leadership Group (ELG). The ELG 

is co-chaired by the Department’s evaluation officer (EO) and 

the director of the Department’s Grants Policy Office (GPO) 

and includes members from the Department’s primary 

grantmaking offices as well as mission-support units, such 

as the Department’s Budget Service, and Office of General 

Counsel, and ex-officio representatives from the Office 

of the Chief Data Officer, the Statistical Official, and the 

Performance Improvement Officer. Feedback from OMB and 

consultation with stakeholders across government, education, 

and the public, was also used to inform the Department’s 

Learning Agenda. 
42 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

In addition to advising the EO on the development of the 

Learning Agenda, the ELG advises Department leaders on 

how to support the capacity of Department staff to make 

better use of data and evidence. GPO, led by the ELG cochair, continues to spearhead a range of internal training 

opportunities for Department staff to bolster the use of the 

secretary’s policy priorities, including the use of evidence 

in program design, and to consider how the Department’s 

grantmaking activities can build evidence for improvement 

in the future.

CONTINUOUS IMPROVEMENT

Improving critical infrastructure, systems and overall 

capacity, and ensuring sound strategic decision-making 

regarding allocation of resources are essential to the 

Department’s future progress and success. Implementing 

Technology Business Management Solutions (TMBS) is 

one of the Department’s key initiatives.

Technology Business Management Solutions 

The purpose of the TBMS project is to provide greater cost 

transparency into IT spending. The TBMS allows OCIO 

to communicate the cost drivers for, and the value of, IT to 

senior leadership, improve the efficiency and predictability 

of the formulation of the IT budget, and optimize IT costs. 

Beginning in 2017, OMB required agencies to begin 

reporting IT spending in alignment with the TBMS 

framework, including using cost pools and IT towers 

to classify IT spending. The Department has started to 

leverage TBMS beyond the minimum OMB reporting 

requirements to encompass the full implementation of 

the TBMS cost accounting framework. The Department 

of Education is refining the TBMS effort to: 1) provide 

accurate cost analysis and accounting of operations and 

services to improve tracking cost variances, 2) provide 

ad hoc reports to stakeholders on IT spending, and 3) 

contextualize the Department’s internal resource costs with 

real-world data to inform decisions. The goal is to provide 

a “bill of IT” to form the basis of a show-back model to 

drive more informed decision-making around IT. 

The objective is to implement an integrated solution that 

will allow OCIO to:

• Accurately account for and categorize IT spending in 

cost pools and IT towers.

• Evaluate IT spending using a method that helps 

identify redundant IT assets (e.g. systems, applications, 

and licenses).

• Extract cost elements from disparate sources, analyze 

these elements, and report cost stressors and trends to 

stakeholders. 

• Prepare accurate pricing through a show-back model to 

client offices for the services provided and consumed 

by each client office.
FINANCIAL

SECTION
44 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | 

Message From the Chief Financial Officer

I am pleased to present our fiscal year (FY) 2021 Agency 

Financial Report (AFR) for the Department of Education 

(Department). Throughout FY 2021, the Department 

has remained committed to our stated mission to 

“promote student achievement and preparation for global 

competitiveness by fostering educational excellence and 

ensuring equal access.”

Congress established the Department as a Cabinetlevel agency in 1980. Today, the Department supports 

programs that touch every area and level of education. The 

Department’s early learning, elementary, and secondary 

education programs annually serve more than 17,000 

school districts and more than 56 million students 

attending more than 98,000 public and 32,000 private 

schools. Department programs also provide grant, loan, 

and work-study assistance to more than 10 million 

postsecondary students at more than 5,600 institutions 

of higher education.

The Department is responsible for administering 

education programs authorized and funded by Congress 

and signed into law by the President. This responsibility 

involves developing regulations and policy guidance 

regarding program operations, determining how program 

funds are awarded to recipients consistent with statutory 

requirements, and ensuring programs are operated 

fairly and conform to statutes and laws prohibiting 

discrimination in federally funded activities. The 

Department also collects data and conducts research on 

education to help focus attention on education issues of 

national importance.

While remaining in a maximum telework posture for 

the past year, the Department’s innovative and dedicated 

workforce achieved several accomplishments during 

FY 2021:

• In FY 2020 and FY 2021, Congress passed multiple 

COVID-19 relief bills that provided the Department 

with over $280 billion of supplemental funding for 

educational purposes. With this influx of funds, the 

Department successfully managed payment integrity 

risk by implementing strong internal controls that 

reduce the risk of improper payments while also 

implementing management flexibilities to temporarily 

reduce regulatory burdens on grantees adversely 

impacted by the pandemic.

• The Department established the Office of Enterprise 

Data Analytics and Risk Management, which merges 

enterprise risk management and operational internal 

controls activities and aims to provide leadership with 

actionable insights powered by data analytics.

• In March 2021, the Federal Student Aid (FSA) 

launched the FSA Partner Connect website, 

fsapartners.ed.gov to help streamline the Next 

Generation Federal Student Aid (Next Gen FSA) 

experience for partners.

• For the 20th consecutive year, we received an 

unmodified (clean) audit opinion on our financial 

statements from our independent auditor. A clean 

opinion confirms that our financial statements are 

presented fairly, in all material respects, and conform 

with generally accepted accounting principles. 

The internal control report identified one repeat 

material weakness, “Controls over the Reliability 

of Underlying Data Used in Credit Reform Reestimates Need Improvement.” The Department 

developed and implemented a corrective action plan 

to begin addressing deficiencies identified as part 

of this particular weakness in FY 2021 and remains 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 45

committed to continually evaluating current internal 

controls for improvement opportunities in FY 2022 

and beyond.

• We received external validation of our sustained efforts

to produce user-friendly, transparent financial reporting

by earning the Department’s 17th award of the

Association of Government Accountants’ Certificate

of Excellence in Accountability Reporting, as well

as a special award for the Innovative Presentation of

A Matter of Wide Public Interest. Federal financial

reports must pass a rigorous independent review

against a comprehensive set of standards to earn this

prestigious recognition, which is the highest award

bestowed for federal financial reporting.

I am proud of the work the Department has accomplished 

over the past fiscal year, though challenges still lie ahead. 

Student loan payment relief during the COVID-19 

pandemic was extended through January 31, 2022. This 

measure included suspending loan payments and halting 

collections on defaulted loans. These actions have largely 

insulated federal student loan performance from economic 

disruption caused by the COVID-19 pandemic, while at 

the same time reducing the amount of loan repayments 

being remitted to the Department. This final extension 

will give students and borrowers the time they need to 

plan for restart and ensure a smooth pathway back to 

repayment. The Department is working with students 

and borrowers and providing guidance and information 

about how to plan for payment restart as the end of the

pause approaches.

The Department’s achievements illustrate the remarkable 

effort and dedication of our employees and partners. We 

will continue to serve as accountable and committed 

stewards supporting the Department’s mission on behalf 

of the public while enhancing our financial management 

capabilities.

Denise Carter

Delegated the authority to perform the functions and duties of 

the position of Chief Financial Officer

November 19, 2021
46 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

About the Financial Section

I

n FY 2021, the Department prepared its financial 

statements as a critical aspect of ensuring accountability 

and stewardship for the public resources entrusted to it. 

Preparation of these statements is an important part of 

the Department’s financial management goal of providing 

accurate and reliable information for decision-making.

FINANCIAL STATEMENTS AND NOTES

The Consolidated Balance Sheets summarize the assets, 

liabilities, and net position by major category as of the 

reporting date. Intragovernmental assets and liabilities 

resulting from transactions between federal agencies 

are presented separately from assets and liabilities from 

transactions with the public.

The Consolidated Statements of Net Cost show, by 

program, the net cost of operations for the reporting 

period. Net cost of operations consists of full program 

costs incurred by the Department less exchange revenues 

earned by those programs.

The Consolidated Statements of Changes in Net 

Position present the Department’s beginning and 

ending net position by two components—Unexpended 

Appropriations and Cumulative Results of Operations. 

It summarizes the change in net position by major 

transaction category. The ending balances of both 

components of the net position are also reported on the 

Consolidated Balance Sheets.

The Combined Statements of Budgetary Resources

present the budgetary resources available to the 

Department, the status of these resources, and the outlays 

of budgetary resources.

The Notes to the Financial Statements provide 

information to explain the basis of the accounting and 

presentation used to prepare the statements and to 

explain specific items in the statements. They also provide 

information to support how particular accounts have been 

valued and computed.

Note 1. Summary of Significant Accounting Policies

Note 2. Non-Entity Assets

Note 3. Fund Balance with Treasury

Note 4. Other Assets

Note 5. Loan Receivables, Net, and Loan 

Guarantee Liabilities

Note 6. Liabilities Not Covered by 

Budgetary Resources

Note 7. Debt Associated with Loans

Note 8. Subsidy Due to Treasury

Note 9. Other Liabilities

Note 10. Net Cost of Operations 

Note 11. COVID-19 Activity

Note 12. Statements of Budgetary Resources

Note 13. Reconciliation of Net Cost to Net Outlays

Note 14. Commitments and Contingencies

Note 15.

Note 16.

Subsequent Event

Reclassification of Statement of Net Cost and 

Statement of Operations and Changes in Net 

Position for FR Compilation Process
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 47

AbOuT ThE FINANCIAL SECTION | FINANCIAL SECTION

REPORT OF ThE INDEPENDENT AuDITORS

The results of the audit of the Department’s financial 

statements for FY 2021 and FY 2020 to comply with 

the Chief Financial Officers Act of 1990, as amended, are 

presented to be read in conjunction with the Financial 

Section in its entirety. The Department’s Office of Inspector 

General contracted with the independent certified public 

accounting firm of KPMG LLP to audit the financial 

statements of the Department as of September 30, 2021, and 

2020, and for the years then ended. 

R E Q u I R E D S u P P L E M E N TA RY 

INFORMATION (uNAuDITED)

This section contains the Combining Statements of 

Budgetary Resources for the years ended 

September 30, 2021, and September 30, 2020.
48 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | FINANCIAL STATEMENTS

U.S. Department of Education

Consolidated Balance Sheets

As of September 30, 2021 and September 30, 2020

(Dollars in Millions)

FY2021 FY2020

ASSETS (Note 2)

Intragovernmental:

Fund balance with Treasury (Note 3) $ 351,868 $ 136,015 

Other Intragovernmental Assets (Note 4) 114 124 

Total Intragovernmental 351,982 136,139 

Public:

Loans Receivable, Net (Note 5)

Direct Loan Program 1,104,851 1,100,544 

Federal Family Education Loan (FFEL) Program 58,246 67,380 

Other Credit Programs for higher Education 1,967 3,107 

Cash and Other Monetary Assets 1,913 1,943 

Other Assets (Note 4) 324 273 

Total Public 1,167,301 1,173,247 

Total Assets $ 1,519,283 $ 1,309,386 

LIABILITIES (Note 6)

Intragovernmental:

Debt Associated with Loans (Note 7)

Direct Loan Program $ 1,142,195 $ 1,160,099 

FFEL Program 78,254 88,986 

Other Credit Programs for higher Education 1,096 2,302 

Accounts Payable 1 - 

Other Liabilities:

Subsidy Due to Treasury (Note 8) 1,513 3,298 

Guaranty Agency Funds Due to Treasury 1,913 1,943 

Other Intragovernmental Liabilities (Note 9) 739 669 

Total Intragovernmental 1,225,711 1,257,297 

Public:

Accounts Payable 5,010 3,773 

Loan Guarantee Liabilities (Note 5) 7,496 1,123 

Other Liabilities:

Accrued Grant Liability 7,589 1,939 

Other (Note 9) 382 323 

Total Public 20,477 7,158 

Total Liabilities $ 1,246,188 $ 1,264,455 

Commitments and Contingencies (Note 14)

NET POSITION

unexpended Appropriations $ 301,798 $ 99,314 

Cumulative Results of Operations (28,703) (54,383)

Total Net Position $ 273,095 $ 44,931 

Total Liabilities and Net Position $ 1,519,283 $ 1,309,386 

The accompanying notes are an integral part of these statements.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 49

FINANCIAL STATEMENTS | FINANCIAL SECTION

U.S. Department of Education

Consolidated Statements of Net Cost

For the Years Ended September 30, 2021 and September 30, 2020 

(Dollars in Millions)

FY2021 FY2020

IMPROVE LEARNING OUTCOMES FOR ALL P-12 STUDENTS

Gross Costs $ 61,013 $ 40,145 

Earned Revenue (118) (129)

Net Program Costs $ 60,895 $ 40,016 

EXPAND POSTSECONDARY OPPORTUNITIES, IMPROVE OUTCOMES 

TO FOSTER ECONOMIC OPPORTUNITY, AND PROMOTE PRODUCTIVE CITIZENRY

Direct Loan Program

Gross Costs $ 131,088 $ 137,303 

Earned Revenue (35,673) (34,970)

Net Cost of Direct Loan Program $ 95,415 $ 102,333 

FFEL Program

Gross Costs $ 16,898 $ 5,419 

Earned Revenue (3,095) (3,108)

Net Cost of FFEL Program $ 13,803 $ 2,311 

Other Credit Programs for Higher Education

Gross Costs $ 1,673 $ 144 

Earned Revenue (1,060) (1,368)

Net Cost of Other Credit Programs for Higher Education $ 613 $ (1,224)

Non-Credit Programs

Gross Costs $ 68,994 $ 45,987 

Earned Revenue (15) (5)

Net Cost of Non-Credit Programs $ 68,979 $ 45,982 

Net Program Costs $ 178,810 $ 149,402 

Total Program Gross Costs $ 279,666 $ 228,998 

Total Program Earned Revenue $ (39,961) $ (39,580)

Net Cost of Operations (Notes 10 & 13) $ 239,705 $ 189,418 

The accompanying notes are an integral part of these statements.
50 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | FINANCIAL STATEMENTS

U.S. Department of Education

Consolidated Statements of Changes in Net Position

For the Years Ended September 30, 2021 and September 30, 2020

(Dollars in Millions)

FY2021 FY2020

 Unexpended 

Appropriations

 Cumulative 

Results of 

Operations

 Unexpended 

Appropriations

 Cumulative 

Results of 

Operations

Beginning Balances $ 99,314 $ (54,383) $ 72,757 $ (76,267)

Appropriations Received 477,507 - 245,237 - 

Appropriations Transferred - In/Out (409) - (154) - 

Other Adjustments (Rescissions, etc.) (1,107) 1 (871) - 

Appropriations used (273,507) 273,507 (217,655) 217,655 

Nonexchange Revenue - 8 - 11 

Donations and Forfeitures of Cash and Cash Equivalents - 1 - - 

Imputed Financing from Costs Absorbed by Others - 36 - 30 

Negative Subsidy Transfers, Downward Subsidy

Re-estimates, and Other - (8,168) - (6,394)

Net Cost of Operations - (239,705) - (189,418)

Net Change $ 202,484 $ 25,680 $ 26,557 $ 21,884 

Net Position $ 301,798 $ (28,703) $ 99,314 $ (54,383)

The accompanying notes are an integral part of these statements.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 51

FINANCIAL STATEMENTS | FINANCIAL SECTION

U.S. Department of Education

Combined Statements of Budgetary Resources 

For the Years Ended September 30, 2021 and September 30, 2020 

(Dollars in Millions) 

FY2021 FY2020

Budgetary

Non-Budgetary 

Credit Reform 

Financing Accounts

Budgetary

Non-Budgetary 

Credit Reform 

Financing Accounts

BUDGETARY RESOURCES

unobligated balance from Prior Year budget Authority (Net) (Note 12) $ 20,772 $ 20,650 $ 17,756 $ 9,119 

Appropriations (Discretionary and Mandatory) 476,520 239 244,680 350 

borrowing Authority (Discretionary and Mandatory) (Note 12) - 129,407 - 135,589 

Spending Authority from Offsetting Collections (Discretionary and Mandatory) (206) 42,224 191 65,762 

Total Budgetary Resources $ 497,086 $ 192,520 $ 262,627 $ 210,820 

 STATUS OF BUDGETARY RESOURCES 

New Obligations and upward Adjustments (Total) $ 457,228 $ 170,268 $ 242,724 $ 188,098 

unobligated balance, End of Year: 

Apportioned, unexpired Accounts 35,815 - 16,446 - 

unapportioned, unexpired Accounts 1,931 22,252 1,822 22,722 

Unexpired Unobligated Balance, End of Year $ 37,746 $ 22,252 $ 18,268 $ 22,722 

Expired unobligated balance, End of Year 2,112 - 1,635 - 

Unobligated Balance, End of Year (Total) $ 39,858 $ 22,252 $ 19,903 $ 22,722 

Total Budgetary Resources $ 497,086 $ 192,520 $ 262,627 $ 210,820 

 OUTLAYS, NET, AND DISBURSEMENTS, NET

Outlays, Net (Discretionary and Mandatory) $ 267,076 $ 218,025 

Distributed Offsetting Receipts (-) (Note 12) (6,625) (13,610)

Agency Outlays, Net (Discretionary and Mandatory) (Notes 12 & 13) $ 260,451 $ 204,415 

Disbursements, Net (Total) (Mandatory) $ (39,881) $ (42,946)

The accompanying notes are an integral part of these statements.
52 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

Notes to the Financial Statements for the 

Years Ended September 30, 2021 

and September 30, 2020

NOTE 1. Summary of Significant 

Accounting Policies

REPORTING ENTITY AND PROGRAMS

The U.S. Department of Education (the Department), 

a Cabinet-level agency of the executive branch of the 

U.S. government, was established by Congress under the 

Department of Education Organization Act (Public Law 96-

88), which became effective on May 4, 1980. The mission 

of the Department is to promote student achievement 

and preparation for global competitiveness by fostering 

educational excellence and ensuring equal access. 

The Department is a component of the U.S. government. 

For this reason, some of the assets and liabilities 

reported by the Department may be eliminated for 

governmentwide reporting because they are offset by assets 

and liabilities of another U.S. government entity. These 

financial statements should be read with the realization 

that they are for a component of the U.S. Government. 

The Department is primarily responsible for administering 

federal student loan and grant programs and provides 

technical assistance to loan and grant recipients and 

other state and local partners. The largest portions of the 

Department’s financial activities relate to the execution of 

loan and grant programs discussed below.

Federal Student Loan Programs. The Department 

administers direct loan, loan guarantee, and other student 

aid programs to help students and their families finance the 

cost of postsecondary education. These include the William 

D. Ford Federal Direct Loan (Direct Loan) Program and 

the Federal Family Education Loan (FFEL) Program.

The Direct Loan Program, added to the Higher Education 

Act of 1965 (HEA) in 1993 by the Student Loan Reform 

Act of 1993, authorizes the Department to make loans 

through participating schools to eligible undergraduate 

and graduate students and their parents. The Direct Loan 

Program offers four types of loans: Stafford, Unsubsidized 

Stafford, Parent Loan for Undergraduate Students (PLUS), 

and Consolidation. Evidence of financial need is required 

for an undergraduate student to receive a subsidized 

Stafford loan. The other three loan programs are available 

to borrowers at all income levels. Loans can be used only 

to meet qualified educational expenses. 

The FFEL Program, authorized by the HEA, operates 

through state and private, nonprofit guaranty agencies that 

provided loan guarantees on loans made by private lenders 

to eligible students. The SAFRA Act, which was included 

in the Health Care and Education Reconciliation Act of 

2010, stated that no new FFEL loans would be made 

effective July 1, 2010. FFEL Program receivables include 

defaulted FFEL loans and acquired FFEL loans. Acquired 

FFEL loans include student loan assets acquired using 

temporary authority provided in the Ensuring Continued 

Access to Student Loans Act of 2008 (ECASLA). ECASLA 

gave the Department temporary authority to purchase 

FFEL loans and participation interests in those loans. 

The Department implemented three activities under this 

authority: loan purchase commitments; purchases of loan 

participation interests; and a put, or forward purchase 

commitment, with an asset-backed commercial paper 

(ABCP) Conduit. This authority expired after September 

30, 2010; as a result, loan purchase commitments and 

purchases of loan participation interests concluded. 

However, under the terms of the Put Agreement with 

the conduit, ABCP Conduit activity ceased operations in 

January 2014.

The Department also administers other credit programs 

for higher education. These include the Federal Perkins 

Loan program, the Teacher Education Assistance for 

College and Higher Education (TEACH) Grant program, 

the Health Education Assistance Loan (HEAL) program, 

and facilities loan programs that include the Historically 

Black Colleges and Universities (HBCU) Capital 

Financing program, along with low-interest loans to 

institutions of higher education (IHE) for the building 

and renovating of their facilities. (See Notes 5 and 10)

Grant Programs. The Department has more than 100 

grant programs. The three largest grant programs are Title 

I of the Elementary and Secondary Education Act, federal 

Pell Grant, and the Individuals with Disabilities Education 

Act (IDEA) grants. In addition, the Department offers 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 53

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

other discretionary grants under a variety of authorizing 

legislation awarded using a competitive process, and 

formula grants using formulas determined by Congress 

with no application process. (See Note 10)

COVID-19. Congress passed multiple COVID-19 relief 

bills in fiscal year (FY) 2020 and FY 2021 including the 

following that provided funding for educational purposes: 

the Coronavirus Aid, Relief, and Economic Security Act, of 

2020 (CARES Act), the Coronavirus Response and Relief 

Supplemental Appropriations Act of 2021 (CRRSAA), and 

the American Rescue Plan Act of 2021 (ARP). The largest 

component of the education funding provided by the 

COVID-19 relief appropriations established the Education 

Stabilization Fund, which includes the (1) Elementary 

and Secondary School Emergency Relief Fund, (2) 

Higher Education Emergency Relief Fund, (3) Governor’s 

Emergency Education Relief Fund, and (4) funds for 

outlying areas. The Education Stabilization Fund is being 

distributed to recipients through various grant programs. 

The Department transferred $563 million of the funds to 

the Department of the Interior to be administered by the 

Bureau of Indian Education. (See Notes 3, 10, and 11)

The COVID-19 relief legislation and administrative 

actions also provided support for student loan borrowers 

primarily by suspending nearly all federal loan payments 

until January 31, 2022, interest free. The Department 

also stopped all federal wage garnishments and collection 

actions for borrowers with federally held loans in default. 

Funding for the student loan repayment deferrals was 

provided through indefinite appropriations. (See Notes 5, 

10, and 11) 

Other regulatory flexibilities and incentives provided in 

the COVID-19 legislation include:

• Federal Supplemental Educational Opportunity Grants 

to provide emergency aid to students.

• Work-study payments, which will continue even if 

students can no longer work on-site.

• Pell Grants, financial aid, and loans originated for 

the spring 2020 term, which students who have had 

to leave college campuses will not have to pay back. 

Moreover, none of this aid will count against students’ 

financial aid lifetime limits.

• Waiving satisfactory academic progress requirements 

to help ensure that students do not lose academic 

standing and the ability to receive federal financial 

student aid.

• Tax credits that incentivize employers to help pay for 

student loans.

PROGRAM OFFICES

The Department has three major program offices that 

administer most of its loan and grant programs: 

• Federal Student Aid (FSA) administers financial 

assistance programs for students pursuing 

postsecondary education and makes available federal 

grants, direct loans, and work-study funding to eligible 

undergraduate and graduate students.

• The Office of Elementary and Secondary Education 

(OESE) assists state education agencies (SEA) and local 

educational agencies (LEA) to improve the achievement 

of preschool, elementary, and secondary school students; 

helps ensure equal access to services leading to such 

improvement—particularly children with high needs; 

and provides financial assistance to LEAs whose local 

revenues are affected by federal activities.

• The Office of Special Education and Rehabilitative 

Services (OSERS) supports programs that help provide 

early intervention and special education services to 

children and youth with disabilities. OSERS also 

supports programs for the vocational rehabilitation 

of youth and adults with disabilities, including 

preemployment transition services and other transition 

services designed to assist students with disabilities to 

enter postsecondary education and achieve employment.

Other offices that administer programs and provide 

leadership, technical assistance, and financial support to 

state and LEAs and IHEs for reform, strategic investment, 

and innovation in education include: the Office of 

Career, Technical, and Adult Education (OCTAE); 

Office of Postsecondary Education (OPE); Institute of 

Education Sciences (IES); and Office of English Language 

Acquisition (OELA). In addition, the Office for Civil 

Rights (OCR) works to ensure equal access to education, 

promotes educational excellence throughout the nation, 

and serves student populations facing discrimination 

and the advocates and institutions promoting systemic 

solutions to civil rights issues. (See Note 10)

b A S I S O F AC C O u N T I N G 

AND PRESENTATION

These financial statements were prepared to report the 

financial position, net cost of operations, changes in net 

position, and budgetary resources of the Department, as 

required by the Chief Financial Officers Act of 1990 and 
54 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

the Government Management Reform Act of 1994. The 

financial statements were prepared from the books and 

records of the Department, in accordance with Generally 

Accepted Accounting Principles (GAAP) accepted in the 

United States for federal entities, issued by the Federal 

Accounting Standards Advisory Board (FASAB), and 

the Office of Management and Budget (OMB) Circular 

A-136, Financial Reporting Requirements, as revised. These 

financial statements are different from the financial reports 

prepared by the Department pursuant to OMB directives 

that are used to monitor and control the use of budgetary 

resources. FSA also issues audited stand-alone financial 

statements that are included in their annual report.

The accounting structure of federal agencies is designed to 

reflect both accrual and budgetary accounting transactions. 

Under the accrual method of accounting, revenues are 

recognized when earned and expenses are recognized when 

a liability is incurred, without regard to receipt or payment 

of cash. Budgetary accounting facilitates compliance with 

legal constraints and controls over the use of federal funds.

Intradepartmental transactions and balances have been 

eliminated from the consolidated financial statements. 

Accounting standards require all reporting entities 

to disclose that accounting standards allow certain 

presentations and disclosures to be modified, if needed, to 

prevent the disclosure of classified information.

AC C O u N T I N G FO R F E D E R A L 

C R E D I T P R O G R A M S 

The Department’s accounting for its loan and loan 

guarantee programs is based on the requirements of the 

Federal Credit Reform Act of 1990 (FCRA). The purpose of 

the FCRA is to record the lifetime subsidy cost of direct 

loans and loan guarantees, in present value terms, at the 

time the loan is disbursed (subsidy). Components of subsidy 

costs for loans and guarantees include defaults (net of 

recoveries); contractual payments to third-party, private loan 

collectors who receive a set percentage of amounts collected; 

and, as an offset, origination and other fees collected. 

For direct loans, the difference between interest rates 

incurred by the Department on its borrowings from the 

U.S. Department of Treasury (Treasury) and interest rates 

charged to particular borrowers is also subsidized (or may 

provide an offset to subsidy if the Department’s rate is less). 

Under the FCRA, subsidy cost is estimated using the 

net present value of future cash flows to and from the 

Department. In accordance with the FCRA, credit 

programs either estimate a subsidy cost to the government 

(a “positive” subsidy), breakeven (zero subsidy cost), 

or estimate a negative subsidy cost. Negative subsidy 

occurs when the estimated cost of providing loans to 

borrowers from Treasury borrowing, collection costs, and 

loan forgiveness is less than the value of collections from 

borrowers for interest and fees, in present value terms.

Subsidy cost is an estimate of the present value cost of 

providing direct loans but excludes the administrative 

costs of issuing and servicing the loans. The Department 

estimates subsidy expense using a set of econometric and 

financial models, as well as cash flow models. 

The Department estimates subsidy costs annually for new 

loans disbursed in the current year; updates to the previous 

cost estimates for outstanding loans disbursed in prior 

years (subsidy re-estimates); and updates to previous cost 

estimates based on new legislation or other government 

actions that change the terms of existing loans (loan 

modifications) that alter the estimated subsidy cost and the 

present value of outstanding loans. Loan modifications can 

also include modification adjustment gains and losses to 

account for the difference between the discount rate used 

to calculate the cost of the modification and the interest 

rate at which the cohort pays or earns interest.

The subsidy costs of direct loan and loan guarantee 

programs are budgeted and tracked by the fiscal year in 

which the loan award is made, or the funds committed. 

Such a grouping of loans or guarantees is referred to as a 

“cohort.” A cohort is a grouping of direct loans obligated 

or loan guarantees committed by a program in the same 

year even if disbursements occur in subsequent years.

To account for the change in the net present value of the 

loan portfolio over time, the subsidy cost is amortized 

each year. Amortization accounts for the differences in 

interest rates, accruals, and cash flows over the life of a 

cohort, ensuring that cost is reflected in subsidy estimates 

and re-estimates. Amortization of subsidy is calculated as 

the difference between interest received from borrowers 

and Treasury (on uninvested funds) and interest paid to 

Treasury on borrowings. 

The FCRA establishes the use of financing, program, 

and Treasury General Fund receipt accounts for loan 

guarantees committed and direct loans obligated after 

September 30, 1991. 

• Financing accounts borrow funds from Treasury, 

make direct loan disbursements, collect fees from 

lenders and borrowers, pay claims on guaranteed 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 55

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

loans, collect principal and interest from borrowers, 

earn interest from Treasury on any uninvested funds, 

and transfer excess subsidy to Treasury General Fund 

receipt accounts. Financing accounts are presented 

separately in the combined statements of budgetary 

resources (SBR) as nonbudgetary credit reform 

accounts to allow for a clear distinction from all other 

budgetary accounts. This facilitates reconciliation of 

the SBR to the Budget of the United States Government

(President’s Budget).

• Program accounts receive and obligate appropriations 

to cover the positive subsidy cost of a direct loan 

or loan guarantee when the loan is approved and 

disburses the subsidy cost to the financing account 

when the loan is issued. Program accounts also receive 

appropriations for administrative expenses.

• Treasury General Fund receipt accounts receive 

amounts paid from financing accounts when there 

are negative subsidies for new loan disbursements or 

downward re-estimates of the subsidy cost of existing 

loans. (See Notes 12 and 13) 

The Department records an obligation each year for direct 

loan awards to be made in a fiscal year based on estimates 

of schools’ receipt of aid applications. The Department 

advances funds to schools based on these estimates. 

Promissory notes are signed when schools reach individual 

agreements with borrowers and the schools subsequently 

report each disbursement of advanced funds to the 

Department. A new promissory note is usually not required 

for students in the second or later year of study. Half of all 

loan awards are issued in the fourth quarter of the fiscal 

year. Loans awarded are typically disbursed in multiple 

installments over an academic period. As a result, loans 

may be disbursed over multiple fiscal years. Loan awards 

may not be fully disbursed due to students leaving or 

transferring to other schools. The Department’s obligation 

estimate may also not reflect the actual amount of awards 

made. Based on historical averages, the Department expects 

approximately 8.9 percent of the amount obligated for new 

loan awards will not be disbursed.

When a loan is placed in deferment or forbearance, loan 

repayment is temporarily suspended with the length of 

postponement different for each borrower. Interest accrues 

while a loan is in deferment or forbearance. Loans are 

canceled if a person dies, meets disability requirements, 

or occasionally through the bankruptcy courts. Loans are 

also canceled through the Public Service Loan Forgiveness 

(PSLF) program, which forgives the remaining balance 

on a direct loan after 120 qualifying monthly payments 

are made. These payments must be made under a 

qualifying repayment plan while working full-time for a 

qualifying employer. In addition, the Department offers 

the Pay As You Earn (PAYE) program. This student loan 

repayment program is designed to help borrowers who 

struggle to make their normal student loan payments. 

The plan allows payments to be limited to 10 percent of 

discretionary income if qualifications are met. Under the 

PAYE program, if all requirements are met, forgiveness of 

the remaining balance of a student loan is possible after 20 

years of payments.

buDGETARY RESOuRCES

Budgetary resources are amounts available to enter into 

new obligations and to liquidate them. The Department’s 

budgetary resources include unobligated balances of 

resources from prior years and new resources, which 

include appropriations, authority to borrow from Treasury, 

and spending authority from collections.

Borrowing authority is an indefinite budgetary resource 

authorized under the FCRA. This resource, when realized, 

finances the unsubsidized portion of the Direct Loan, 

FFEL, and other loan programs. In addition, borrowing 

authority is requested to cover the cost of the initial loan 

disbursement as well as any related negative subsidy to be 

transferred to Treasury General Fund receipt accounts. 

Treasury prescribes the terms and conditions of borrowing 

authority and lends to the financing account amounts as 

appropriate. Amounts borrowed, but not yet disbursed, are 

included in uninvested funds and earn interest. Treasury 

uses the same weighted average interest rates for both 

the interest charged on borrowed funds and the interest 

earned on uninvested funds. Treasury sets a different 

fixed interest rate to be used for each loan cohort once 

the loans are substantially disbursed. The Department 

may carry forward borrowing authority to future fiscal 

years if cohorts are disbursing loans. All borrowings from 

Treasury are effective on October 1 of the current fiscal 

year, regardless of when the Department borrowed the 

funds, except for amounts borrowed to make annual 

interest payments.

Authority to borrow from Treasury provides most of 

the funding for disbursements made under the Direct 

Loan, FFEL, and other loan programs. Subsidy and 

administrative costs of the programs are funded by 

appropriations. Borrowings are repaid using collections 

from borrowers, fees, and interest on uninvested funds.
56 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Unobligated balances represent the cumulative amount 

of budgetary resources that are not obligated and that 

remain available for obligation under law, unless otherwise 

restricted. Resources expiring at the end of the fiscal 

year remain available for five years, but only for upward 

adjustments of prior-year obligations, after which they 

are canceled and may not be used. Resources that have 

not expired at year-end are available for new obligations, 

as well as upward adjustments of prior-year obligations. 

Funds are appropriated on an annual, multiyear, or 

no-year basis. Appropriated funds expire on the last 

day of availability and are no longer available for new 

obligations. Amounts in expired funds are unavailable 

for new obligations but may be used to adjust previously 

established obligations.

Permanent Indefinite Budget Authority. The Direct 

Loan, FFEL, and other loan programs have permanent 

indefinite budget authority through legislation to fund 

subsequent increases to the estimated future costs of the 

loan programs. Parts B, Federal Family Education Loan 

Program, and D, Federal Direct Student Loan, of the 

HEA pertain to the existence, purpose, and availability of 

permanent indefinite budget authority for these programs.

Reauthorization of Legislation. Funds for most 

Department programs are authorized, by statute, to be 

appropriated for a specified number of years, with an 

automatic one-year extension available under Section 422 

of the General Education Provisions Act. Congress may 

continue to appropriate funds after the expiration of the 

statutory authorization period, effectively reauthorizing 

the program through the appropriations process. The 

current President’s Budget presumes all programs continue 

in accordance with congressional budgeting rules. 

(See Note 12)

ENTITY AND NON-ENTITY ASSETS

Assets are classified as either entity or non-entity assets. 

Entity assets are those that the Department has authority 

to use for its operations. Non-entity assets are those 

held by the Department but not available for use in its 

operations. Non-entity assets are offset by liabilities to 

third parties and have no impact on net position. The 

Department combines its entity and non-entity assets on 

the balance sheets and discloses its non-entity assets in the 

notes. (See Note 2)

FuND bALANCE WITh TREASuRY

Fund Balance with Treasury includes amounts available to 

pay current liabilities and finance authorized purchases, 

as well as funds restricted until future appropriations 

are received. Treasury processes cash receipts and cash 

disbursements for the Department. The Department’s 

records are reconciled with Treasury’s records. (See Note 3)

ACCOuNTS RECEIVAbLE

Accounts receivable are amounts due to the Department 

from the public and other federal agencies. Receivables 

from the public result from overpayments to recipients 

of grants and other financial assistance programs, as well 

as disputed costs resulting from audits of educational 

assistance programs. Amounts due from federal agencies 

result from reimbursable agreements entered into by 

the Department with other agencies to provide various 

goods and services. Accounts receivable are reduced to net 

realizable value by an allowance for uncollectible amounts. 

The estimate of an allowance for loss on uncollectible 

accounts is based on the Department’s experience in the 

collection of receivables and an analysis of the outstanding 

balances. (See Note 4)

CASh AND OThER MONETARY ASSETS

Cash and other monetary assets are the federal 

government’s interest in the program assets held by state 

and nonprofit FFEL Program guaranty agencies (guaranty 

agencies’ federal funds). Section 422A of the HEA required 

FFEL guaranty agencies to establish federal student loan 

reserve funds. Guaranty agencies’ federal funds include 

initial federal start-up funds, receipts of federal reinsurance 

payments, insurance premiums, guaranty agency share 

of collections on defaulted loans, investment income, 

administrative cost allowances, and other assets.

The balance of guaranty agencies’ federal funds represents 

consolidated reserve balances of the 20 guaranty agencies 

based on the guaranty agency financial reports that each 

agency submits annually to the Department. Although the 

Department and the guaranty agencies operate on different 

fiscal years, all guaranty agencies are subject to an annual 

audit. A year-end valuation adjustment is made to adjust the 

Department’s balances to comply with federal accounting 

principles and disclose funds held outside of Treasury.

Guaranty agencies’ federal funds are classified as 

non-entity assets with the public and are offset by 

a corresponding liability due to Treasury on the 

Department’s balance sheets. The funds are held by 

the guaranty agencies but can only be used for certain 

specific purposes listed in the Department’s regulations. 

The guaranty agencies’ federal funds are the property 

of the United States and are reflected in the President’s 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 57

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

Budget. Payments made to the Department from guaranty 

agencies’ federal funds through a statutory recall or agency 

closures represent capital transfers and are returned to 

Treasury’s General Fund. (See Note 2)

LO A N R EC E I VA b L E S , N E T A N D LO A N 

G u A R A N T E E L I A b I L I T I E S 

The financial statements reflect the Department’s estimate 

of the long-term subsidy cost of direct and guaranteed 

loans in accordance with the FCRA. Loans and interest 

receivable are valued at their gross amounts less an 

allowance for the present value of amounts not expected 

to be recovered, and thus having to be subsidized—called 

an “allowance for subsidy.” The difference between the 

gross amount and the allowance for subsidy is the present 

value of the cash flows to, and from, the Department that 

are expected from receivables over their projected lives. 

Similarly, liabilities for loan guarantees are valued at the 

present value of the cash outflows from the Department 

less the present value of related inflows. The estimated 

present value of net long-term cash outflows of the 

Department for subsidized costs is net of recoveries, 

interest supplements, and offsetting fees.

The loan guarantee liabilities presents the net present 

value of all future cash flows from currently insured FFEL 

loans, including claim payments, interest assistance, 

allowance payments, and recoveries from assigned loans. 

Guaranteed loans that default are initially turned over to 

guaranty agencies for collection. Defaulted FFEL loans are 

accounted for as assets and reported at their net present 

value, similar to direct loans, although they are legally 

not direct student loans. Credit program receivables, net 

includes defaulted FFEL loans owned by the Department 

and held by the Department or guaranty agencies. In most 

cases, after approximately four years, defaulted guaranteed 

loans not in repayment are turned over by the guaranty 

agencies to the Department for collection.

FFEL Program receivables include purchased loans and 

other interests acquired under an expired program. The 

cash flows related to these receivables include collections 

on purchased loans and other activities, including transfers 

of re-estimated subsidy. The cash flows of these authorities 

also include inflows and outflows associated with the 

underlying or purchased loans and other related activities, 

including any positive or negative subsidy transfers. 

Capitalization of interest occurs as a result of various 

initiatives, such as loan consolidations. As a result, interest 

receivable is reduced, and loan principal is increased. 

(See Note 5)

P R O P E R T Y A N D E Q u I P M E N T, N E T 

AND LEASES

The Department has very limited acquisition costs 

associated with buildings, furniture, and equipment as 

all Department and contractor staff are housed in leased 

buildings. The Department does not own real property 

for the use of its staff. The Department leases office space 

from the General Services Administration (GSA). The 

lease contracts with GSA for privately and publicly owned 

buildings are operating leases.

The Department also leases information technology and 

telecommunications equipment, as part of a contractorowned, contractor-operated services contract. Lease 

payments associated with this equipment have been 

determined to be operating leases and, as such, are 

expensed as incurred. The noncancellable lease term is one 

year, with the Department holding the right to extend the 

lease term by exercising additional one-year options. (See 

Notes 4 and 14)

LIAbILITIES

• Liabilities represent actual and estimated amounts to 

be paid as a result of transactions or events that have 

already occurred.

• Liabilities are classified as covered by budgetary 

resources if budgetary resources are available to pay 

them. Credit program liabilities funded by permanent 

indefinite appropriations are also considered covered by 

budgetary resources. 

• Liabilities are classified as not covered by budgetary 

resources when congressional action is needed before 

they can be paid. Although future appropriations to 

fund these liabilities are likely, it is not certain that 

appropriations will be enacted to fund these liabilities. 

• Liabilities not requiring appropriated budgetary 

resources include those related to deposit funds, 

Subsidy Due to Treasury General Fund for Future 

Liquidating Account Collections (pre-1992 loan 

guarantee programs), and Federal Perkins Loan 

program balances due to be repaid to the Treasury 

General Fund. (See Note 6) 

DEbT ASSOCIATED WITh LOANS

The Department borrows from Treasury to provide 

funding for the Direct Loan, FFEL, and other credit 

programs for higher education. The liability to Treasury 

from borrowings represents unpaid principal at year-
58 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

end. The Department repays the principal based on 

available fund balances. Interest rates are based on the 

corresponding rate for 10-year Treasury securities and are 

set for those borrowings supporting each cohort of loans 

once the loans for that cohort are substantially disbursed. 

Interest is paid to Treasury on September 30. In addition, 

the Federal Financing Bank (FFB) holds bonds issued 

by a designated bonding authority, on behalf of the 

Department, for the HBCU Capital Financing program. 

The debt for other credit programs for higher education 

includes the liability for full payment of principal and 

accrued interest for the FFB-financed HBCU Capital 

Financing program. (See Note 7) 

SubSIDY DuE TO TREASuRY

The Department must transfer to the Treasury General 

Fund all excess funding resulting from downward reestimates of credit program loans that are subject to FCRA 

requirements. This excess funding is included in the 

liability for subsidy due to Treasury and will be transferred 

to Treasury in the succeeding fiscal year upon receipt 

of authority from OMB. Subsidy due to Treasury also 

includes future liquidating account collections (estimated 

collections in excess of estimated outlays) for the 

Department’s pre-1992 FFEL and HEAL loans that, when 

collected, will also be transferred to the Treasury General 

Fund. (See Note 8)

ACCOuNTS PAYAbLE

Accounts payable include amounts owed by the 

Department for goods and services received from other 

entities, as well as payments not yet processed. Accounts 

payable to the public primarily consists of in-process grant 

and loan disbursements, including an accrued liability for 

schools that have disbursed loans before requesting funds. 

(See Note 9)

ACCRuED GRANT LIAbILITY

Some grant recipients incur allowable expenditures as 

of the end of an accounting period but have not been 

reimbursed by the Department. The Department accrues 

a liability for these allowable expenditures. The amount 

is estimated using statistical sampling of unliquidated 

balances. (See Note 9)

P E R S O N N E L C O M P E N S AT I O N A N D OT h E R 

EMPLOYEE bENEFITS

Annual, Sick, and Other Leave. The liability for annual 

leave, compensatory time off, and other vested leave is 

accrued when earned and reduced when taken. Each year, 

the accrued annual leave account balance is adjusted to 

reflect current pay rates. Sick leave and other types of 

nonvested leave are expensed as taken. Annual leave earned 

but not taken, within established limits, is funded from 

future financing sources. (See Notes 6 and 9)

Retirement Plans and Other Retirement Benefits.

Employees participate in either the Civil Service 

Retirement System (CSRS), a defined benefit plan, or the 

Federal Employees Retirement System (FERS), a defined 

benefit and contribution plan. For CSRS employees, the 

Department contributes a fixed percentage of pay.

FERS consists of Social Security, a basic annuity plan, 

and the Thrift Savings Plan. The Department and the 

employee contribute to Social Security and the basic 

annuity plan at rates prescribed by law. In addition, the 

Department is required to contribute to the Thrift Savings 

Plan a minimum of 1 percent per year of the basic pay 

of employees covered by this system, match voluntary 

employee contributions up to 3 percent of the employee’s 

basic pay, and match one-half of contributions between 

3 percent and 5 percent of the employee’s basic pay. For 

FERS employees, the Department also contributes the 

employer’s share of Medicare.

Federal Employees’ Compensation Act. The Federal 

Employees’ Compensation Act (FECA) (Pub. L. 103-

3) provides income and medical cost protection to 

covered federal civilian employees injured on the job, to 

employees who have incurred work-related occupational 

diseases, and to beneficiaries of employees whose deaths 

are attributable to job-related injuries or occupational 

diseases. The FECA program is administered by the 

U.S. Department of Labor (DOL), which pays valid 

claims and subsequently seeks reimbursement from the 

Department for these paid claims.

The FECA liability consists of two elements. The first 

element, accrued FECA liability, is based on claims paid 

by DOL but not yet reimbursed by the Department. 

The Department reimburses DOL for claims as funds 

are appropriated for this purpose. In general, there is a 

two- to three-year period between payment by DOL and 

reimbursement to DOL by the Department. As a result, 

the Department recognizes an intragovernmental liability, 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 59

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

not covered by budgetary resources, for the claims paid by 

DOL that will be reimbursed by the Department.

The second element, actuarial FECA liability, is the 

estimated liability for future benefit payments and is 

recorded as a liability with the public, not covered by 

budgetary resources. The actuarial FECA liability includes 

the expected liability for death, disability, medical, and 

miscellaneous costs for approved compensation cases. 

DOL determines the actuarial FECA liability annually, as 

of September 30, using an actuarial method that considers 

historical benefit payment patterns, wage inflation 

factors, medical inflation factors, and other variables. 

The projected annual benefit payments are discounted to 

present value. (See Notes 6 and 9)

IMPuTED COSTS

Services are received from other federal entities at no cost 

or at a cost less than the full cost to the Department. 

Consistent with accounting standards, certain costs of 

the providing entity that are not fully reimbursed by 

the Department are recognized as imputed cost in the 

Statements of Net Cost and are offset by imputed revenue 

in the Statements of Changes in Net Position. Such 

imputed costs and revenues relate to employee benefits. 

However, unreimbursed costs of services other than 

those related to employee benefits are not included in the 

Department’s financial statements.

NET COST

As required by the GPRA Modernization Act of 2010, the 

Department’s programs have been aligned with the goals 

presented in the Department’s Strategic Plan. 

Net cost consists of gross costs less earned revenue. Major 

components of the Department’s net costs include credit 

program subsidy expense, credit program interest revenue 

and expense, and grant expenses. (See Note 10)

Credit Program Subsidy Expense. Subsidy expense is 

an estimate of the present value cost of providing loans, 

excluding the administrative costs of issuing and servicing 

the loans. To estimate subsidy expense, the Department 

must project lifetime cash flows associated with loans 

disbursed in a specific fiscal year (i.e., the loan cohort). 

The Department projects these lifetime cash flows using 

a set of econometric and financial models, as well as 

cash flow models. The Department estimates subsidy 

expenses annually for new loans disbursed in the current 

year; updates the previous cost estimates for outstanding 

loans disbursed in prior years (subsidy re-estimates); and 

updates previous cost estimates based on changes to terms 

of existing loans (loan modifications). Loan modifications 

include actions resulting from new legislation or from 

the exercise of administrative discretion under existing 

law, which directly or indirectly alters the estimated 

subsidy cost of outstanding direct loans (or direct loan 

obligations). The change in book value of direct loans 

resulting from a modification and the cost of modification 

will normally differ due to the use of different discount 

rates or the use of different measurement methods. Any 

difference between the change in book value and the cost 

of modification is recognized as a modification adjustment 

transfer gain or a modification adjustment transfer loss. 

(See Notes 5 and 10) 

Credit Program Interest Revenue and Expense. The 

Department recognizes interest revenue from the public 

when interest is accrued on Direct Loan Program loans, 

defaulted and acquired FFEL loans, and outstanding 

principal for other loan programs. Interest due from 

borrowers is accrued at least monthly and is satisfied upon 

collection or capitalization into the loan principal. Federal 

interest revenue is recognized on the unused fund balances 

with Treasury in the financing accounts.

Federal interest expense is recognized monthly on the 

outstanding borrowing from Treasury (debt) used to 

finance direct loan and loan guarantee programs. Accrued 

interest to Treasury is paid on September 30. The interest 

rate for federal interest expense is the same as the rate used 

for federal interest revenue.

Interest expense equals interest revenue plus administrative 

fees accrued for all credit programs due to subsidy 

amortization. Subsidy amortization is required by the 

FCRA and accounts for the difference between interest 

expense and revenue cash flows. For direct loans, the 

allowance for subsidy is adjusted with the offset to interest 

revenue. For guaranteed loans, the liability for loan 

guarantees is adjusted with the offset to interest expense. 

(See Note 10)

NET POSITION

Net position consists of unexpended appropriations 

and cumulative results of operations. Unexpended 

appropriations include undelivered orders and unobligated 

balances, except for amounts in financing accounts, 

liquidating accounts, and trust funds. Cumulative 

results of operations represent the net difference since 

inception between (1) expenses and (2) revenues and 

financing sources.
60 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

ALLOCATION TRANSFERS

The Department is a party to allocation transfers with 

other federal agencies as both a transferring (parent) entity 

and a receiving (child) entity. Allocation transfers are 

legal delegations by one entity of its authority to obligate 

budget authority and outlay funds to another entity. A 

separate fund account (allocation account) is created in 

the Treasury as a subset of the parent fund account for 

tracking and reporting purposes. All allocation transfers 

of balances are credited to this account, and subsequent 

obligations and outlays incurred by the child entity are 

charged to this allocation account as they execute the 

delegated activity on behalf of the parent entity. All 

financial activity related to this allocation transfer (e.g., 

budget authority, obligations, outlays) is reported in 

the financial statements of the parent entity from which 

the underlying legislative authority, appropriations, and 

budget apportionments are derived.

The Department is a party to allocation transfers as a 

parent entity to the Department of the Interior and 

receives allocation transfers as a child entity from the 

Department of Health and Human Services. 

TAXES

The Department is a federal entity and is not subject to 

federal, state, or local taxes. Therefore, no provision for 

income taxes is recorded.

uSE OF ESTIMATES

Department management is required to make certain 

estimates while preparing consolidated financial statements 

in conformity with GAAP. These estimates are reflected 

in the assets, liabilities, net cost, and net position of the 

financial statements and may differ from actual results. 

The Department’s estimates are based on management’s 

best knowledge of current events, best available data, 

economic assumptions, historical experiences, and other 

assumptions that are believed to be reasonable under 

the circumstances. Significant estimates reported on the 

financial statements include: allocation of Department 

administrative overhead costs; allowance for subsidy and 

subsidy expense for direct, defaulted guaranteed, and 

acquired loans; the liability for loan guarantees; and grant 

liability and advance accruals. (See Notes 4, 5, 9, and 10)

The Department’s estimates for credit programs are 

calculated using a series of assumption models that are 

updated using a statistically valid sample of National 

Student Loan Data System (NSLDS®

) data, data from the 

Debt Management and Collection System, and economic 

assumptions provided by OMB. Actual results may 

differ from those assumptions and estimates. Differences 

between actual results and these estimates may occur in 

the valuation of credit program receivables and liabilities 

for loan guarantees under guidelines in the FCRA. The 

Department recognizes the sensitivity of credit reform 

modeling. Slight changes in modeling methodology or 

data used to derive assumptions can produce largely varied 

results. The Department therefore continually reviews 

its model factors and statistical modeling techniques to 

reflect the most accurate credit program costs possible in 

its annual financial statements. The Department updates 

its assumption models in accordance with its model 

update plan, which takes into consideration statutory or 

new program requirements, major changes to the model 

structure or methodology, and data updates. This level of 

granularity in the modeling methodology is essential to 

the financial reporting and budgeting processes so that 

the Department can forecast the costs of various program 

options when making policy decisions. (See Note 5)

R EC L A S S I F I C AT I O N S 

The following reclassifications were made to the prior-year 

financial statements and notes to conform to the current 

year presentation. These changes had no effect on total 

assets, liabilities and net position, net cost of operations, or 

budgetary resources. 

• The format of the balance sheet was changed to reflect 

more detail for certain line items, as required for all 

significant reporting entities by OMB Circular A-136. 

This change will allow readers to see how the amounts 

shown on the balance sheet are reflected on the 

Governmentwide Balance Sheet and thereby support 

the preparation and audit of the Financial Report of 

the United States Government. The presentation of the 

FY 2020 balance sheet was modified to be consistent 

with the 2021 presentation. Balance sheet notes 

affected by the new balance sheet format were also 

reclassified. (See Notes 2, 4, 5, and 9)

• Note 13, Reconciliation of Net Cost to Net Outlays, 

was reclassified to conform to FY 2021 Treasury 

guidance for the presentation of this reconciliation. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 61

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

NOTE 2. Non-Entity Assets

(Dollars in Millions)

2021 2020

Intragovernmental With the Public Intragovernmental With the Public

Non-Entity Assets

Fund balance with Treasury $ 285 $ - $ 233 $ - 

Loans Receivable, Net - 693 - 633 

Cash and Other Monetary Assets - 1,913 - 1,943 

Other Assets

Accounts Receivable, Net - 66 - 42 

Total Non-Entity Assets 285 2,672 233 2,618 

Entity Assets 351,697 1,164,629 135,906 1,170,629 

Total Assets $ 351,982 $ 1,167,301 $ 136,139 $ 1,173,247 

The Department’s FY 2021 assets are predominantly entity assets (99.8 percent), leaving a small portion of assets remaining 

as non-entity assets. Non-entity intragovernmental assets primarily consist of balances in deposit and clearing accounts. 

Non-entity assets with the public primarily consist of guaranty agency reserves (71.6 percent), reported as cash and other 

monetary assets, and Federal Perkins Loan program loan receivables (25.9 percent), reported as loan receivables, net. Federal 

Perkins Loan program receivables are a non-entity asset because the assets are held by the Department but are not available 

for use by the Department. The corresponding liabilities for non-entity assets are reflected in various accounts, including 

intragovernmental accounts payable, Guaranty Agencies’ Federal Funds Due to Treasury, and other liabilities (see Note 9).

NOTE 3. Fund balance with Treasury 

(Dollars in Millions)

2021 2020

COVID-19 

Funds

All Other 

Funds Total COVID-19 

Funds

All Other 

Funds Total

unobligated balance

Available $ 18,515 $ 17,300 $ 35,815 $ 672 $ 15,774 $ 16,446 

unavailable - 24,382 24,382 - 24,236 24,236 

Obligated balance, Not Disbursed 203,460 130,330 333,790 18,944 124,403 143,347 

Authority Temporarily Precluded from Obligation - (396) (396) - - - 

borrowing Authority Not Yet Converted to Fund 

balance with Treasury (Note 12) - (41,978) (41,978) - (48,230) (48,230)

Other - 255 255 - 216 216 

Total Fund Balance with Treasury $ 221,975 $ 129,893 $ 351,868 $ 19,616 $ 116,399 $ 136,015 

Available unobligated balances represent amounts that are apportioned for obligation in the current fiscal year. Unavailable 

unobligated balances represent amounts that are not apportioned for obligation during the current fiscal year and expired 

appropriations no longer available to incur new obligations. Total unavailable unobligated balance ($24.4 billion) differs 

from unapportioned and expired amounts on the SBR ($26.3 billion) due to the Guaranty Agencies’ Federal Funds 

($1.9 billion).

In FY 2021 and FY 2020, $354 million and $305 million, respectively, of unused funds from canceled appropriations were 

returned to Treasury. Such balances are excluded from the amount reported as Fund Balance with Treasury in accordance 

with Treasury guidelines (see Note 12).
62 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

NOTE 4. Other Assets 

(Dollars in Millions)

2021 2020

Intragovernmental With the Public Intragovernmental With the Public

Accounts Receivable, Net $ 9 $ 284 $ 3 $ 234 

Advances to Others and Prepayments 104 34 120 32 

Property and Equipment, Net - 6 - 6 

Other 1 - 1 1 

Total Other Assets $ 114 $ 324 $ 124 $ 273 

Included in the accounts receivable with the public are amounts owed because of criminal restitution orders that are to be 

collected by the Department of Justice on behalf of the Department of Education. Amounts collected for these criminal 

restitutions are generally returned to the Treasury General Fund. Gross receivables and the allowance for uncollectible 

amounts as of September 30, 2021, related to criminal restitutions totaled $120 million and $109 million, respectively.

Changes in property and equipment balances were as follows:

Property and Equipment 

(Dollars in Millions)

 Acquisition Value Accumulated 

Depreciation Net

2021

balance beginning of the Year $ 167 $ (161) $ 6 

Capitalized Acquisitions 1 - 1 

Depreciation Expense - (1) (1)

Balance At End of Year $ 168 $ (162) $ 6 

2020

balance beginning of the Year $ 169 $ (161) $ 8 

Dispositions (2) 1 (1)

Depreciation Expense - (1) (1)

Balance At End of Year $ 167 $ (161) $ 6 

NOTE 5. Loan Receivables, Net and Loan Guarantee Liabilities 

Loans Receivables

(Dollars in Millions)

Principal Accrued Interest Allowance for Subsidy Net

2021

Direct Loan Program $ 1,292,214 $ 86,501 $ (273,864) $ 1,104,851 

FFEL Program 82,009 23,902 (47,665) 58,246 

Other Credit Programs for higher Education 2,060 294 (387) 1,967 

Total Loans Receivable $ 1,376,283 $ 110,697 $ (321,916) $ 1,165,064 

2020

Direct Loan Program $ 1,224,816 $ 92,132 $ (216,404) $ 1,100,544 

FFEL Program 84,765 24,110 (41,495) 67,380 

Other Credit Programs for higher Education 3,364 373 (630) 3,107 

Total Loans Receivable $ 1,312,945 $ 116,615 $ (258,529) $ 1,171,031 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 63

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

The federal student loan programs provide students and their families with the funds to help meet postsecondary education 

costs. Funding for these programs is provided through permanent indefinite budget authority. The emergency relief 

measures provided by Congress and the administration in response to the COVID-19 pandemic were recorded as loan 

modifications and are described in each of the programs below. Per OMB guidance, loan modifications were calculated 

using the President’s Budget formulation discount rates. The net loans receivable is not necessarily representative of the 

proceeds that might be expected if these loans were sold on the open market.

What follows is additional analysis of the activity, costs, and adjustments for each of the loan programs

D I R EC T LO A N P R O G R A M 

The federal government makes loans directly to students and parents through participating IHEs under the Direct Loan 

Program. Direct loans are originated and serviced through contracts with private vendors.

Direct Loan Program loan receivables include defaulted and nondefaulted loans owned by the Department. Of the 

$1,378.7 billion in gross loan receivables, as of September 30, 2021, $91.5 billion (6.6 percent) in loan principal was in 

default and had been transferred to the Department’s defaulted loan servicer, compared to $100.3 billion (7.6 percent) as of 

September 30, 2020.

Direct Loan Program Loan Disbursements by Loan Type

(Dollars in Millions)

2021 2020

Stafford $ 18,325 $ 19,126 

unsubsidized Stafford 44,146 46,077 

PLuS 20,824 21,735 

Consolidation 21,508 30,427 

Total Disbursements $ 104,803 $ 117,365 

The allocation of disbursements for the first three loan types is estimated based on historical trend information.

Student and parent borrowers may prepay existing loans without penalty through a new consolidation loan. Under the FCRA 

and requirements provided by OMB regulations, the retirement of direct loans being consolidated is considered a collection 

of principal and interest. This receipt is offset by the disbursement related to the newly created consolidation loan. Underlying 

direct or guaranteed loans, performing or nonperforming, are paid off in their original cohort; new consolidation loans are 

originated in the cohort in which the new consolidation loan was obligated. Consolidation activity is taken into consideration 

in establishing subsidy rates for defaults and other cash flows. The cost of new consolidations is included in subsidy expense 

for the current-year cohort; the effect of prepayments on existing loans could contribute to re-estimates of prior cohort subsidy 

costs. The net receivables include estimates of future prepayments of existing loans through consolidations; they do not reflect 

subsidy costs associated with anticipated future consolidation loans.

Direct loan consolidations were $21.5 billion during FY 2021 and $30.4 billion during FY 2020. The effect of the early payoff 

of the existing loans—those being consolidated—is recognized in the future projected cash flows associated with that cohort.
64 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Direct Loan Program Interest Expense and Revenues (See Note 10)

(Dollars in Millions)

2021 2020

Interest Expense on Treasury borrowing $ 32,957 $ 34,705 

Total Interest Expense $ 32,957 $ 34,705 

Interest Revenue From the Public (459) 28,161 

Interest Revenue on uninvested Funds 4,230 4,786 

Administrative Fees 32 163 

Amortization of Subsidy 29,154 1,595 

Total Revenues $ 32,957 $ 34,705 

Direct Loan Program Subsidy Expense 

(Dollars in Millions)

2021 2020

Subsidy Expense for Direct Loans Disbursed in the Current Year

Interest Rate Differential $ 19,844 $ 19,022 

Defaults, Net of Recoveries 606 1,925 

Fees (1,603) (1,676)

Other (17,259) (14,131)

Total Subsidy Expense for Direct Loans Disbursed in the Current Year 1,588 5,140 

Modifications and Re-Estimates

Loan Modifications

Modification Adjustment Transfer Gain (2,716) (265)

Modification Adjustment Transfer Loss 182 347 

Loan Modifications 70,812 39,576 

Total Loan Modifications 68,278 39,658 

Net upward Subsidy Re-Estimates

Interest Rate Re-estimates (6,221) (967)

Technical and Default Re-estimates 30,246 57,077 

Total Net Upward Subsidy Re-estimates 24,025 56,110 

Total Modifications and Re-estimates 92,303 95,768 

Direct Loan Subsidy Expense $ 93,891 $ 100,908 

Subsidy Expense for Direct Loans Disbursed in the Current Year. The two major components of the total subsidy expense 

for direct loans disbursed in the current year (subsidy transfers) are Interest Rate Differential and Other components. 

Interest Rate Differential is attributable to the difference between the borrowers’ interest payments due to the Department 

and the Department’s estimated cost to finance the direct loan on a present value basis. The Other components of subsidy 

transfers primarily consists of contract collection costs, program review collections, fees, and loan forgiveness.

Loan Modifications. Loan modifications for the Direct Loan Program for FY 2021 included the following:

• Loan Deferral Extension. In FY 2021 the outgoing administration extended the student loan repayment deferrals 

through January 31, 2021. Subsequently, the current administration extended the student loan repayment deferrals 

through January 31, 2022. The extended relief for borrowers resulted in an upward modification cost of $52.0 billion. 

There was a net positive $2.5 billion modification adjustment transfer associated with these modifications, bringing the 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 65

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

total FY 2021 modification cost for the student loan 

repayment deferrals to $49.5 billion.

• Total and Permanent Disability. The Department 

recorded an upward modification for costs associated 

with the regulatory action to clarify that borrowers 

determined to be eligible for a total and permanent 

disability discharge based on data that the Secretary 

obtains from the Department of Veterans Affairs (VA) 

or the Social Security Administration (SSA) are not 

required to submit an application to have their federal 

student loans discharged. These discharges resulted in 

an upward modification cost of $18.7 billion.

• Faith-Based Final Rule. The Department recorded an 

upward modification to reflect the cost of updated 

program regulations that permit borrowers who work 

for employers that engage in religious instruction, 

worship services, or proselytizing to qualify for PSLF 

so long as they meet the applicable standards. These 

updated regulations resulted in an upward modification 

cost of $0.1 billion.

Net Upward Subsidy Re-Estimates for All Prior-Year 

Loan Cohorts. The Direct Loan Program subsidy 

re-estimate increased subsidy expense in FY 2021 by 

$24.0 billion. Re-estimated costs only include cohorts that 

are 90 percent disbursed (i.e., cohort years 1994–2020). 

The re-estimate reflects the assumption updates and other 

changes described below. 

In addition to the major assumption updates described 

below, the re-estimate reflects several other assumption 

updates, including loan volume, disbursement, and enter 

repayment rates. 

• Death, Disability, and Bankruptcy (DDB). The 

Department updated the data and made a technical 

change to extend the window for a DDB event to 

occur from 15 to 30 years. Those claims were included 

in the estimates of DDB rates previously, but the 

extended timeframe allows for a more realistic sense of 

their timing. The combined effect of these updates led 

to a new upward re-estimate of $3.2 billion.

• Income-Driven Repayment (IDR) Model Changes. 

The Department completed a standard IDR data 

update to reflect the immediate prior cycle for interest 

rates, defaults, prepayments, contract collection costs, 

and DDB. The DDB update includes adjustments 

for the Total Permanent Disability (TPD) regulation 

that resulted in increased disability rates related to the 

expanded opt-out process with SSA to match borrowers 

within the IDR model. In addition, actual data on 

borrower incomes was analyzed using the NSLDS data. 

The number of actual incomes for 2019 was very low 

due to impacts from the COVID-19 pandemic, which 

led to stable income calibration results compared to last 

year’s level of 35 percent. Payments in FY 2020 were 

adjusted to account for voluntary payments made by 

students during the payment pause as seen in the FSA 

data. The combined effect of these updates led to a net 

upward re-estimate of $22.4 billion.

• Deferment and Forbearance. The Department updated 

actual deferment and forbearance rates for FY 2020 

and calibrated FY 2021 and FY 2022 rates using data 

from FSA on borrower payments made during the 

period of repayment deferral. The combined effect of 

these changes led to a net downward re-estimate of 

$4.8 billion. 

• Collections. The Department updated the data and 

calibrated FY 2021 collection rates to reflect the 

extension of the repayment deferral. The combined 

effect of these changes led to a net upward re-estimate 

of $1.5 billion.

• Default. In addition to the adjustments for the 

extension of the student loan repayment deferrals, 

the Department updated the data and incorporated 

actual unemployment rates from the Bureau of Labor 

Statistics and projected unemployment rates from 

OMB. The combined effect of these changes led to a 

net downward re-estimate of $6.4 billion.

• Repayment Plan Selection. The Department 

incorporated new repayment plan data that showed a 

continuing increase in IDR plan usage. This update led 

to an upward re-estimate of $0.7 billion.

• 2020 Cohort Assumption Changes. The technical 

re-estimate cannot reflect the impacts of certain 

assumption changes applicable to the current year 

loan cohort until the following fiscal year per OMB 

guidance. The current year’s re-estimate includes a 

net upward adjustment of $15.5 billion for these 

current-year assumption changes attributable to the 

FY 2020 cohort.

• Discount Rates. FCRA requires that for discounting 

cash flows, financing accounting borrowing and 

financing account interest earnings be identical and 

based on the Treasury rates in effect during the period 
66 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

of loan disbursement. Adjustments to the FY 2019 

and FY 2020 cohort discount rates were calculated. 

The combined effect of these adjustments led to a new 

downward re-estimate of $11.1 billion.

• Interest on the Re-Estimate. Interest on re-estimates 

is the amount of interest that would have been earned 

or paid by each cohort on the subsidy re-estimate if 

the re-estimated subsidy had been included as part of 

the original subsidy estimate. The interest on the reestimate calculated on the overall subsidy re-estimate 

resulted in a net upward re-estimate of $5.0 billion.

• Interactive Effects. The re-estimate includes a net 

downward re-estimate of $1.6 billion attributed to 

the interactive effects of the assumption changes 

described above. Each assumption described above is 

run independently. The interactive effect is a result of 

combining all assumptions together to calculate the 

final re-estimate.

Direct Loan Subsidy Rates—Cohort 2021

Interest 

 Differential Defaults Fees Other Total

Stafford 24.70% 0.92% -1.06% -17.16% 7.40%

unsubsidized Stafford 23.78% 0.48% -1.06% -25.03% -1.83%

PLuS 12.20% 0.37% -4.23% -24.27% -15.93%

Consolidation 14.67% -1.19% 0.00% 4.45% 17.93%

Weighted Average Total 19.48% 0.08% -1.33% -15.90% 2.33%

*The Other component reflects costs associated with loan cancelations and the interactive effects of payment plans on the components of subsidy.

The subsidy rates disclosed pertain only to the current year’s cohorts. These rates cannot be applied to the direct loans 

disbursed during the current reporting year to yield the subsidy expense. The subsidy expense for new loans reported in the 

current year could result from disbursements of loans from both current year cohorts and prior-year cohorts. The subsidy 

expense reported in the current year also includes modifications and re-estimates. 

The subsidy costs of the Department’s student loan programs, especially the Direct Loan Program, are highly sensitive 

to changes in actual and forecasted interest rates. The formulas for determining program interest rates are established by 

statute; the existing loan portfolio has a mixture of borrower and lender rate formulas. Interest rate projections are based on 

probabilistic interest rate scenario inputs developed and provided by OMB.

Direct Loan Program Reconciliation of Allowance for Subsidy 

(Dollars in Millions)

2021 2020

Beginning Balance of Allowance for Subsidy $ 216,404 $ 124,438 

Total Subsidy Expense for Direct Loans Disbursed in the Current Year 1,588 5,140 

Adjustments

Loan Modifications 68,278 39,658 

Fees Received 1,562 1,609 

Loans Written Off (8,354) (7,833)

Subsidy Allowance Amortization (29,154) (1,595)

Other Activities (485) (1,123)

Ending Balance of Allowance for Subsidy Before Re-Estimates 249,839 160,294 

Net upward Subsidy Re-Estimates 24,025 56,110 

Ending Balance of Allowance for Subsidy $ 273,864 $ 216,404 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 67

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

The estimation process used to determine the amount of positive or negative subsidy expense each fiscal year, and 

subsequently the cumulative taxpayer cost of the program (allowance for subsidy), is subject to various external risk factors 

that often show strong interdependence with one another. These risks include uncertainty about changes in the general 

economy, changes in the legislative and regulatory environment, and changing trends in borrower performance related to 

contractual cash flows within the loan programs.

Due to the complexity of the Direct Loan Program, there is inherent projection risk in the process used for estimating longterm program costs. As stated, some uncertainty stems from potential changes in student loan legislation and regulations 

because these changes may fundamentally alter the cost structure of the program. Operational and policy shifts may also 

affect program costs by causing significant changes in borrower repayment timing. Actual performance may deviate from 

estimated performance, which is not unexpected given the long-term nature of these loans (cash flows may be estimated 

up to 40 years), and the multitude of projection paths and possible outcomes. The high percentage of borrowers in IDR 

plans has made projection of borrower incomes a key input for the estimation process. This uncertainty is directly tied to 

the macroeconomic climate and is another inherent program element that displays the interrelated risks facing the Direct 

Loan Program. The Department utilizes the best data available with modeling techniques that have been examined over time 

by several outside entities. Management has confidence over the estimates by using several different tools to analyze cost 

estimates. Re-estimates on the loan portfolio are performed twice a year ensuring that the most up to date data and models 

are used.

Loans written off result from borrowers having died, becoming disabled, or having a loan approved for discharge in 

bankruptcy. The interest rate re-estimate reflects the cost of finalizing the Treasury borrowing rate to be used for borrowings 

received to fund the disbursed portion of the loan awards obligated. 

FEDER AL FAMILY EDuCATION LOAN PROGR AM

FFEL was established in FY 1965 and is a guaranteed loan program. As a result of the SAFRA Act, no new FFEL loans have 

been made since July 1, 2010. Federal guarantees on FFEL Program loans and commitments remain in effect for loans 

made before July 1, 2010, unless they were sold to the Department through an ECASLA authority (acquired FFEL loans), 

consolidated into a direct loan, or otherwise satisfied, discharged, or canceled.

FFEL Guaranteed Loans Outstanding

(Dollars in Billions)

2021

Outstanding Principal of Guaranteed Loans, Face Value $ 116.9 

Amount of Outstanding Principal Guaranteed $ 116.9 

As of September 30, 2021, the total principal value of guaranteed loans outstanding and the amount of that principal which 

is guaranteed is approximately $116.9 billion. Additionally, the FFEL Program guarantees outstanding interest balances. 

As of September 30, 2021, the interest balances outstanding for guaranteed loans held by lenders was approximately 

$4.4 billion. The Department’s total FFEL Program guarantees (principal and interest) are approximately $121.3 billion 

as of September 30, 2021. Of the total guaranteed amount, the Department would expect to pay a smaller amount to 

the guaranty agencies. The guarantee rates range from 75 to 100 percent of the principal and interest balance depending 

on the type of claim, when the loan was made, and the guaranty agency’s claim experience. For purposes of disclosing the 

Department’s total risk exposure for FFEL guarantees, the highest reimbursement rate of 100 percent is assumed.
68 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Defaulted and acquired FFEL loans are accounted for as assets as shown in the following table.

FFEL Program Loan Receivables 

(Dollars in Millions)

Principal Accrued Interest

Allowance 

for Subsidy 

(Present Value)

Net

2021

DEFAULTED FFEL GUARANTEED LOANS

FFEL GSL Program (Pre-1992) $ 3,638 $ 5,739 $ (8,418) $ 959 

FFEL GSL Program (Post-1991) 32,612 9,302 (26,735) 15,179 

Total Defaulted FFEL Guaranteed Loans 36,250 15,041 (35,153) 16,138 

ACQUIRED FFEL LOANS

Loan Purchase Commitment 15,238 2,716 (4,822) 13,132 

Loan Participation Purchase 29,178 5,776 (7,316) 27,638 

AbCP Conduit 1,343 369 (374) 1,338 

Total Acquired FFEL Loans 45,759 8,861 (12,512) 42,108 

FFEL Program Loan Receivables $ 82,009 $ 23,902 $ (47,665) $ 58,246 

2020

DEFAULTED FFEL GUARANTEED LOANS

FFEL GSL Program (Pre-1992) $ 3,627 $ 5,809 $ (8,249) $ 1,187 

FFEL GSL Program (Post-1991) 33,057 9,121 (22,286) 19,892 

Total Defaulted FFEL Guaranteed Loans 36,684 14,930 (30,535) 21,079 

ACQUIRED FFEL LOANS

Loan Purchase Commitment 16,009 2,797 (4,102) 14,704 

Loan Participation Purchase 30,683 6,005 (6,424) 30,264 

AbCP Conduit 1,389 378 (434) 1,333 

Total Acquired FFEL Loans 48,081 9,180 (10,960) 46,301 

FFEL Program Loan Receivables $ 84,765 $ 24,110 $ (41,495) $ 67,380 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 69

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

FFEL Program Subsidy Expense 

(Dollars in Millions)

2021 2020

Loan Modification Costs

FFEL Guaranteed Loan Program

Net Modification Adjustment Transfer (Gain)/Loss $ (302) $ (9)

Loan Modifications 3,164 835 

Total FFEL Guaranteed Loan Program Loan Modifications 2,862 826 

Loan Purchase Commitment

Net Modification Adjustment Transfer (Gain)/Loss - (7)

Loan Modifications 1,069 958 

Total Loan Purchase Commitment Loan Modifications 1,069 951 

Loan Participation Purchase

Net Modification Adjustment Transfer (Gain)/Loss - (10)

Loan Modifications 1,879 1,658 

Total Loan Participation Purchase Loan Modifications 1,879 1,648 

Total Loan Modification Costs 5,810 3,425 

Upward/(Downward) Subsidy Re-Estimates

FFEL Loan Guarantee Program 7,226 (3,451)

Loan Purchase Commitment 208 802 

Loan Participation Purchase 397 1,376 

Total FFEL Program Subsidy Re-Estimates 7,831 (1,273)

FFEL Program Subsidy Expense $ 13,641 $ 2,152 

Loan Modifications. Loan modifications for the FFEL Loan Program for FY 2021 included the following:

• Loan Deferral Extension. In FY 2021 the outgoing administration extended the student loan repayment deferrals 

through January 31, 2021. Subsequently, the current administration extended the student loan repayment deferrals 

through January 31, 2022. The extended relief for borrowers resulted in an upward modification cost of $3.9 billion.

There was a net positive $0.3 billion modification adjustment transfer associated with these modifications, bringing the 

total FY 2021 modification cost for the student loan repayment deferrals to $3.6 billion.

• Total and Permanent Disability. The Department recorded an upward modification for costs associated with the 

regulatory action to clarify that borrowers determined to be eligible for a total and permanent disability discharge based 

on data that the Secretary obtains from the VA or the SSA are not required to submit an application to have their federal 

student loans discharged. These discharges resulted in an upward modification cost of $2.2 billion.

Net Downward Subsidy Re-Estimates. The FFEL subsidy re-estimate increased subsidy expense in FY 2021 by $7.8 billion. 

The net upward re-estimates in these programs were due primarily to updated collection and default rates.
70 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Reconciliation of Liabilities for Loan Guarantees 

(Dollars in Millions)

2021 2020

Beginning Balance of Post-1991 FFEL Loan Guarantee Liability $ 884 $ 5,205 

Adjustments

Loan Modifications 2,862 826 

Interest Supplements Paid (348) (757)

Loan Modifications (2,613) (4,285)

Fees Received 1,014 1,215 

Interest on Accumulation on the Liability balance (863) (1,064)

Other Activities (910) 3,195 

Net Downward Subsidy Re-Estimates 7,226 (3,451)

Ending Balance of Post-1991 FFEL Loan Guarantee Liability 7,252 884 

Pre-1992 FFEL Liquidating Account Liability for Loan Guarantees - 1 

FFEL Liabilities for Loan Guarantees 7,252 885 

hEAL Liabilities for Loan Guarantees 244 238 

Total Liabilities for Loan Guarantees $ 7,496 $ 1,123 

Other activity includes negative special allowance collections, collections on defaulted FFEL loans, guaranty agency 

expenses, and loan cancellations due to death, disability, or bankruptcy.

Allowance for Subsidy Reconciliation for Acquired FFEL Loans 

(Dollars in Millions)

Loan Purchase 

Commitment

Loan Participation 

Purchase ABCP Conduit Total

2021

Beginning Balance of Allowance for Subsidy $ 4,102 $ 6,424 $ 434 $ 10,960 

Adjustments

Loan Modifications 1,069 1,879 - 2,948 

Subsidy Allowance Amortization (424) (952) (42) (1,418)

Loans Written Off (136) (424) (16) (576)

Other Activities 3 (8) (2) (7)

Ending Balance of Allowance for Subsidy 

Before Re-estimates 4,614 6,919 374 11,907 

Net upward Subsidy Re-Estimates 208 397 - 605 

Ending Balance of Allowance for Subsidy $ 4,822 $ 7,316 $ 374 $12,512 

2020

Beginning Balance of Allowance for Subsidy $ 2,531 $ 3,843 $ 455 $ 6,829 

Adjustments

Loan Modifications 951 1,648 - 2,599 

Subsidy Allowance Amortization 3 (89) - (86)

Loans Written Off (140) (271) (16) (427)

Other Activities (45) (83) (5) (133)

Ending Balance of Allowance for Subsidy 

Before Re-estimates 3,300 5,048 434 8,782 

Net upward Subsidy Re-Estimates 802 1,376 - 2,178 

Ending Balance of Allowance for Subsidy $ 4,102 $ 6,424 $ 434 $ 10,960 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 71

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

OThER CREDIT PROGRAMS FOR hIGhER EDuCATION

Loans Receivables, Other Credit Programs for Higher Education 

(Dollars in Millions)

Principal Accrued Interest Allowance for Subsidy 

(Present Value) Net

2021

Federal Perkins Loans $ 708 $ 197 $ (212) $ 693 

TEACh Program Loans 783 70 (256) 597 

hEAL Program Loans 388 26 (1) 413 

Facilities Loan Programs 181 1 82 264 

Total $ 2,060 $ 294 $ (387) $ 1,967 

2020

Federal Perkins Loans $ 615 $ 202 $ (184) $ 633 

TEACh Program Loans 764 88 (182) 670 

hEAL Program Loans 396 29 (38) 387 

Facilities Loan Programs 1,589 54 (226) 1,417 

Total $ 3,364 $ 373 $ (630) $ 3,107 

Federal Perkins Loan Program. Loans made through 

the Federal Perkins Loan program were low-interest 

federal student loans for undergraduate and graduate 

students with exceptional financial needs. Schools made 

these Perkins loans to their students and are responsible 

for servicing the loans throughout the repayment term. 

Borrowers who undertake certain public, military, or 

teaching service employment are eligible to have all or part 

of their loans canceled. 

The Perkins Loan program was a revolving loan program 

where the loan repayments collected from former students 

were used to make new loans to current students. The 

Department provided most of the capital used by schools 

to make these loans to eligible students. Participating 

schools provided the remaining program funding. In 

some statutorily defined cases, funds were provided by the 

Department to reimburse schools for loan cancellations. 

The above schedule includes only Perkins loans that were 

assigned to the Department when schools discontinued 

their participation in the program. For these assigned 

Perkins loans, collections of principal, interest, and fees, 

net of amounts paid to cover contract collection costs 

totaled $79 million and $38 million for FY 2021 and 

FY 2020, respectively.

The Federal Perkins Loan Program Extension Act of 2015

(Extension Act) eliminated the authorization for schools to 

make new Perkins loan disbursements as of September 30, 

2017, and ended all Perkins loan disbursements by 

June 30, 2018. Before the authority for new Perkins loans 

ended, collections made by the schools would go back into 

each school’s Perkins fund to be used to make more loans. 

Schools are required to return to the Department the 

federal share of any excess beyond what is needed (excess 

liquid capital). 

Schools are not required to liquidate and close out their 

programs now that no new Perkins loans are being made. 

Schools continue to take in collections and are required 

to return the federal share of the capital that is collected 

to the Department on an annual basis. Schools returned 

$850 million and $1,279 million to the Department in 

FY 2021 and FY 2020, respectively, for the federal share 

of collected cash. 

Schools will continue to service outstanding Perkins 

loans to recover the money they contributed to their 

Perkins funds for as long as it is feasible to do so or until 

the eventual wind-down of their portfolios. Schools that 

liquidate and close out their programs must transfer any 

outstanding portfolio to the Department and liquidate any 

final cash. Most recent data from the 2021–22 reporting 

year shows a $3.3 billion outstanding principal balance on 

Perkins loans held by schools, and the Department’s equity 

interest on this portfolio is $2.8 billion.

The amounts collected by the Department annually for 

defaulted Perkins loans and for the return of the federal 

share of schools’ Perkins capital contributions are returned 

to the Treasury General Fund. (see Note 12)
72 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

TEACH Grant Program. The Department awards 

annual grants of up to $4,000 to eligible undergraduate 

and graduate students who agree to serve as full-time 

mathematics, science, foreign language, bilingual 

education, special education, or reading teachers at 

high-need schools for four years within eight years of 

graduation. The maximum lifetime grant for students 

is $16,000 for undergraduate programs and $8,000 for 

graduate programs. For students failing to fulfill the 

service requirement, the grants are converted to direct 

unsubsidized Stafford Loans. In FY 2021 the outgoing 

administration extended the student loan repayment 

deferrals through January 31, 2021. Subsequently, 

the current administration extended the student loan 

repayment deferrals through January 31, 2022. The 

extended relief for borrowers resulted in an upward 

modification cost of $21 million. The Department also 

recorded an upward modification to reflect the cost of 

updated program regulations to improve the certification 

process and reduce grant to loan conversions. These 

updated regulations resulted in an upward modification of 

$25 million. There was a positive $1 million modification 

adjustment transfer associated with this modification, 

bringing the total cost of this modification to $24 million.

TEACH Subsidy Rates—Cohort 2021

Interest Differential Defaults Fees Other Total

Subsidy Rates 76.33% -0.04% 0.00% -44.57% 31.72%

*The Other component reflects costs associated with loan cancelations and the interactive effects of payment plans on the components of subsidy.

HEAL Program. The Department assumed responsibility 

in FY 2014 for the HEAL program and the authority to 

administer, service, collect, and enforce the program. The 

HEAL program is structured as required by the FCRA. 

A liquidating account is used to record all cash flows 

to and from the government resulting from guaranteed 

HEAL loans committed before 1992. All loan activity for 

1992 and beyond is recorded in corresponding financing 

accounts. In FY 2021 the outgoing administration 

extended the student loan repayment deferrals 

through January 31, 2021. Subsequently, the current 

administration extended the student loan repayment 

deferrals through January 31, 2022. The extended relief 

for borrowers resulted in an upward modification cost of 

$1 million.

Facilities Loan Programs. The Department also 

administers the HBCU Capital Financing program. 

Since 1992, this program has given HBCUs access to 

financing for the repair, renovation, and in exceptional 

circumstances, the construction or acquisition of facilities, 

equipment, and infrastructure through federally insured 

bonds. The Department has authorized a designated 

bonding authority to make loans to eligible institutions, 

charge interest, and collect principal and interest 

payments. In compliance with HEA, as amended, the 

bonding authority maintains an escrow account to pay the 

principal and interest on bonds for loans in default. 

The FAFSA Simplification Act provided debt relief for most 

outstanding HBCU Capital Financing program loans as 

of December 27, 2020. This resulted in an upward loan 

modification cost of $1.6 billion.

The total amount of support for HBCU programs, along 

with any accrued interest and unpaid servicing fees, will 

be capitalized to principal and be reamortized through the 

original maturity date of June 1, 2037. The Department 

has approximately $372 million in outstanding borrowing 

from the FFB to support loans made to HBCU 

institutions and $547 million obligated to support near 

term lending as of September 30, 2021.

The Department administers the College Housing and 

Academic Facilities Loan program, the College Housing 

Loan program, and the Higher Education Facilities Loan 

program. From 1952 to 1993, these programs provided 

low-interest financing to IHEs for the construction, 

reconstruction, and renovation of housing, academic, and 

other educational facilities.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 73

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

NOTE 6. Liabilities Not Covered by budgetary Resources 

(Dollars in Millions)

2021 2020

Intragovernmental With the Public Intragovernmental With the Public

Liabilities Not Covered By Budgetary Resources

unfunded Leave $ - $ 52 $ - $ 47 

FECA Liabilities 2 14 2 13 

Total Liabilities Not Covered By 

Budgetary Resources 2 66 2 60 

Liabilities Not Requiring Budgetary Resources

Subsidy Due to Treasury General Fund 1,209 - 1,451 - 

Federal Perkins Loan Program 682 - 619 - 

Miscellaneous Receipt, Deposit Funds and 

Clearing Accounts 38 289 36 239 

Custodial Liabilities 4 - 2 - 

Total Liabilities Not Requiring Budgetary Resources 1,933 289 2,108 239 

Total Liabilities Covered by budgetary Resources 1,223,776 20,122 1,255,187 6,859 

Total Liabilities $ 1,225,711 $ 20,477 $ 1,257,297 $ 7,158 

NOTE 7. Debt Associated with Loans

(Dollars in Millions)

Beginning 

Balance Borrowing Repayments Accrued Interest Ending Balance

2021

Debt to the Bureau of Public Debt

Direct Loan Program $ 1,160,099 $ 119,950 $ (137,854) $ - $ 1,142,195 

FFEL Program 88,986 1,630 (12,362) - 78,254 

Other Credit Programs for higher Education 784 308 (156) - 936 

Total Debt to the Bureau of Public Debt 1,249,869 121,888 (150,372) - 1,221,385 

Debt to the Federal Financing Bank

Other Credit Programs for higher Education 1,518 192 (1,551) 1 160 

Total Debt Associated with Loans $ 1,251,387 $ 122,080 $ (151,923) $ 1 $ 1,221,545 

2020

Debt to the Bureau of Public Debt

Direct Loan Program $ 1,192,138 $ 116,883 $ (148,922) $ - $ 1,160,099 

FFEL Program 94,671 10,997 (16,682) - 88,986 

Other Credit Programs for higher Education 702 154 (72) - 784 

Total Debt to the Bureau of Public Debt 1,287,511 128,034 (165,676) - 1,249,869 

Debt to the Federal Financing Bank

Other Credit Programs for higher Education 1,482 165 (142) 13 1,518 

Total Debt Associated with Loans $ 1,288,993 $ 128,199 $ (165,818) $ 13 $ 1,251,387 

The Department borrows from Treasury’s Bureau of the Public Debt and the FFB to fund the disbursement of new 

loans and the payment of credit program outlays and related costs. During FY 2021, debt decreased 2.4 percent from 

$1,251.4 billion in the prior year to $1,221.5 billion. The Department makes periodic principal payments after considering 

the cash position and liability for future outflows in each cohort of loans, as mandated by the FCRA.
74 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Approximately 93.5 percent of the Department’s debt, as of September 30, 2021, is attributable to the Direct Loan 

Program. Most the net borrowing activity (borrowing less repayments) for the year was designated for funding new direct 

loan disbursements.

During FY 2021, TEACH net borrowing of $73 million was used for the advance of new grants and repayments of 

principal made to Treasury. In FY 2021, debt in HBCU decreased by $1,134 million, or 73 percent. This total represents 

the aggregate of new bonds administered and repayments made on previously issued bonds.

NOTE 8. Subsidy Due to Treasury 

(Dollars in Millions)

2021 2020

Credit Program Downward Subsidy Re-estimates

Direct Loan Program $ 303 $ 1,773 

FFEL Program 1 74 

Total Credit Program Downward Subsidy Re-estimates 304 1,847 

Future Liquidating Account Collections

FFEL Program 1,209 1,436 

Other Credit Programs for higher Education - 15 

Total Future Liquidating Account Collections 1,209 1,451 

Total Subsidy Due to Treasury General Fund $ 1,513 $ 3,298 

NOTE 9. Other Liabilities

(Dollars in Millions)

2021 2020

Intragovernmental With the Public Intragovernmental With the Public

Federal Perkins Loan Program $ 682 $ - $ 619 $ - 

Miscellaneous Receipt, Deposit Funds and 

Clearing Accounts 38 289 36 239 

Liability for Advances and Prepayments 3 - 2 - 

Accrued Funded Payroll and Leave - 26 - 23 

Accrued unfunded Annual Leave - 52 - 47 

Employer Contributions and Payroll Taxes Payable 10 1 8 1 

FECA Liabilities 2 14 2 13 

Custodial Liabilities 4 - 2 - 

Total Other Liabilities $ 739 $ 382 $ 669 $ 323 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 75

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

NOTE 10. Net Cost of Operations

As required by the GPRA Modernization Act of 2010, the Department’s programs have been aligned with the goals presented 

in the Department’s Strategic Plan as shown below. Goals 3 and 4 in the Strategic Plan are considered crosscutting goals, and 

therefore costs and revenues associated with these activities are included in the net cost programs associated with Goals 1 

and 2. Programs associated with COVID-19 activities are administered by multiple program offices but are summarized 

separately. (See also Note 11)

Program Offices Strategic Goal Net Cost Program

Net Cost Statement Program Alignment with Strategic Plan

OESE

OSERS

Other:

OCTAE

IES

OELA

OCR

Goal 1: Support state and local efforts to improve learning outcomes for all P-12 students in 

every community.

Improve learning 

outcomes for all 

P–12 students

FSA

OSERS

Other:

OCTAE

IES

OPE

OCR

Goal 2: Expand postsecondary education opportunities, improve outcomes to foster economic 

opportunity and promote an informed, thoughtful, and productive citizenry.

Expand 

postsecondary 

opportunities, improve 

outcomes to foster 

economic opportunity, 

and promote 

productive citizenry

All Offices Goal 3: Strengthen the quality, accessibility, and use of education data through better 

management, increased privacy protections, and transparency.

Crosscutting Goal

All Offices Goal 4: Reform the effectiveness, efficiency, and accountability of the Department. Crosscutting Goal
76 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Gross Costs and Earned Revenue by Program 

(Dollars in Millions)

2021

FSA OESE OSERS COVID-19 Other Total

IMPROVE LEARNING OUTCOMES FOR ALL P-12 STUDENTS

Gross Cost

Grants $ - $ 24,328 $ 12,685 $ 20,965 $ 2,173 $ 60,151 

Other - 68 - 30 764 862 

Earned Revenue - - - - (118) (118)

Net Program Costs - 24,396 12,685 20,995 2,819 60,895 

EXPAND POSTSECONDARY OPPORTUNITIES, IMPROVE OUTCOMES TO FOSTER ECONOMIC OPPORTUNITY, AND PROMOTE 

PRODUCTIVE CITIZENRY

Direct Loan Program

Gross Cost

Credit Program Interest Expense 32,957 - - - - 32,957 

Subsidy Expense 44,426 - - 52,181 - 96,607 

Administrative Expenses 1,516 - - 8 - 1,524 

Earned Revenue

Subsidy Expense (9) - - (2,707) - (2,716)

Interest & Administrative Fees (3,803) - - - - (3,803)

Subsidy Amortization (29,154) - - - - (29,154)

Net Cost of Direct Loan Program 45,933 - - 49,482 - 95,415 

FFEL Program

Gross Cost

Credit Program Interest Expense 3,538 - - - - 3,538 

Subsidy Expense 9,994 - - 4,006 - 14,000 

Subsidy Amortization (Guaranteed Loans) (863) - - - - (863)

Guaranty Agencies 79 - - - - 79 

Administrative Expenses 144 - - - - 144 

Earned Revenue

Subsidy Expense - - - (359) - (359)

Interest & Administrative Fees (1,257) - - - - (1,257)

Subsidy Amortization (Acquired FFEL Loans) (1,418) - - - - (1,418)

Guaranty Agencies (61) - - - - (61)

Net Cost of FFEL Program 10,156 - - 3,647 - 13,803 

Other Credit Programs for higher Education

Gross Cost

Credit Program Interest Expense 22 - - - 105 127 

Subsidy Expense 104 - - 22 1,393 1,519 

Administrative Expenses 1 - - - 26 27 

Earned Revenue

Subsidy Expense (1) - - - - (1)

Interest & Administrative Fees (4) - - - (49) (53)

Subsidy Amortization (18) - - - (56) (74)

Other (932) - - - - (932)

Net Cost of Other Credit Programs for 

Higher Education (828) - - 22 1,419 613 

Non-Credit Programs

Gross Cost

Grants 29,117 24 3,721 32,015 3,707 68,584 

Other 130 - 3 3 274 410 

Earned Revenue (1) - - - (14) (15)

Net Cost of Non-Credit Programs 29,246 24 3,724 32,018 3,967 68,979 

Net Program Costs 84,507 24 3,724 85,169 5,386 178,810 

Total Program Gross Costs 121,165 24,420 16,409 109,230 8,442 279,666 

Total Program Earned Revenue (36,658) - - (3,066) (237) (39,961)

Net Cost $ 84,507 $ 24,420 $ 16,409 $ 106,164 $ 8,205 $ 239,705 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 77

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

Gross Costs and Earned Revenue by Program 

(Dollars in Millions)

2020

FSA OESE OSERS COVID-19 Other Total

IMPROVE LEARNING OUTCOMES FOR ALL P-12 STUDENTS

Gross Cost

Grants $ - $ 22,544 $ 12,801 $ 1,839 $ 2,145 $ 39,329 

Other - 67 - - 749 816 

Earned Revenue - - - - (129) (129)

Net Program Costs - 22,611 12,801 1,839 2,765 40,016 

EXPAND POSTSECONDARY OPPORTUNITIES, IMPROVE OUTCOMES TO FOSTER ECONOMIC OPPORTUNITY, AND PROMOTE 

PRODUCTIVE CITIZENRY

Direct Loan Program

Gross Cost

Credit Program Interest Expense 34,705 - - - - 34,705 

Subsidy Expense 62,348 - - 38,825 - 101,173 

Administrative Expenses 1,425 - - - - 1,425 

Earned Revenue

Subsidy Expense (2) - - (263) - (265)

Interest & Administrative Fees (33,110) - - - - (33,110)

Subsidy Amortization (1,595) - - - - (1,595)

Net Cost of Direct Loan Program 63,771 - - 38,562 - 102,333 

FFEL Program

Gross Cost

Credit Program Interest Expense 4,021 - - - - 4,021 

Subsidy Expense (1,145) - - 3,325 - 2,180 

Subsidy Amortization (Guaranteed Loans) (1,064) - - - - (1,064)

Guaranty Agencies 126 - - - - 126 

Administrative Expenses 156 - - - - 156 

Earned Revenue

Subsidy Expense (1) - - (27) - (28)

Interest & Administrative Fees (2,871) - - - - (2,871)

Subsidy Amortization (Acquired FFEL Loans) (86) - - - - (86)

Guaranty Agencies (123) - - - - (123)

Net Cost of FFEL Program (987) - - 3,298 - 2,311 

Other Credit Programs for higher Education

Gross Cost

Credit Program Interest Expense 23 - - - 59 82 

Subsidy Expense 9 - - 51 - 60 

Administrative Expenses 2 - - - - 2 

Earned Revenue

Subsidy Expense - - - (2) - (2)

Interest & Administrative Fees (26) - - - (52) (78)

Subsidy Amortization 1 - - - (5) (4)

Other (1,281) - - - (3) (1,284)

Net Cost of Other Credit Programs for 

Higher Education (1,272) - - 49 (1) (1,224)

Non-Credit Programs

Gross Cost

Grants 28,113 25 3,494 9,420 4,304 45,356 

Other 348 - 3 10 270 631 

Earned Revenue - - - - (5) (5)

Net Cost of Non-Credit Programs 28,461 25 3,497 9,430 4,569 45,982 

Net Program Costs 89,973 25 3,497 51,339 4,568 149,402 

Total Program Gross Costs 129,067 22,636 16,298 53,470 7,527 228,998 

Total Program Earned Revenue (39,094) - - (292) (194) (39,580)

Net Cost $ 89,973 $ 22,636 $ 16,298 $ 53,178 $ 7,333 $ 189,418 
78 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Credit Program Interest Expense and Revenues 

(Dollars in Millions)

Gross Interest 

Expense

Subsidy 

Amortization Net Interest 

Expense

Gross Interest and Administrative 

Fee Revenue

Subsidy 

Amortization

Net Revenue

Intragovernmental With the 

Public Intragovernmental With the 

Public

With the 

Public

2021

Direct Loan Program $ 32,957 $ - $ 32,957 $ 4,230 $ (427) $ 29,154 $ 32,957 

FFEL Program 3,538 (863) 2,675 1,326 (69) 1,418 2,675 

Other Credit Programs 

for higher Education 127 - 127 28 25 74 127 

Total $ 36,622 $ (863) $ 35,759 $ 5,584 $ (471) $ 30,646 $ 35,759 

2020

Direct Loan Program $ 34,705 $ - $ 34,705 $ 4,786 $ 28,324 $ 1,595 $ 34,705 

FFEL Program 4,021 (1,064) 2,957 1,435 1,436 86 2,957 

Other Credit Programs 

for higher Education 82 - 82 14 64 4 82 

Total $ 38,808 $ (1,064) $ 37,744 $ 6,235 $ 29,824 $ 1,685 $ 37,744 

Interest expense equals interest revenue plus administrative fees accrued for all credit programs due to subsidy amortization. 

Subsidy amortization is required by the FCRA and accounts for the difference between interest expense and revenue cash 

flows. For direct loans, the allowance for subsidy is adjusted with the offset to interest revenue. For guaranteed loans, the 

liability for loan guarantees is adjusted with the offset to interest expense.

Due to the COVID-19 relief actions to suspend nearly all required federal student loans payments and set borrower 

interest rates to zero percent until January 31, 2022, no new interest revenues were recognized in FY 2021. However, 

interest adjustment and reapplication activity is included in the current year’s interest with the public in the schedule 

above. Adjustments and reapplications cause loan activity during the period between the original effective date and the new 

processing date to be reversed and reposted. As a result, interest accrued in a prior year is reversed and typically reposted. 

The amount of interest reposted can be different than the original amount depending on the purpose of the adjustment and 

whether the adjustment or reapplication caused an increase or decrease to the principal balance as of the original effective 

date. These adjustments and reapplications resulted in net negative FY 2021 interest revenues for the Direct Loan Program 

and the FFEL Program.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 79

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

Grant Expenses by Appropriation

(Dollars in Millions)

2021 2020

IMPROVE LEARNING OUTCOMES FOR ALL P-12 STUDENTS 

COVID-19 $ 20,965 $ 1,839 

Education for the Disadvantaged 16,171 15,750 

Special Education - IDEA Grants 12,685 12,801 

School Improvement Programs 6,069 4,755 

Impact Aid 1,484 1,466 

Innovation and Improvement 928 907 

English Language Acquisition 667 676 

Career, Technical, and Adult Education 425 383 

hurricane Education Recovery 271 253 

Institute of Education Sciences 152 179 

Other 334 320 

Subtotal $ 60,151 $ 39,329 

EXPAND POSTSECONDARY OPPORTUNITIES, IMPROVE OUTCOMES TO FOSTER ECONOMIC OPPORTUNITY, AND PROMOTE 

PRODUCTIVE CITIZENRY

COVID-19 $ 32,015 $ 9,420 

Student Financial Assistance

Pell Grants 26,852 25,882 

Federal Work-Study Program 1,145 1,203 

Federal Supplemental Educational Opportunity Grants 1,120 1,028 

Rehabilitation Services 3,347 3,133 

higher Education 1,977 2,738 

Career, Technical, and Adult Education 1,440 1,284 

Special Education - IDEA Grants 122 118 

hurricane Education Recovery 24 25 

Institute of Education Sciences 35 42 

Other 507 483 

Subtotal 68,584 45,356 

Total Grant Costs $ 128,735 $ 84,685 

The Department has more than 100 grant programs. Descriptions of COVID-19 grant programs are provided in Note 11. 

Descriptions of non-COVID-19 major grant program areas are as follows: 

Student Financial Assistance

• Pell Grant—Provides need-based grants to students to promote access to postsecondary education. Grant amounts are 

dependent on the student’s expected family contribution; the cost of attendance (as determined by the institution); the 

student’s enrollment status (full-time or part-time); and whether the student attends for a full academic year or less. Pell 

Grants are the single largest source of grant aid for postsecondary education.

• Federal Work-Study Program—Provides funds by formula to enable eligible institutions to offer employment to 

students based on financial needs. The program is available to full-time or part-time students and encourages community 

service work. The work is often related to the student’s course of study. This program is administered by the schools 

that participate in the Federal Work-Study program. Hourly earnings under this program must be at least the federal 

minimum wage. Federal funding, in most cases, pays 75 percent of a student’s hourly wage, with the remaining 

25 percent paid by the employer.

• Federal Supplemental Educational Opportunity Grant—Provides funds by formula to enable eligible institutions to 

offer grants to students based on need. Federal grants distributed under this program are administered directly by the 

financial aid office at each participating school.
80 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Education for the Disadvantaged—Primarily consists 

of grants that provide financial assistance through SEAs to 

LEAs and public schools with high numbers or percentages 

of poor children to help ensure that all children meet 

challenging state academic content and student academic 

achievement standards. Also provides funds to states to 

support educational services to children of migratory 

farmworkers and fishers, and to neglected or delinquent 

children and youth in state-run institutions, attending 

community day programs, and correctional facilities.

Special Education—Consists primarily of IDEA Grants 

that provide funds by formula to states to assist them in 

providing a free appropriate public education in the least 

restrictive environment for children with disabilities ages 3 

through 21 and assists states in providing early intervention 

services for infants and toddlers birth through age 2 and 

their families. Also provides discretionary grants to IHEs 

and other nonprofit organizations to support research, 

demonstrations, technical assistance and dissemination, 

technology, personnel development and parent-training, 

and information centers. 

School Improvement Programs—Provides funds to SEAs 

to make competitive subgrants to LEAs that demonstrate 

the greatest need for the funds and the strongest 

commitment to use the funds to provide adequate resources 

to substantially raise the achievement of students in their 

lowest-performing schools.

Rehabilitation Services—Provides funds to states and 

other agencies to support vocational rehabilitation and 

other services to individuals with disabilities to maximize 

their employment, independence, and integration into the 

community and the competitive labor market.

Higher Education—Includes Institutional Service 

grants designed to improve academic quality, institutional 

management and fiscal stability, and strengthen physical 

plants and endowments of IHEs, with an emphasis on 

institutions that enroll large proportions of minority and 

financially disadvantaged students. Also includes Student 

Service grant programs supporting low-income, firstgeneration students and individuals with disabilities as 

they progress through the academic pipeline from middle 

school to graduate school, in addition to programs focused 

on college readiness, campus-based childcare, and graduate 

fellowships. Also includes International and Foreign 

Language Education grant and fellowship programs that 

strengthen foreign language instruction, area/international 

studies teaching and research, professional development 

for educators, and curriculum development at the K–12, 

graduate, and postsecondary levels.

Career, Technical, and Adult Education—Includes 

programs that are related to adult education and literacy, 

career and technical education, community colleges and 

correctional education.

Impact Aid—Provides funds to LEAs to replace the lost 

local revenue that would otherwise be to educate children of 

federal workers that live on government property, which is 

exempt from local property taxes that finance education.

Innovation and Improvement—Includes support for 

nontraditional programs that improve student achievement 

and attainment; supports the development of educational 

television and digital media programs targeted at preschool 

and early elementary school children and their families 

to promote early learning and school readiness, with 

a particular interest in reaching low-income children; 

and supports LEAs and their partners in implementing, 

evaluating, and refining tools and approaches for developing 

the noncognitive skills of middle school students to increase 

student success. 

English Language Acquisition—Provides funds primarily 

by formula to states to improve services for English learners. 

Also provides discretionary funds to support national 

activities, including professional development to increase 

the supply of high-quality teachers of English learners and a 

national clearinghouse on English language acquisition. 

Hurricane Education Recovery—Provides onetime emergency-relief grants, funded by supplemental 

appropriations acts enacted in response to specific events, 

to support schools and students directly affected by natural 

disasters. Assists students displaced or disrupted by such 

disasters as well as eligible agencies and institutions that 

require funding to cover unexpected expenses and return to 

normal operations. 

Institute of Education Sciences—Provides funding 

to: support research, development, and dissemination 

activities that provide parents, teachers, and schools with 

evidence-based information on effective educational 

practices; support statistical data collection activities 

conducted by the National Center for Education Statistics; 

support the ongoing National Assessment of Educational 

Progress and the National Assessment Governing 

Board; support research to build the evidence base on 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 81

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

improving special education and early intervention 

services and outcomes for infants, toddlers, and children 

with disabilities; and support studies, evaluations, and 

assessments related to IDEA.

NOTE 11. COVID-19 ACTIVITY 

Congress passed multiple COVID-19 relief bills in 

FY 2020 and FY 2021 including the following that 

provided the Department with a total of $282.5 billion of 

direct appropriation funding for educational purposes:

• Coronavirus Aid, Relief, and Economic Security Act of 

2020 (CARES Act) $31.0 billion.

• Coronavirus Response and Relief Supplemental 

Appropriations Act of 2021 (CRRSAA) $82.0 billion.

• American Rescue Plan Act of 2021 (ARP) $169.5 billion. 

These appropriations funded a variety of programs 

administered primarily through grant programs as 

described starting on page 84. The largest component of 

the education funding provided by the COVID-19 relief 

appropriations established the Education Stabilization 

Fund which included the (1) Elementary and Secondary 

School Emergency Relief Fund, (2) Higher Education 

Emergency Relief Fund, (3) Governor’s Emergency 

Education Relief Fund, and (4) funds for outlying areas. 

The Education Stabilization Fund is being distributed to 

recipients through various grant programs.

The COVID-19 relief legislation and administrative 

actions also provided support for student loan borrowers 

primarily by suspending nearly all federal loan payments 

until January 31, 2022, interest free. A Dear Colleague 

Letter released on May 12, 2021, expanded the pause on 

federal student loan interest and collections on all defaulted 

loans in the FFEL Program that are managed by guaranty 

agencies, retroactive to March 2020. The Department 

authorized guaranty agencies to reimburse themselves from 

the Federal Fund for lost revenue that they will realize 

because of these actions. However, that reimbursement 

will only cover the share of what a guaranty agency might 

have reasonably collected during the pandemic but for 

the suspension.

Funding for student loan repayment deferrals was provided 

through FY 2020 and FY 2021 indefinite appropriations 

totaling $42.2 billion and $56.2 billion, respectively. Cost 

impacts of the student loan repayment deferrals were 

recorded as loan modifications in FY 2020 ($41.9 billion) 

and FY 2021 ($53.1 billion). These COVID-19 loan 

modifications are a component of a subsidy expense 

that reduced the overall credit program loan receivable 

balances. (see Notes 5 and 10)

In addition to suspending student loan repayments, other 

COVID-19 relief provided to student loan borrowers 

included the following:

• The Department stopped all federal wage garnishments 

and collection actions for borrowers with federally held 

loans in default.

• The Department provided relief for certain borrowers 

who received student loan discharges due to total and 

permanent disability. Unless it is through a process 

with the VA, borrowers receiving this discharge are, by 

regulation, subject to a three-year monitoring period 

during which they must provide the Department with 

information about their earnings from employment. 

Per regulation, borrowers whose earnings exceed certain 

thresholds and borrowers who do not meet certain 

other criteria will have their loans reinstated. The 

Department provided relief to ensure no borrowers 

are at risk of having their loans reinstated, meaning 

they would have to repay their debt—for failure to 

provide earnings information during the COVID-19 

emergency. This change was made retroactive 

to March 13, 2020, the start of the COVID-19 

national emergency.

• The Department requested a waiver from the Small 

Business Administration to immediately help nearly 

30,000 small business owners in the Paycheck 

Protection program who faced difficulties because they 

were delinquent or in default on a federal student loan.

Unobligated CARES Act balances as of the end of 

FY 2020 totaling $672 million were carried forward to 

FY 2021 and are reported in the FY 2021 COVID-19 

following schedule as Unobligated Balances from Prior 

Year Budget Authority (Net) together with $26 million 

of net downward adjustments to FY 2020 CARES Act 

unpaid obligations recorded in FY 2021. Obligated and 

unobligated COVID-19 funds remaining to be disbursed 

as of the end of FY 2020 totaled $19.6 billion. Obligated 

and unobligated COVID-19 funds remaining to be 

disbursed as of the end September 30, 2021, totaled 

$222.0 billion. (see Note 3)

The tables on pages 82 and 83 provide more detail on the 

Department’s funded COVID-19 activity for FY 2021 

and FY 2020, respectively.
82 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

COVID-19 Activity

(Dollars in Millions)

2021

Unobligated 

Balance from 

Prior Year 

Budget Authority 

(Net)

Appropriations Appropriations

Transferred Obligated Unobligated Outlays

Transfers 

to General 

Fund

Net Costs 

(See Note 

10)

COVID-19 Direct Appropriations

Education Stabilization Fund

Elementary and Secondary 

School Emergency Relief Fund

Allocations to States $ - $ 176,286 $ - $ 161,349 $ 14,937 $ 19,021 $ - $ 20,035 

Assistance for homeless 

Children and Youth - 800 - 799 1 1 - 1 

higher Education Emergency 

Relief Fund

higher Education Funds to 

Students 113 24,066 - 23,982 197 10,838 - 14,097 

higher Education Funds to 

Institutions 155 32,157 100 32,084 328 15,225 - 15,226 

Proprietary Institutions Grant 

Funds for Students - 1,077 - 843 234 473 - 475 

hbCus, and Minority Serving 

Institutions (MSIs) 

MSIs 5 1,207 - 1,169 43 391 - 397 

hbCus - 2,576 - 2,575 1 791 - 793 

Tribally Controlled Colleges 

and universities (TCCus) - 225 - 223 2 36 - 36 

Strengthening Institutions 

Program 9 663 - 606 66 231 - 231 

Fund for the Improvement of 

Postsecondary Education 203 - - 91 112 140 - 140 

Supplemental Assistance 

and Support - 311 - 226 85 5 - 12 

Governor’s Emergency Education 

Relief Fund

Emergency Education 

Relief Grants 48 1,303 - 1,351 - 1,055 - 1,061 

Emergency Assistance to NonPublic Schools Program - 5,500 - 3,327 2,173 277 - 280 

Outlying Areas - 1,259 - 1,259 - 114 - 114 

bureau of Indian Education - 409 (409) - - - - - 

Discretionary Grants - - - - - 16 - 16 

Total Education 

Stabilization Fund 533 247,839 (309) 229,884 18,179 48,614 - 52,914 

Individuals with Disabilities 

Education Act Grants - 3,030 - 2,991 39 - - - 

School Improvement Programs - 170 - 113 57 - - - 

American Indian Resilience in 

Education - 20 - - 20 - - - 

Safe Schools & 

Citizenship Education 100 - (100) - - - - - 

Gallaudet university - 30 - 30 - 16 - 16 

howard university - 55 - 55 - 44 - 44 

National Technical Institute for 

the Deaf - 30 - 30 - 6 - 6 

hbCu Loan Deferment 30 - - - 30 - - - 

Student Aid Administration 24 121 - 91 54 8 - 8 

Program Administration 4 30 - 12 22 11 - 11 

Inspector General 7 10 - 4 13 2 - 2 

Institute of Education Sciences - 128 - 27 101 20 - 20 

Total COVID-19 Direct 

Appropriations 698 251,463 (409) 233,237 18,515 48,721 - 53,021 

COVID-19 Indirect Appropriations 

(See Note 5)

Student Loan Deferrals

DL Program - 52,181 - 52,181 - 52,181 2,707 49,474 

FFEL Program - 4,006 - 4,006 - 4,006 359 3,647 

hEAL Program - 1 - 1 - 1 - 1 

TEACh Program - 21 - 21 - 21 - 21 

Total Student Loan Deferrals - 56,209 - 56,209 - 56,209 3,066 53,143 

Total COVID-19 Indirect 

Appropriations - 56,209 - 56,209 - 56,209 3,066 53,143 

Total COVID-19 Activity $ 698 $ 307,672 $ (409) $ 289,446 $ 18,515 $ 104,930 $ 3,066 $ 106,164 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 83

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

COVID-19 Activity

(Dollars in Millions)

2020

Appropriations Appropriations

Transferred Obligated Unobligated Outlays Transfers to General Fund

Net Costs 

(See Note 10)

COVID-19 Direct Appropriations

Education Stabilization Fund

Elementary and Secondary 

School Emergency Relief Fund

Allocations to States $ 13,229 $ - $ 13,229 $ - $ 1,552 $ - $1,552 

Assistance for homeless 

Children and Youth - - - - - - - 

higher Education Emergency 

Relief Fund

higher Education Funds to 

Students 6,279 - 6,188 91 5,382 - 5,396 

higher Education Funds to 

Institutions 6,279 - 6,127 152 3,320 - 3,387 

Proprietary Institutions Grant 

Funds for Students - - - - - - - 

hbCus, and Minority Serving 

Institutions (MSIs) 

MSIs 270 - 265 5 66 - 66 

hbCus 577 - 577 - 161 - 161 

Tribally Controlled Colleges 

and universities (TCCus) 50 - 50 - 17 - 17 

Strengthening 

Institutions Program 149 - 141 8 43 - 43 

Fund for the Improvement of 

Postsecondary Education 349 - 145 204 64 - 65 

Supplemental Assistance 

and Support - - - - - - - 

Governor’s Emergency Education 

Relief Fund

Emergency Education 

Relief Grants 2,953 - 2,905 48 535 - 536 

Emergency Assistance to NonPublic Schools Program - - - - - - - 

Outlying Areas 154 - 154 - 21 - 21 

bureau of Indian Education 154 (154) - - - - - 

Discretionary Grants 307 - 307 - - - - 

Total Education 

Stabilization Fund 30,750 (154) 30,088 508 11,161 - 11,244 

Individuals with Disabilities 

Education Act Grants - - - - - - - 

Safe Schools & 

Citizenship Education - - - - - - - 

School Improvement Programs - - - - - - - 

American Indian Resilience 

in Education 100 - - 100 - - - 

Gallaudet university 7 - 7 - 2 - 2 

howard university 13 - 13 - 13 - 13 

National Technical Institute for 

the Deaf - - - - - - - 

hbCu Loan Deferment 62 - 32 30 32 - 32 

Student Aid Administration 40 - 17 23 9 - 9 

Program Administration 8 - 4 4 - - - 

Inspector General 7 - - 7 - - - 

Institute of Education Sciences - - - - - - - 

Total COVID-19 Direct 

Appropriations 30,987 (154) 30,161 672 11,217 - 11,300 

COVID-19 Indirect Appropriations 

(See Note 5)

Student Loan Deferrals

DL Program 38,825 - 38,825 - 38,825 263 38,562 

FFEL Program 3,325 - 3,325 - 3,325 28 3,297 

hEAL Program 3 - 3 - 3 - 3 

TEACh Program 16 - 16 - 16 - 16 

Total Student Loan Deferrals 42,169 - 42,169 - 42,169 291 41,878 

Total COVID-19 Indirect 

Appropriations 42,169 - 42,169 - 42,169 291 41,878 

Total COVID-19 Activity $ 73,156 $ (154) $ 72,330 $ 672 $ 53,386 $ 291 $ 53,178 
84 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Elementary and Secondary School Emergency Relief 

(ESSER) Fund—Supports continued learning for 

K–12 students whose education has been disrupted 

by COVID-19.

• Allocations to States—Provides grants to states 

based on the same proportion that each state receives 

under the Elementary and Secondary Education Act

(ESEA) Title-IA. States must distribute at least 

90 percent of funds to local education agencies 

based on their proportional share of ESEA Title I-A 

funds. States have the option to reserve 10 percent 

of the allocation for emergency needs as determined 

by the state to address issues responding to the 

COVID-19 pandemic. 

• Assistance for Homeless Children and Youth—

Provides grants to supports the specific needs of 

homeless children and youth with wraparound 

services to address the challenges of COVID-19, 

and to enable homeless children and youth to attend 

school and fully participate in school activities.

Higher Education Emergency Relief Fund (HEERF) 

—Provides grants for IHEs to address needs directly 

related to COVID-19, including transitioning courses 

to distance education and granting aid to students for 

educational costs such as food, housing, course materials, 

health care, and childcare. The fund is distributed 

through the following grant programs. 

• Higher Education Funds to Students—Provides 

grants to IHEs to give emergency financial aid grants 

to students whose lives have been disrupted, many of 

whom are facing financial challenges and struggling to 

make ends meet. Institutions have the responsibility of 

determining how grants will be distributed to students, 

how the amount of each student grant is calculated, 

and the development of any instructions or directions 

that are provided to students about the grant. 

• Higher Education Funds to Institutions—Provides 

grants to IHEs which can use up to one-half of 

the total funds to cover any costs associated with 

significant changes to the delivery of instruction due 

to COVID-19. Institutions are encouraged to use the 

funds to expand remote learning programs, build IT 

capacity to support such programs, and train faculty 

and staff to operate effectively in a remote learning 

environment. They are also encouraged to use the 

funds to expand support for students with the most 

significant financial needs arising from the COVID-19 

pandemic, including eligible expenses under a 

student’s cost of attendance, such as course materials, 

technology, health care, childcare, food, and housing.

• Proprietary Institutions Grant Funds for Students—

Provides grants to proprietary IHEs to give emergency 

financial aid grants to students, which may be used for 

any component of the student’s cost of attendance or 

for emergency costs that arise due to COVID-19, such 

as tuition, food, housing, health care (including mental 

health care) or childcare.

• Minority Serving Institutions (MSIs)—Provides 

grants to MSIs to defray institutional expenses, which 

may include lost revenue, reimbursement for expenses 

already incurred, technology costs associated with 

the transition to distance education, faculty and staff 

training, and payroll. MSIs include institutions that 

are eligible to participate in the following programs: 

Predominantly Black Institutions, Alaska Native 

and Native Hawaiian-Serving Institutions, Asian 

American and Native American Pacific IslanderServing Institutions, Native American-Serving 

Nontribal Institutions, Developing Hispanic-Serving 

Institutions program, and Promoting Postbaccalaureate 

Opportunities for Hispanic Americans. MSIs are 

encouraged to use as much of these funds as possible 

to provide students eligible for financial aid with grants 

for any component of the student’s cost of attendance, 

including tuition, course materials, and technology.

• Historically Black Colleges and Universities 

(HBCUs)—Provides grants to HBCUs to defray 

institutional expenses, which may include lost 

revenue, reimbursement for expenses already incurred, 

technology costs associated with the transition to 

distance education, faculty and staff training, and 

payroll. HBCUs are also encouraged to use as much 

of these funds as possible to provide students eligible 

for financial aid with grants for any component of the 

student’s cost of attendance, including tuition, course 

materials, and technology.

• Tribally Controlled Colleges and Universities 

(TCCUs)—Provides grants to TCCUs to defray 

institutional expenses, which may include lost 

revenue, reimbursement for expenses already incurred, 

technology costs associated with the transition to 

distance education, faculty and staff training, and 

payroll. TCCUs are also encouraged to use as much 

of these funds as possible to provide students eligible 

for financial aid with grants for any component of the 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 85

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

student’s cost of attendance, including tuition, course 

materials, and technology. 

• Strengthening Institutions Program—Provides grants 

to institutions that are not participating in the MSI 

programs but have at least 50 percent of their degree 

students receiving need-based assistance under Title 

IV of the Higher Education Act or have a substantial 

number of enrolled students receiving Pell Grants and 

have low educational and general expenditures. These 

funds can be used to defray institutional expenses, 

which may include lost revenue, reimbursement for 

expenses already incurred, technology costs associated 

with the transition to distance education, faculty 

and staff training, and payroll. These institutions are 

encouraged to use as much of these funds as possible 

to provide students eligible for financial aid with grants 

for any component of the student’s cost of attendance, 

including tuition, course materials, and technology. 

• Fund for the Improvement of Postsecondary 

Education (FIPSE)—Provides grants that support 

projects to encourage innovative reform and expand 

education opportunities to underrepresented groups. 

Institutions can use these additional FIPSE funds to 

defray institutional expenses, which may include lost 

revenue, reimbursement for expenses already incurred, 

technology costs associated with the transition to 

distance education, faculty and staff training, and 

payroll. Institutions are also encouraged to use as much 

of these funds as possible to provide students eligible 

for financial aid with grants for any component of the 

student’s cost of attendance, including tuition, course 

materials, and technology.

• Supplemental Assistance and Support—Provides 

discretionary grants to institutions of higher education 

with unmet needs related to recovery from disruptions 

in the finances, day-to-day operations, instruction, and 

student support due to COVID-19.

Governor’s Emergency Education Relief (GEER) 

Fund—Provides grants to state governors to ensure 

education continues for students of all ages impacted by 

the COVID-19 national emergency. The GEER Fund 

is a flexible emergency block grant designed to enable 

governors to decide how best to meet the needs of 

students, schools (including charter schools and nonpublic schools), postsecondary institutions, and other 

education-related organizations.

• Emergency Education Relief Grants—Provide 

grants to state governors for the purpose of providing 

local educational agencies (LEA), IHEs, and other 

education-related entities with emergency assistance as 

a result COVID-19.

• Emergency Assistance to Non-Public Schools 

Program—Provides grants to state governors to 

provide services or assistance to eligible non-public 

schools to address COVID-19 impacts.

Outlying Areas, Bureau of Indian Education, and 

Discretionary Grants—Provides funding for outlying 

areas and states with the highest COVID-19 burdens. 

These funds are distributed through the following grant 

programs.

• Outlying Areas—Provides grants for the outlying 

areas of the United States, specifically: the U.S. Virgin 

Islands, Guam, the Commonwealth of the Northern 

Mariana Islands, and American Samoa. Money made 

available from these grants will be used in response 

to COVID-19 and was calculated via formula. Each 

outlying area received two block grants from the 

Education Stabilization Fund—one to the governor’s 

offices and one to the SEA.

• Bureau of Indian Education—Provides funding for 

programs operated by the Bureau of Indian Education 

(BIE), in consultation with the Secretary of Interior. 

The Department transferred these funds to BIE.

• Discretionary Grants—Provides grants to states to use 

to create adaptable, innovative learning opportunities 

for K–12 and postsecondary learners in response to the 

COVID-19 national emergency. 

In addition to the Education Stabilization Fund, 

COVID-19 appropriations also included funding for the 

following.

Individuals with Disabilities Education Act Grants—

Provides grants to states to help them recover from the 

impact of the COVID-19 and to safely reopen schools and 

sustain safe operations. These grants assist states in providing 

a free, appropriate public education in the least restrictive 

environment for children with disabilities ages 3 through 21 

and assists states in providing early intervention services for 

infants and toddlers birth through age 2 and their families.
86 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

NOTE 12. Statements of budgetary Resources

The SBR compares budgetary resources with the status of those resources. As of September 30, 2021, budgetary resources 

were $689.6 billion, and net agency outlays were $260.5 billion. As of September 30, 2020, budgetary resources were 

$473.2 billion, and net agency outlays were $161.5 billion.

Net Adjustments to Unobligated Balances Brought Forward, October 1

(Dollars in Millions)

2021 2020

Budgetary

Non-Budgetary 

Credit Reform 

Financing 

Accounts

Budgetary

Non-Budgetary 

Credit Reform 

Financing 

Accounts

Prior Year Unobligated Balance, End of Year (Total) $ 19,904 $ 22,726 $ 16,774 $ 18,324 

Recoveries of Prior Year unpaid Obligations 1,317 16,676 1,426 18,220 

borrowing Authority Withdrawn - (13,566) - (15,004)

Actual Repayments of Debt, Prior-Year balances - (5,444) - (12,720)

Actual Capital Transfers to the Treasury General Fund (97) - (265) - 

Canceled Authority (354) - (305) - 

Downward Adjustments of Prior-Year Paid Delivered Orders 3 257 128 301 

Other Differences (1) 1 (2) (2)

Unobligated Balance from Prior Year Budget Authority (Net) $ 20,772 $ 20,650 $ 17,756 $ 9,119 

School Improvement Programs—Provides additional 

funds to SEAs to make competitive subgrants to LEAs 

that demonstrate the greatest need for the funds and the 

strongest commitment to use the funds to provide adequate 

resources to substantially raise the achievement of students 

in their lowest-performing schools.

American Indian Resilience in Education—Provides 

grants to tribal education agencies for activities authorized 

under Section 6121(c) of the Elementary and Secondary 

Education Act of 1965. Those activities include a broad 

range of direct services to Indian children and youth, their 

teachers, and families.

Safe Schools and Citizenship Education—The CARES 

Act provided additional funding for this program to 

prevent, prepare for, and respond to COVID-19, including 

disinfecting affected schools, and assisting in counseling and 

distance learning. The CRRSAA subsequently authorized 

these additional funds to be reallocated to the HEERF. 

Gallaudet University—Provides funding to help address 

challenges associated with COVID-19.

Howard University—Provides funding to help address 

challenges associated with COVID-19.

HBCU Loan Deferment—Provides funding for 

the deferment of loan repayments for HBCUs that 

were provided low-cost capital financing for campus 

maintenance and construction projects. During the 

period of the deferment, the Department was required 

to pay the required principal and interest due. At the end 

of the deferment, the HBCU is required to repay the 

Department for payments made on its behalf.

Student Aid Administration—Provides funding for 

the additional costs of administering the COVID-19 

provisions affecting student financial aid programs.

Program Administration—Provides funding to 

the Department to fund costs of administrating the 

COVID-19 appropriations.

Inspector General—Provides funding for salaries and 

expenses necessary for Office of Inspector General 

oversight and audit of COVID-19 programs, grants, and 

projects.

Institute of Education Sciences—Provides funding for 

research to address learning loss caused by the coronavirus 

and to disseminate findings to SEAs, LEAs, and other 

others, and for carrying out the National Assessment of 

Educational Progress Authorization Act.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 87

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

During the periods ended September 30, 2021, and September 30, 2020, certain adjustments were made to the balance of 

unobligated budgetary resources available as of October 1, 2020, and October 1, 2019. These adjustments included, among 

other things, recoveries of prior year unpaid obligations that result from downward adjustments of undelivered orders that 

were obligated in a prior fiscal year.

Unused Borrowing Authority 

(Dollars in Millions)

2021 2020

Beginning Balance - Unused Borrowing Authority $ 48,230 $ 55,845 

Current Year borrowing Authority 129,407 135,589 

Funds Drawn from Treasury (122,093) (128,200)

borrowing Authority Withdrawn (13,566) (15,004)

Ending Balance - Unused Borrowing Authority $ 41,978 $ 48,230 

The Department is given authority to draw funds from Treasury to finance the Direct Loan, FFEL, and other loan programs. 

Unused borrowing authority is a budgetary resource and is available to support obligations for these programs. The 

Department periodically reviews its borrowing authority balances in relation to its obligations, resulting in the withdrawal of 

unused amounts.

Undelivered Orders at the End of the Period

(Dollars in Millions)

2021 2020

Intragovernmental With the Public Intragovernmental With the Public

unpaid $ 252 $ 321,379 $ 180 $ 138,621 

Paid 104 1,287 121 503 

Undelivered Orders $ 356 $ 322,666 $ 301 $ 139,124 

Undelivered orders represent the amount of goods and/or services ordered that have not been actually or constructively 

received. Paid amounts include any orders that may have been prepaid or advanced but for which delivery or performance 

has not yet occurred.

Unpaid undelivered orders increased significantly in FY 2021 primarily due to a $184.5 billion increase in unpaid 

undelivered COVID-19 fund balances (see Note 3).
88 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Distributed Offsetting Receipts

(Dollars in Millions)

2021 2020

Negative Subsidies and Downward Re-estimates of Subsidies:

Direct Loan Program $ 4,809 $ 5,382 

FFEL Program 589 6,865 

hEAL Program 25 - 

TEACh Program 3 36 

Facilities Loan Programs 207 48 

Total Negative Subsidies and Downward Re-estimates of Subsidies 5,633 12,331 

Repayment of Perkins Loans and Capital Contributions 866 1,317 

Other 126 (38)

Distributed Offsetting Receipts $ 6,625 $ 13,610 

Distributed offsetting receipts are amounts that the Department collects from the public or from other federal agencies that 

are used to offset or reduce the Department’s budget outlays. The Department’s outlays are measured on both a gross and 

net basis, with net outlays being reduced by offsetting receipts.

Most of the distributed offsetting receipts line item on the SBR represents amounts paid from the Direct Loan Program and 

FFEL Program financing accounts to Treasury General Fund receipt accounts for downward current fiscal year executed 

subsidy re-estimates and negative subsidies

Explanation of Differences between the SBR and the Budget of the U.S. Government 

(Dollars in Millions)

Budgetary 

Resources

New Obligations 

and Upward 

Adjustments 

(Total)

Distributed 

Offsetting 

Receipts

Net Outlays

Combined Statements of Budgetary Resources $ 473,447 $ 430,822 $ 13,610 $ 204,415 

Expired Funds (2,368) (733) - - 

FFEL Guaranty Agency Amounts Included in the 

President's budget 6,125 6,125 - - 

Distributed Offsetting Receipts - - - 13,610 

Other 5 - 53 54 

Budget of the United States Government1 $ 477,209 $ 436,214 $ 13,663 $ 218,079 

1

 Amounts obtained from the Appendix, budget of the united States Government, FY 2022

The FY 2023 President’s Budget, which presents the actual amounts for the year ending September 30, 2021, has not been 

published as of the issue date of these financial statements. The FY 2023 President’s Budget is scheduled for release in 

February 2022 and will be made available on OMB’s website. The table above reconciles the FY 2020 SBR to the FY 2022 

President’s Budget (FY 2020 actual amounts) for budgetary resources, new obligations and upward adjustments, distributed 

offsetting receipts, and net outlays.

Reconciling differences exist because the President’s Budget excludes expired funds. Additionally, the President’s Budget 

includes a public enterprise fund that reflects the gross obligations by the FFEL Program for the estimated activity of the 

consolidated federal fund of the guaranty agencies. Ownership by the federal government is independent of the actual 

control of the assets. Since the actual operation of the federal fund is independent from the Department’s direct control, 

budgetary resources and new obligations and upward adjustments are estimated and disclosed in the President’s Budget 

to approximate the gross activities of the combined federal fund. Amounts reported on the SBR for the federal fund are 

compiled by combining all guaranty agencies’ annual reports to determine a net valuation amount for the federal fund.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 89

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

NOTE 13. Reconciliation of Net Cost to Net Outlays

(Dollars in Millions)

2021 2020

Intragovernmental With the 

Public Total Intragovernmental With the 

Public Total

Net Cost $ 31,606 $ 208,099 $ 239,705 $ 33,158 $ 156,260 $ 189,418 

Components of Net Cost Not Part of 

Budgetary Outlays:

Year-End Credit Reform Subsidy 

Accrual Re-Estimates - (28,399) (28,399) - (52,571) (52,571)

Loan Modification Adjustment Transfers - 2,837 2,837 - (54) (54)

Property and Equipment 

Depreciation Expense - (1) (1) - (1) (1)

Property and Equipment Disposals 

and Revaluations - - - - (1) (1)

Increase/(Decrease) in Assets:

Loans Receivables, Net (Non-FCRA) - (62) (62) - 398 398 

Other Assets (13) 22 9 58 (46) 12 

(Increase)/Decrease in Liabilities:

Accounts Payable (1) (597) (598) - (137) (137)

Loan Guarantee Liabilities (Non-FRCA) - (2) (2) - (5) (5)

Other Liabilities 171 (5,728) (5,557) (150) 709 559 

Financing Sources:

Imputed Costs (36) - (36) (30) - (30)

Total Components of Net Cost Not Part of 

Budgetary Outlays 121 (31,930) (31,809) (122) (51,708) (51,830)

Components of Budget Outlays Not Part of 

Net Cost:

Effect of Prior-Year Credit Reform 

Subsidy Re-estimates - 52,571 52,571 - 67,225 67,225 

Acquisition of Capital Assets - 1 1 - - - 

Financing Sources:

 Donated Revenue - (1) (1) - - - 

Total Components of Budget Outlays Not 

Part of Net Cost - 52,571 52,571 - 67,225 67,225 

Miscellaneous Items:

Other Loan Activities (Non-FCRA) (89) - (89) (351) - (351)

Non-Entity Activity 82 - 82 (37) - (37)

Non-Exchange Revenues (9) - (9) (10) - (10)

Other Temporary Timing Differences

Total Miscellaneous Items (16) - (16) (398) - (398)

Budgetary Agency Outlays, Net $ 260,451 $ 204,415 
90 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

This reconciliation explains the relationship between the 

Department’s net cost and its net outlays. Reconciling 

items result from transactions that did not result in a 

current period outlay but did result in a current period 

cost, and current period outlays that did not result in a 

current period cost. 

Disbursements for new FCRA loans and collections of 

principal and interest on existing FCRA loans are recorded 

in nonbudgetary credit reform financing accounts. 

These disbursements and collections are reported on the 

Statement of Budgetary Resources as disbursements, net, 

and not as agency outlays, net. Since these disbursements 

and collections affect neither net cost of operations 

nor agency outlays, net, they are excluded from this 

reconciliation as are any increases or decreases in the 

FCRA loan receivable balances. 

The two major reconciling differences, both associated 

with the Department’s FCRA loan programs, are for 

Year-End Credit Reform Subsidy Accrual Re-Estimates 

(current-year subsidy accrual costs) and Effect of PriorYear Credit Reform Subsidy Re-Estimates (current-year 

budget subsidy costs).

• Current-year subsidy accrual costs are the portion 

of the current-year loan subsidy re-estimates not 

impacting the current year outlays.

• Current-year budget subsidy costs are current year 

indirect appropriations provided to fund subsidy 

costs accrued in the prior year. This includes the 

portion of the current year’s executed President’s 

Budget re-estimates not included in this year’s net cost 

subsidy expense. 

NOTE 14. Commitments and Contingencies

The Department discloses contingencies where any of the 

conditions for liability recognition are not met and there is 

at least a reasonable possibility that a loss or an additional 

loss may have been incurred in accordance with FASAB 

Standard No. 5, Accounting for Liabilities of the Federal 

Government. The following commitments are amounts 

for contractual arrangements that may require future 

financial obligations.

Future Minimum Lease Payments

(Dollars in Millions)

2021 2020

2022 $ 69 2021 $ 72 

2023 71 2022 75 

2024 71 2023 77 

2025 72 2024 74 

2026 73 2025 75 

After 2026 75 After 2025 77 

Total $ 431 Total $ 450 

The Department leases from the GSA all or a portion of 

14 privately owned and 12 publicly owned buildings in 

20 cities. The table above presents the estimated future 

minimum lease payments for these privately and publicly 

owned buildings.

GuARANTY AGENCIES

The Department may assist guaranty agencies experiencing 

financial difficulties. The Department has not done so 

in FY 2021 or FY 2020 and does not expect to in future 

years. No provision has been made in the financial 

statements for potential liabilities.

LITIGATION AND OThER CLAIMS

The Department is involved in various lawsuits incidental 

to its operations. In the opinion of management, the 

ultimate resolution of pending litigation will not have a 

material impact on the Department’s financial position. 

As appropriate, the Department would seek recovery from 

Treasury’s Judgment Fund for any loss in litigation that 

may occur. The Judgment Fund is a permanent, indefinite 

appropriation available to pay judgments against the 

government if appropriated funds cannot be used. 

The cost of loan forgiveness related to borrower defense 

claims reflected in the accompanying financial statements 

is limited to loans originated through September 30, 

2021. The final disposition of claims filed and those yet 

to be filed from loans originated before September 30, 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 91

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

2021, is not expected to have a material impact on these 

financial statements.

OT h E R M AT T E R S 

Some portion of the current-year financial assistance 

expenses (grants) may include funded recipient 

expenditures that are subsequently disallowed through 

program review or audit processes. In the opinion of 

management, the ultimate disposition of these matters 

will not have a material effect on the Department’s 

financial position.

NOTE 15. Subsequent Event

The Department announced in October 2021 significant 

changes to some of the eligibility criteria and potential 

forgiveness of loans as part of the PSLF program. The 

PSLF program provides debt relief to teachers, nurses, 

firefighters, service members and others serving their 

communities. By canceling loans after 10 years of public 

service, PSLF removes the burden of student debt on 

public servants. Policy changes to be implemented in 

FY 2022 will result in 22,000 borrowers who have 

consolidated loans—including previously ineligible 

loans—being immediately eligible for $1.74 billion 

in forgiveness without the need for further action on 

their part. Another 27,000 borrowers could potentially 

qualify for an additional $2.82 billion in forgiveness if 

they certify additional periods of employment. All told, 

the Department estimates that over 550,000 borrowers 

who have previously consolidated their loans will see an 

increase in qualifying payments with the average borrower 

receiving another two years of progress toward forgiveness. 

Many more will also see progress as borrowers consolidate 

into the Direct Loan Program and apply for PSLF, and as 

the Department rolls out other changes during FY 2022. 

The Department’s financial statements do not include 

an estimate for impacts of the announced changes to the 

PSLF program eligibility criteria and potential forgiveness 

of loans.

NOTE 16. Reclassification of Statement of 

Net Cost and Statement of Operations and 

Changes in Net Position for Financial Report 

Compilation Process

To prepare the Financial Report (FR) of the U.S. 

government, Treasury requires agencies to submit an 

adjusted trial balance, which is a listing of accounts that 

appear in the financial statements. Treasury uses the trial 

balance information reported in the Governmentwide 

Treasury Account Symbol Adjusted Trial Balance System 

to develop a Reclassified Statement of Net Cost and a 

Reclassified Statement of Operations and Changes in Net 

Position for each agency, all of which show how agency 

amounts are related to particular FR statement line items. 

Treasury eliminates all intragovernmental balances from 

the reclassified statements and aggregates lines with the 

same title to develop the FR statements. 

The two schedules in this note show the Department’s 

financial statements and the Department’s reclassified 

statements before elimination of intragovernmental 

balances and before aggregation of repeated FR line items. 

The term “Non-Federal” is used in this note to refer to 

federal government amounts that result from transactions 

with non-federal entities. These include transactions with 

individuals, businesses, nonprofit entities, and state, local, 

and foreign governments.

A copy of the September 30, 2020, FR can be found on 

Treasury’s website and a copy of the September 30, 2021, 

FR will be posted to this site as soon as it is released.
92 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Reclassification of Statement of Net Cost to Line Items Used for the Governmentwide Statement

of Net Cost for the Period Ending September 30, 2021

(Dollars in Millions)

FY 2021 Department Statement of Net Cost Line Items Used to Prepare FY 2021 Governmentwide 

Statement of Net Cost 

Financial Statement Line Amounts Amounts Reclassified Financial Statement Line

Total Gross Cost $ 279,666 $ 242,470 Non-Federal Gross Cost

 141 Benefit Program Costs

 36 Imputed Costs

 381 buy/Sell Cost

 36,547 borrowing and Other Interest Expense

 75 borrowing Losses

 16 Other Expenses (Without Reciprocals)

Total Gross Cost $ 279,666 $ 279,666 Department Total Gross Cost

Total Earned Revenue $ (39,961) $ (34,371) Non-Federal Earned Revenue

 (6) buy/Sell Revenue (Exchange)

 (5,572) borrowing and Other Interest Revenue (Exchange)

 (12) borrowing Gains

Total Earned Revenue (39,961) (39,961) Department Total Earned Revenue

Net Cost $239,705 $ 239,705 Net Cost
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 93

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

Reclassification of Statement of Changes in Net Position to Line Items Used for the

Governmentwide Statement of Operations and Changes in Net Position for the Period

Ending September 30, 2021

(Dollars in Millions)

FY 2021 Department Statement of Changes in Net Position Line Items Used to Prepare FY 2021 Governmentwide 

Statement of Operations and Changes in Net Position

Financial Statement Line Amounts Amounts Reclassified Financial Statement Line

unexpended Appropriations

beginning balance $ 99,314 $ 99,314 Net Position, beginning of Period

Appropriations Received 477,507 476,400 Appropriations Received as Adjusted (Rescissions and 

Other Adjustments)

Other Adjustments (Rescissions, etc.) (1,107)

Appropriations Transferred (409) (409) Non-Expenditure Transfers-out of unexpended 

Appropriations and Financing Sources

Appropriations used (273,507) (273,507) Appropriations used

Unexpended Appropriations, Ending Balance 301,798 301,798 

Cumulative Results of Operations

beginning balance (54,383) (54,383) Net Position, beginning of Period

Appropriations used 273,507 273,507 Appropriations Expended

Nonexchange Revenue 8 8 Collections transferred into a TAS Other Than the 

General Fund of the u.S. Government - Nonexchange

Donations and Forfeitures of Cash 

and Cash Equivalents 1 1 Other Taxes and Receipts

Imputed Financing from Costs Absorbed by Others 36 36 Imputed Financing Sources

Negative Subsidy Transfers, Downward Subsidy 

Re-estimates, and Other (8,168) (9,751) Non-Entity Collections Transferred to the General Fund 

of the u.S. Government

 1,732 

Accrual for Non-Entity Amounts to be Collected and 

Transferred to the General Fund of the 

u.S. Government

 5 Other Taxes and Receipts

 (154) Other budgetary Financing Sources

Net Cost (239,705) (239,705) Net Cost 

Cumulative Results of Operations, 

Ending Balance $ (28,704) $ (28,704)

Net Position $ 273,094 $ 273,094 Net Position, End of Period
94 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

Required Supplementary Information (unaudited)

U.S. Department of Education Combining Statement of Budgetary Resources 

For the Year Ended September 30, 2021

(Dollars in Millions)

(Unaudited)

Federal Student Aid Office of Elementary and 

Secondary Education

budgetary

Non-budgetary Credit 

Reform Financing 

Accounts

budgetary 

BUDGETARY RESOURCES

unobligated balance from Prior Year budget Authority (Net) (Note 12) $ 16,988 $ 20,473 $ 1,999 

Appropriations (Discretionary and Mandatory) 172,332 239 24,760 

borrowing Authority (Discretionary and Mandatory) (Note 12) - 128,739 - 

Spending Authority from Offsetting Collections (Discretionary and Mandatory) 142 42,050 - 

Total Budgetary Resources $ 189,462 $ 191,501 $ 26,759 

STATUS OF BUDGETARY RESOURCES 

New Obligations and upward Adjustments (Total) (Note 12) $ 171,476 $ 169,693 $ 24,910 

unobligated balance, End of Year:

Apportioned, unexpired Accounts 14,397 - 1,778 

unapportioned, unexpired Accounts 1,930 21,808 - 

Unexpired Unobligated Balance, End of Year $ 16,327 $ 21,808 $ 1,778 

Expired unobligated balance, End of Year 1,659 - 71 

Unobligated Balance, End of Year (Total) $ 17,986 $ 21,808 $ 1,849 

Total Status of Budgetary Resources $ 189,462 $ 191,501 $ 26,759 

OUTLAYS, NET

Outlays, Net (Discretionary and Mandatory) $ 170,470 $ 23,027 

Distributed Offsetting Receipts (-) (Note 12) (6,296) (1) 

Agency Outlays, Net (Discretionary and Mandatory) (Notes 12 & 13) $ 164,174 $ 23,026 

Disbursements, Net (Total) (Mandatory) $ (38,680) 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 95

REQuIRED SuPPLEMENTARY INFORMATION (uNAuDITED) | FINANCIAL SECTION

Office of Special Education 

and Rehabilitative Services

Education 

Stabilization Fund Other Combined

Total

budgetary budgetary budgetary

Non-budgetary 

Credit Reform 

Financing 

Accounts

budgetary

Non-budgetary 

Credit Reform 

Financing Accounts

$ 346 $ 633 $ 806 $ 177 $ 20,772 $ 20,650 $ 41,422 

21,022 247,839 10,567 - 476,520 239 476,759 

- - - 668 - 129,407 129,407 

- (409) 61 174 (206) 42,224 42,018 

$ 21,368 $ 248,063 $ 11,434 $ 1,019 $ 497,086 $ 192,520 $ 689,606 

$20,941 $229,884 $10,017 $575 $457,228 $170,268 $627,496 

220 18,179 1,241 - 35,815 - 35,815 

- - 1 444 1,931 22,252 24,183 

$ 220 $ 18,179 $ 1,242 $ 444 $ 37,746 $ 22,252 $ 59,998 

207 - 175 - 2,112 - 2,112 

$ 427 $ 18,179 $ 1,417 $ 444 $ 39,858 $ 22,252 $ 62,110 

$ 21,368 $ 248,063 $ 11,434 $ 1,019 $ 497,086 $ 192,520 $ 689,606 

$ 15,939 $ 48,614 $ 9,026 $ 267,076 $ 267,076 

- - (328) (6,625) (6,625)

$ 15,939 $ 48,614 $ 8,698 $ 260,451 $ 260,451 

$ (1,201) $ (39,881) $ (39,881)
96 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | REQuIRED SuPPLEMENTARY INFORMATION (uNAuDITED)

U.S. Department of Education 

Combining Statement of Budgetary Resources 

For the Year Ended September 30, 2020

(Dollars in Millions)

(Unaudited)

Federal Student Aid Office of Elementary and 

Secondary Education

budgetary

Non-budgetary Credit 

Reform Financing 

Accounts

budgetary 

BUDGETARY RESOURCES

unobligated balance from Prior Year budget Authority (Net) (Note 12) $ 14,938 $ 8,939 $ 2,103 

Appropriations (Discretionary and Mandatory) 163,672 349 24,379 

borrowing Authority (Discretionary and Mandatory) (Note 12) - 135,300 - 

Spending Authority from Offsetting Collections (Discretionary and Mandatory) 272 65,625 - 

Total Budgetary Resources $ 178,842 $ 210,213 $ 26,482 

STATUS OF BUDGETARY RESOURCES 

New Obligations and upward Adjustments (Total) (Note 12) $ 162,465 $ 187,667 $ 24,680 

unobligated balance, End of Year:

Apportioned, unexpired Accounts 13,386 - 1,736 

unapportioned, unexpired Accounts 1,819 22,546 - 

Unexpired Unobligated Balance, End of Year $ 15,205 $ 22,546 $ 1,736 

Expired unobligated balance, End of Year 1,172 - 66 

Unobligated Balance, End of Year (Total) $ 16,377 $ 22,546 $ 1,802 

Total Status of Budgetary Resources $ 178,842 $ 210,213 $ 26,482 

OUTLAYS, NET

Outlays, Net (Discretionary and Mandatory) $ 160,912 $22,656 

Distributed Offsetting Receipts (-) (Note 12) (13,606) - 

Agency Outlays, Net (Discretionary and Mandatory) (Notes 12 & 13) $ 147,306 $ 22,656 

Disbursements, Net (Total) (Mandatory) $ (42,956) 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 97

REQuIRED SuPPLEMENTARY INFORMATION (uNAuDITED) | FINANCIAL SECTION

Office of Special Education 

and Rehabilitative Services

Education 

Stabilization Fund Other Combined

Total

budgetary budgetary budgetary

Non-budgetary 

Credit Reform 

Financing 

Accounts

budgetary

Non-budgetary 

Credit Reform 

Financing Accounts

$ 274 $ - $ 441 $180 $ 17,756 $ 9,119 $ 26,875 

17,676 30,750 8,203 1 244,680 350 245,030 

- - - 289 - 135,589 135,589 

- (154) 113 137 191 65,762 65,953 

$ 17,950 $30,596 $ 8,757 $ 607 $ 262,627 $ 210,820 $ 473,447 

$ 17,571 $ 30,088 $ 7,290 $ 4,310 $ 242,724 $ 188,098 $ 430 

138 508 678 176 16,446 - 16,446 

- - 3 176 1,822 22,722 24,544 

$ 138 $ 508 $ 681 $ 176 $ 18,268 $ 22,722 $ 40,990 

241 - 156 - 1,635 1,635 

$ 379 $ 508 $837 $ 176 $ 19,903 $ 22,722 $ 42,625 

$ 17,950 $ 30,596 $ 8,757 $ 607 $ 262,627 $ 210,820 $ 473,447 

$ 16,268 $ 11,160 $ 7,029 $ 218,025 $ 218,025 

- - (4) (13,610) 13,610 

$ 16,268 $ 11,160 $ 7,025 $ 204,415 $ 204,415 

$ 10 $ (42,946) $ 42,946 
98 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

Report of the Independent Auditors

UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF INSPECTOR GENERAL

 THE INSPECTOR GENERAL

400 MARYLAND AVENUE, S.W., WASHINGTON, DC 20202-1510

Promoting the efficiency, effectiveness, and integrity of the Department’s programs and operations.

November 19, 2021 

The Honorable Miguel Cardona

Secretary of Education

Washington, D.C. 20202

Dear Secretary Cardona: 

The enclosed Independent Auditors’ Report (report) presents the results of the audit of the U.S. 

Department of Education’s (Department) financial statements for fiscal years 2021 and 2020 to 

comply with the Chief Financial Officers Act of 1990, as amended. The report should be read in 

conjunction with the Department’s financial statements and notes to fully understand the 

context of the information contained therein.

We contracted with the independent certified public accounting firm KPMG LLP (KPMG) to 

audit the financial statements of the Department as of September 30, 2021, and 2020, and for 

the years then ended. The contract requires that the audit be performed in accordance with 

U.S. generally accepted government auditing standards and Office of Management and Budget 

bulletin, Audit Requirements for Federal Financial Statements.

Results of the Independent Audit

KPMG found:

• The fiscal years 2021 and 2020 financial statements are presented fairly, in all material 

respects, in accordance with accounting principles generally accepted in the United 

States of America. 

• One material weakness in internal control over financial reporting:

o Controls over the Reliability of Underlying Data Used in Credit Reform Reestimates Need Improvement. 

• Three significant deficiencies in internal control over financial reporting:

o Information Technology Controls Need Improvement, 

o Monitoring Controls over Service Organizations Need Improvement, and

o Entity Level Controls Need Improvement. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 99

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Page 2 – The Honorable Miguel Cardona

In connection with the contract, we reviewed KPMG’s report and related documentation and 

inquired of its representatives. Our review, as differentiated from an audit of the financial 

statements in accordance with U.S. generally accepted government auditing standards, was not 

intended to enable us to express, and we do not express, opinions on the Department’s 

financial statements or internal control over financial reporting, or conclusions on whether the 

Department’s financial management systems complied substantially with the three FFMIA 

requirements, or on compliance with laws and other matters. KPMG is responsible for the 

auditor’s report dated November 19, 2021, and the conclusions expressed therein. However, 

our review disclosed no instances where KPMG did not comply, in all material respects, with 

U.S. generally accepted government auditing standards. 

We appreciate the cooperation given KPMG and my office during the audit. If you have any 

questions or would like to discuss the report, please contact me at (202) 245-6900. 

Sincerely, 

Sandra D. Bruce

Deputy Inspector General Delegated the Duties

 of Inspector General

Enclosure
100 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

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Independent Auditors’ Report

Deputy Inspector General Delegated the Duties of Inspector General

United States Department of Education

Secretary

United States Department of Education:

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of the United States Department of 

Education (Department), which comprise the consolidated balance sheets as of September 30, 2021 and 2020,

and the related consolidated statements of net cost, and changes in net position, and combined statements of 

budgetary resources for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements 

in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and 

maintenance of internal control relevant to the preparation and fair presentation of consolidated financial 

statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We 

conducted our audits in accordance with auditing standards generally accepted in the United States of America, 

in accordance with the standards applicable to financial audits contained in Government Auditing Standards

issued by the Comptroller General of the United States, and in accordance with Office of Management and 

Budget (OMB) Bulletin No. 21-04, Audit Requirements for Federal Financial Statements. Those standards and 

OMB Bulletin No. 21-04 require that we plan and perform the audit to obtain reasonable assurance about 

whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the 

consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the 

assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud 

or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of the consolidated financial statements in order to design audit procedures 

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness 

of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the 

appropriateness of accounting policies used and the reasonableness of significant accounting estimates made 

by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 

audit opinion.

Opinion 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, 

the financial position of the United States Department of Education as of September 30, 2021 and 2020, and its 

net costs, changes in net position, and budgetary resources for the years then ended in accordance with 

U.S. generally accepted accounting principles.

KPMG LLP

Suite 12000

1801 K Street, NW

Washington, DC 20006

KPMG LLP, a Delaware limited liability partnership and a member firm of 

the KPMG global organization of independent member firms affiliated with 

KPMG International Limited, a private English company limited by guarantee. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 101

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2

Other Matters

Interactive Data

Management has elected to reference to information on websites or other forms of interactive data outside the 

FY2021 Agency Financial Report to provide additional information for the users of its consolidated financial 

statements. Such information is not a required part of the basic consolidated financial statements or 

supplementary information required by the Federal Accounting Standards Advisory Board. The information on 

these websites or the other interactive data has not been subjected to any of our auditing procedures, and 

accordingly we do not express an opinion or provide any assurance on it.

Required Supplementary Information

U.S. generally accepted accounting principles require that the information in the Management’s Discussion and 

Analysis and Required Supplementary Information sections be presented to supplement the basic consolidated

financial statements. Such information, although not a part of the basic consolidated financial statements, is 

required by the Federal Accounting Standards Advisory Board who considers it to be an essential part of 

financial reporting for placing the basic consolidated financial statements in an appropriate operational, 

economic, or historical context. We have applied certain limited procedures to the required supplementary 

information in accordance with auditing standards generally accepted in the United States of America, which 

consisted of inquiries of management about the methods of preparing the information and comparing the 

information for consistency with management’s responses to our inquiries, the basic consolidated financial 

statements, and other knowledge we obtained during our audits of the basic consolidated financial statements. 

We do not express an opinion or provide any assurance on the information because the limited procedures do 

not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial statements 

as a whole. The information on pages i through iii, Message from the Secretary, the information on page vii, 

Message from the Chief Financial Officer, About the Financial Section, Other Information section, Appendices, 

and Acknowledgments is presented for purposes of additional analysis and is not a required part of the basic 

consolidated financial statements. Such information has not been subjected to the auditing procedures applied 

in the audits of the basic consolidated financial statements, and accordingly, we do not express an opinion or 

provide any assurance on it.

Other Reporting Required by Government Auditing Standards

Internal Control over Financial Reporting

In planning and performing our audit of the consolidated financial statements as of and for the year ended 

September 30, 2021, we considered the Department’s internal control over financial reporting (internal control) 

as a basis for designing procedures that are appropriate in the circumstances for the purpose of expressing our 

opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the 

effectiveness of the Department’s internal control. Accordingly, we do not express an opinion on the 

effectiveness of the Department’s internal control. We did not test all internal controls relevant to operating 

objectives as broadly defined by the Federal Managers’ Financial Integrity Act of 1982.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was 

not designed to identify all deficiencies in internal control that might be material weaknesses or significant 

deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been 

identified. However, as described in the accompanying exhibits, we did identify certain deficiencies in internal 

control that we consider to be a material weakness and significant deficiencies.

A deficiency in internal control exists when the design or operation of a control does not allow management or 

employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, 

misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in 
102 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

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3

internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial 

statements will not be prevented, or detected and corrected, on a timely basis. We consider the deficiency 

described in the accompanying Exhibit A, Controls over the Reliability of Underlying Data Used in Credit 

Reform Re-estimates Need Improvement, to be a material weakness.

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe 

than a material weakness, yet important enough to merit attention by those charged with governance. We 

consider the deficiencies described in Exhibit B, Information Technology Controls Need Improvement,

Monitoring Controls over Service Organizations Need Improvement, and Entity Level Controls Need 

Improvement, to be significant deficiencies.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Department’s consolidated financial statements 

as of and for the year ended September 30, 2021 are free from material misstatement, we performed tests of 

its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance 

with which could have a direct and material effect on the consolidated financial statements. However, providing 

an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not 

express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that 

are required to be reported under Government Auditing Standards or OMB Bulletin No. 21-04.

We also performed tests of its compliance with certain provisions referred to in Section 803(a) of the Federal 

Financial Management Improvement Act of 1996 (FFMIA). Providing an opinion on compliance with FFMIA was 

not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests 

disclosed no instances in which the Department’s financial management systems did not substantially comply 

with the (1) Federal financial management systems requirements, (2) applicable Federal accounting standards, 

and (3) the United States Government Standard General Ledger at the transaction level.

Department’s Responses to Findings

The Department’s responses to the findings identified in our audit are described in Exhibit C. The Department’s

responses were not subjected to the auditing procedures applied in the audit of the consolidated financial 

statements and, accordingly, we express no opinion on the responses.

Purpose of the Other Reporting Required by Government Auditing Standards

The purpose of the communication described in the Other Reporting Required by Government Auditing 

Standards section is solely to describe the scope of our testing of internal control and compliance and the 

results of that testing, and not to provide an opinion on the effectiveness of the Department’s internal control or 

compliance. Accordingly, this communication is not suitable for any other purpose.

Washington, D.C.

November 19, 2021
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A-1 

Exhibit A 

Material Weakness

Controls over the Reliability of Underlying Data Used in Credit Reform Re-estimates Need Improvement 

Under the Federal Credit Reform Act of 1990 (FCRA), the United States Department of Education (Department) 

is required to perform periodic interest rate and technical re-estimates of the subsidy costs of its direct loan and 

guaranty programs. These re-estimates are calculated using an internally developed cash flow model. The 

cash flow model utilizes assumptions based on internally sourced data elements from Information Technology 

(IT) systems. The future cash flow outputs generated from the Department’s cash flow model, the Student Loan 

Model (SLM), are then input into the format required by the Office of Management and Budget (OMB) Credit 

Subsidy Calculator (CSC), a required present value discount tool for agencies with credit reform programs. 

These procedures are necessary to generate subsidy re-estimates in accordance with the FCRA, as required 

by U.S. generally accepted accounting principles.

Condition: 

The Department and Federal Student Aid (FSA) did not design and implement effective controls to ensure that 

the data used to develop the re-estimate is reliable, considering the elevated risk associated with such data 

caused by the IT control deficiencies discussed in Exhibit B of this report. Specifically, the Department and FSA 

management did not perform sufficient procedures to ensure that the data elements transmitted to and 

extracted from the various systems and used in the cash flow model are complete and accurate. 

Cause/Effect: 

The Department’s and FSA’s risk assessment process did not identify completeness and accuracy of the 

underlying data resulting from the IT system control deficiencies as a risk that required additional compensating 

controls. Inadequate controls over the completeness and accuracy of the underlying data used to develop the 

re-estimate increases the risk that the financial statements could be materially misstated. 

Criteria: 

The following criteria were considered in the evaluation of the material weakness presented in this exhibit: 

– The Standards for Internal Control in the Federal Government issued by the Comptroller General of the 

United States (the Green Book), Principle No. 10, Design Control Activities; Principle No. 11, Design 

Activities for the Information System; Principle No. 13, Use Quality Information. 

– FASAB Technical Release 6, Preparing Estimates for Direct Loan and Loan Guarantee Subsidies under 

the Federal Credit Reform Act – Amendments to Technical Release No. 3 Preparing and Auditing Direct 

Loan and Loan Guarantee Subsidies under the Federal Credit Reforms Act, Paragraphs 20 and 40. 

Recommendations: 

We recommend that the Department and FSA: 

1. Strengthen the risk assessment process by considering the impact of IT control deficiencies on internal 

controls over the reliability of information in the Department’s IT systems. Such considerations should be 

documented. 

2. Design and implement additional review controls that operate at a sufficient level of precision over the 

completeness and accuracy of the underlying data used to develop the re-estimate. 

3. Ensure proper documentation of controls identified to evidence the review, the conclusion and actions to be 

taken to address outstanding differences and/or matters to be researched. 
104 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

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B-1 

Exhibit B 

Significant Deficiencies 

A. Information Technology Controls Need Improvement

The following control deficiencies in the areas of IT logical access, security management, segregation of IT 

duties, and application change management are related to both the Department and FSA systems.

Conditions: 

In FY 2020, we reported a significant deficiency related to FSA’s IT controls due to persistent unmitigated IT 

control deficiencies. During FY 2021, the FSA management demonstrated progress implementing corrective 

actions to remediate some prior-year deficiencies such as background investigations. However, management 

has not fully remediated prior-year deficiencies related to logical access administration, separated/transferred 

user access removal, user access reviews and recertification, and configuration management. We noted new 

and existing IT control deficiencies related to security management, access controls, segregation of IT duties, 

and application change management for three of FSA’s financial and mixed systems and two access control 

support systems. In addition, we noted deficiencies related to Department-level logical access for its core 

financial management system. Specifically, we noted the following: 

Department: 

1. Weakness in IT logical access controls: New and separated contractors were not consistently and 

accurately tracked resulting in the inconsistent reporting of start and termination dates and system access 

that was not always removed upon separation from the Department. 

FSA:

1. Weakness in IT security management controls: Plan of Action and Milestone (POA&M) closure 

documentation for FSA systems did not always address the root cause of the deficiencies, thereby not 

preventing future reoccurrences. 

2. Weakness in IT logical access controls: The account management and access control processes were not 

consistently followed for three FSA systems and two access control support systems. We noted evidence 

supporting new, modified, or separated users could not be provided or was provided and missing required 

information and/or approvals. Additionally, we noted evidence supporting complete and accurate access 

reviews and recertifications was not provided or retained. Finally, we noted the Department’s requirement 

for two-factor authentication was not met for all internal system users. 

3. Weaknesses in IT controls related to the segregation of IT duties: For one FSA system, users with 

developer access had access to the system’s production environment or update access to the production 

and development environments. 

4. Weakness in IT application change management controls: The application change management process 

was not consistently followed for one FSA system. FSA was unable to provide a complete and accurate 

population of application changes. We also noted the documentation for a selection of changes contained 

inaccuracies in recorded testing and migration dates. 

Cause/Effect:

There was a lack of effective monitoring controls by the Department and FSA to ensure:

1. Systems and support processes consistently adhered to documented agency-wide policies and procedures 

for the financially and mixed systems hosted and managed by FSA and the Department. 
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B-2 

Additionally, there was a lack of effective IT controls implemented by FSA to ensure: 

1. Corrective actions to remediate prior-year conditions and associated causes are fully implemented, as well 

as verifying and validating that these corrective actions were effectively addressing the weakness with 

adequate documented supporting evidence. 

2. The established logical access control process is followed and requests for new, modified, or separated 

users were retained, documented completely and accurately, and approved. 

3. Segregation of duties and least privilege principles are followed and enforced. 

4. The established change process is followed and application change tickets accurately document the testing 

and migration dates. 

Ineffective IT controls increases the risk of unauthorized use, disclosure, disruption, modification, or destruction 

of information and information systems that could impact the integrity and reliability of information processed in 

the associated applications which may lead to misstatements of the financial statements. 

Criteria:

The following criteria were considered in the evaluation of the significant deficiency presented in this exhibit: 

– The Departmental Directive OCIO 3-112, Cybersecurity Policy. 

– Department Baseline Cybersecurity Standard, OCIO-STND-01, dated April 1, 2020, Section 3.13. 

Personnel Access.

– The Standards for Internal Control in the Federal Government issued by the Comptroller General of the 

United States (the Green Book), Section OV3.08 Effect of Deficiencies on the Internal Control System, 

Principle 3 Establish Structure, Responsibility, and Authority, Documentation of the Internal Control 

System, Principle No. 3.08 Assignment of Responsibility and Delegation of Authority, Principle No. 8.07 

Response to Fraud Risks, Principle No. 10.3 Design of Appropriate Types of Control Activities, Principle 

No.10.12 Segregation of Duties, Principle No. 11, Design Activities for the Information System, and 

Principle No. 13, Use Quality Information, Principle No.17, Evaluate Issues and Remediate Deficiencies. 

– National Institute of Standards and Technology Special Publication 800-53, Security and Privacy Controls 

for Federal Information Systems and Organizations, Revision 4, dated April 2013, specifically security 

control requirements PM-4 Plan of Action and Milestone, AC-2 Account Management, AC-5 Separation of 

Duties, AC-6 Least Privilege, CM-3 Configuration Change Control, and CM-5 Access Restrictions for 

Change. 

Recommendations: 

We recommend that the Department: 

1. Evaluate, develop, and implement a formal process to track and report all new and separated contractors. 

2. Ensure separated contractors are off-boarded and system personnel are notified in a timely manner to 

disable or remove access to IT resources. 

3. Provide training and oversight to Education personnel with on/off-boarding responsibilities to help ensure 

new/separated contractors are properly tracked. 
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B-3 

We recommend that FSA: 

4. Implement a process to evaluate the significance of a deficiency by considering the magnitude of impact, 

likelihood of occurrence, and nature of the deficiency and tailor the corrective actions to remediate the risk 

and address the root cause. Further, update guidance to ensure that quality reviews over the POA&M 

closure documentation are conducted to confirm the noted deficiencies are fully addressed to help prevent 

future reoccurrences. 

5. Formally develop and implement a quality control review process to ensure that logical access control 

processes are followed completely and accurately to validate logical access requests, reviews, and 

recertifications. 

6. Ensure segregation of duties and least privilege principles are adhered to when granting user access to 

prevent users with the ability to develop and/or change application code from having update access to the 

environment where the final tested and approved changes are staged prior to migration to the financial and 

mixed systems’ production environment; and prevent users with access to develop code from having 

update access to the production environment. 

7. Ensure a complete and accurate population of application changes can be provided. Formally develop and 

implement a quality control review process to ensure that the application change control process is 

followed and consistently and accurately documented. 
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B-4 

B. Monitoring Controls over Service Organizations Need Improvement 

The Department and FSA rely on a certain IT system to store data for student loan programs. The Cost 

Estimation and Analysis Division (CEAD) within the Department also uses the data in the system for the 

development and update of the assumptions used in the re-estimation of subsidy allowance, a critical 

component of management’s financial reporting process. The IT system is owned and controlled by FSA, who 

is responsible for the application-level internal controls, and is hosted by a service organization, who is 

responsible for internal controls at the data center. 

Condition:

The Department and FSA did not have effective monitoring controls in place to ensure that the scope of the 

System and Organization Controls (SOC) 1, Type 2 report for the service organization and/or management’s

internal control processes sufficiently cover the relevant key controls to support the reliability and integrity of the 

data stored in the IT system. For example, we noted that there were no sufficient relevant controls identified 

and tested for data transmission/batch job processing at the host level for one FSA system to ensure the 

completeness and accuracy of the data used in the re-estimate. 

Cause/Effect: 

FSA did not perform a comprehensive assessment of key relevant controls to appropriately assess the risks in 

the financial reporting process. 

Ineffective monitoring controls over the service organization increase the risk of disruption, modification, or 

destruction of information that could impact the integrity and reliability of information processed in the 

associated application which may lead to misstatements of the financial statements. 

Criteria: 

The following criteria were considered in the evaluation of the significant deficiency presented in this exhibit:

– The Standards for Internal Control in the Federal Government issued by the Comptroller General of the 

United States (the Green Book), Section OV4.01 Additional Consideration, Service Organizations, Principle 

16.08 - Perform Monitoring Activities.

– National Institute of Standards and Technology Special Publication 800-53, Security and Privacy Controls 

for Federal Information Systems and Organizations, Revision 4, dated April 2013, specifically security 

control requirements SA-9 External Information System Services.

Recommendations: 

We recommend that FSA:

1. Enhance their risk assessment to identify risks impacting financial reporting processes. 

2. Identify the controls at the service organization for the systems that are responsive to risks and that are 

relevant to FSA’s financial statements. 

3. Regularly monitor and meet with the service organization to communicate and ensure that controls that are 

relevant to FSA for financial reporting are adequately tested for design, implementation, and operating 

effectiveness. 

4. Assess the need to implement compensating controls for financial reporting in the event relevant controls at 

the service organization are not within the scope of the SOC 1 report. 
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B-5 

C. Entity Level Controls Need Improvement 

The Department and FSA are continually seeking ways to improve accountability in achieving the entity’s 

mission. A key factor in improving accountability in achieving an entity’s mission is to implement an effective 

internal control system. The control environment sets the tone of an organization by influencing the control 

consciousness of its personnel. It is also the foundation for all components of internal control, providing 

discipline and structure. The Department and FSA need to address weaknesses in its entity-wide control 

environment as we have observed two entity-wide control environment conditions through our procedures that 

have a pervasive influence on the effectiveness of controls. These common themes, which contributed to the 

deficiencies noted above, are related to the entity’s risk assessment and monitoring activities.

Conditions:

1. Risk Assessment- The Department and FSA’s entity level controls were not designed and implemented 

appropriately in order to define objectives related to the financial reporting process to enable the 

identification of risks, define risk tolerances and identified processes and controls responsive to those risks. 

2. Monitoring Activities- The Department and FSA’s entity level controls were not designed and implemented 

appropriately in order to remediate identified internal control deficiencies in a timely manner.

Cause/Effect

1. Risk Assessment considerations address the risks facing the entity as it seeks to achieve its objectives. 

This assessment provides the basis for developing appropriate risk responses. Specifically, inadequate risk 

assessment throughout the Department and FSA, prevented the proper identification and analysis of risks 

related to the financial reporting process at the Department and FSA, and from designing appropriate risk 

responses. For example, the Department did not identify the risk objectives that should have been either 

addressed by the SOC1, Type 2 report or through compensating controls at the Department and FSA, to 

support the reliability and integrity of the data used in the financial reporting process. 

2. Monitoring Activities considerations address management’s processes to establish and implement 

operations that assess the quality of performance over time and promptly resolve the findings of audits and 

other reviews. Specifically, insufficient monitoring has prevented the Department and FSA from ensuring 

that corrective action plans are implemented, and control deficiencies are remediated timely. 

Criteria

The following criteria were considered in the evaluation of the significant deficiency presented in this Exhibit: 

– GAO Standards for Internal Control in the Federal Government (Green Book) Principle 6, Management 

should define objectives clearly to enable the identification of risks and define risk tolerances.

– GAO Standards for Internal Control in the Federal Government (Green Book) Principle 17, Management 

should remediate identified internal control deficiencies on a timely basis

Recommendations

We recommend that management implement the following to improve the effectiveness of entity-level controls: 

1. Improve the risk assessment process at the financial statement assertion level and at the process level to 

ensure the department is appropriately defining objectives to enable the identification of risks and define 

risk tolerances. 

2. Implement key monitoring controls to ensure that corrective action plans are implemented to timely 

remediate control deficiencies identified. In addition, increase oversight, review, and accountability over the 

process among various offices and directorates within the Department and FSA. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 109

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UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF FINANCE AND OPERATIONS

November 16, 2021 

MEMORANDUM

TO:

Bryon S. Gordon 

Assistant Inspector General for Audit 

FROM: Denise L. Carter

Delegated the authority to perform the functions and duties 

of the position of Chief Financial Officer 

Jason Gray

Chief Information Officer

SUBJECT: DRAFT INDEPENDENT AUDITORS’ REPORT

Fiscal Years 2021 and 2020 Financial Statements

U.S. Department of Education 

ED-OIG/A21FS0021 

Please convey the Department’s sincere thanks to everyone on your staff who worked diligently 

on this financial statement audit. The Department reviewed the draft Fiscal Year 2021 Financial 

Statement Audit Report. We concur and agree with the Independent Auditors’ Report, including 

the Opinion on the Financial Statements, Internal Control over Financial Reporting, and 

Compliance and Other Matters. 

We will share the final audit results with responsible senior officials, other interested program 

managers, and staff. At that time, we will also request the preparation of corrective action plans

to be used in the resolution process. 

Again, please convey our appreciation to everyone on your staff whose efforts permitted the 

Department to complete the audit. 

Please contact Gary Wood, Deputy Assistant Secretary, Office of Financial Management, Office 

of Finance and Operations, and Acting Deputy Chief Financial Officer, at 202-453-7631 with 

any questions or comments. 

400 MARYLAND AVE., S.W., WASHINGTON, DC 20202 

www.ed.gov

The Department of Education's mission is to promote student achievement and preparation for global competitiveness by 

fostering educational excellence and ensuring equal access.

Denise Carter Digitally signed by Denise Carter 

Date: 2021.11.16 15:38:29 -05'00'

JASON GRAY Digitally signed by JASON GRAY 

Date: 2021.11.16 15:40:36 -05'00'

Management's Response

Exhibit C
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OTHER

INFORMATION
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FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 113

About the Other Information Section

The Other Information section includes:

O F F I C E O F I N S P EC TO R G E N E R A L’ S 

M A N AG E M E N T A N D P E R FO R M A N C E 

CHALLENGES

The Management and Performance Challenges Report 

provides a summary of what the Office of Inspector 

General (OIG) believes are the Department’s biggest 

challenges for FY 2022. The OIG identified the following 

five challenges: (1) Implementing the Coronavirus 

Aid, Relief, and Economic Security Act (CARES Act), 

(2) Oversight and Monitoring, (3) Data Quality and 

Reporting, (4) Improper Payments, and (5) Information 

Technology Security. The full report is available at the 

OIG website.

S U M M A RY O F F I N A N C I A L S TAT E M E N T 

AUDIT AND MANAGEMENT ASSURANCES

The Summary of Financial Statement Audit and 

Management Assurances provides information about 

the material weaknesses reported by the Department or 

through the audit process.

PAY M E N T I N T E G R I T Y I N F O R M AT I O N 

ACT REPORTING

This section summarizes the U.S. Department of 

Education’s (the Department) efforts to maintain payment 

integrity and to develop effective controls designed to 

prevent, detect, and recover improper payments. It also 

includes information regarding the Department’s high-risk 

programs.

C I V I L M O N E TA RY P E N A LT Y A D J U S T M E N T 

FOR INFLATION

This section reports on the Department’s annual inflation 

adjustments to civil monetary penalties as required 

under the Federal Civil Penalties Inflation Adjustment Act 

Improvements Act of 2015.

THE G R A N T S OV E R S I G H T A N D N E W 

EFFICIENCY ACT O F 2 016 (G O N E 

AC T ) A N D E D U C AT I O N ’ S G R A N T 

CLOSEOUT PROCESS

This section provides a high-level summary of the 

Department’s expired, but not closed, federal grants and 

cooperative agreements.
114 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION | MEMORANDUM FROM THE OFFICE OF INSPECTOR GENERAL

UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF INSPECTOR GENERAL

 THE INSPECTOR GENERAL

400 MARYLAND AVENUE, S.W., WASHINGTON, DC 20202-1510

Promoting the efficiency, effectiveness, and integrity of the Department’s programs and operations.

TO: The Honorable Miguel Cardona

Secretary of Education

FROM: Bryon Gordon

Assistant Inspector General for Audit

SUBJECT: Management Challenges for Fiscal Year 2022 

In compliance with the Reports Consolidation Act of 2000, the U.S. Department of Education 

(Department) Office of Inspector General (OIG) reports annually on the most serious 

management and performance challenges faced by the Department. In addition to the

challenges themselves, these reports include a brief assessment of the Department’s progress 

in addressing the challenges and identity further actions that, if properly implemented, could 

enhance the effectiveness of the Department’s programs and operations. 

The Government Performance and Results Modernization Act of 2010 identifies major 

management challenges as programs or management functions that are vulnerable to waste, 

fraud, abuse and mismanagement and where a failure to perform well could seriously affect the 

ability of the Department to achieve its mission or goals. To identify management challenges, 

the OIG routinely examines past audit, inspection, and investigative work; reviews corrective 

actions that have not been completed; assesses ongoing audit, inspection, and investigative 

work to identify significant vulnerabilities; and analyzes new programs and activities that could 

post significant challenges because of their breadth and complexity. Our assessment also 

considers the accomplishments reported by the Department as of September 30, 2021. 

Our FY 2022 report identifies five management challenges facing the Department as it 

continues its efforts to promote student achievement and preparation for global 

competitiveness by fostering educational excellence and ensuring equal access. We specifically 

retained all five management challenges from our FY 2021 report. Although the Department 

made progress in addressing these challenges, our work continues to identify vulnerabilities 

within each of these areas. Additional challenges may exist in areas that we have not recently 

reviewed. 

We provided our draft report to Department officials and considered their comments in 

developing the final report. This report will be posted to our website at 

http://www2.ed.gov/about/offices/list/oig/managementchallenges.html. We look forward to 

working with the Department to address the FY 2022 management challenges in the coming 

year. If you have any questions or would like to discuss these issues, please contact me at (202) 

245-6051. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 115

Office of Inspector General’s (OIG) 

Management and Performance Challenges 

for Fiscal Year 2021

MANAGEMENT CHALLENGE 1—

IMPLEMENTING PANDEMIC RELIEF LAWS

The U.S. Department of Education (Department) was 

provided with more than $280 billion under three major 

pandemic relief laws to assist States, schools, school districts, 

and institutions of higher education (IHEs) in meeting 

their needs and the needs of students impacted by the 

pandemic. This included the Coronavirus Aid, Relief, 

and Economic Security (CARES) Act, enacted in March 

2020; the Coronavirus Response and Relief Supplemental 

Appropriations Act, 2021, enacted in December 2020; 

and the American Rescue Plan (ARP), enacted in March 

2021. Collectively, these laws established and funded 

new emergency relief programs, allowed the Department 

to provide State educational agencies (SEA) and local 

educational agencies (LEA) with waivers of certain statutory 

or regulatory requirements, and included provisions 

intended to provide borrowers with emergency relief. 

Why This Is a Challenge 

Implementation of the pandemic relief laws poses challenges 

for the Department as it must effectively oversee and monitor 

new grant programs and additional Federal education funds, 

implement additional student financial assistance program 

requirements, and ensure that quality data are reported. 

While these laws provide more than $161 million to the 

Department for student aid administration and $38 million 

for program administration, the Department must design 

and implement related processes timely and effectively to help 

ensure the overall success of its pandemic relief activities. In 

addition to the programs funded by the pandemic relief laws, 

the Department must oversee more than 100 other grant and 

loan programs, including a Federal student loan portfolio of 

about $1.5 trillion.

New Grant Programs and Additional Federal 

Education Funds 

As shown in Table 4, the pandemic relief laws included 

funding for State and local agencies, higher education, 

nonpublic schools, and other education-related entities. 

Table 4 

Education Stabilization Fund Summary

Program Funding Overview

Elementary and Secondary School 

Emergency Relief Fund (ESSER)

$190 billion ESSER funds are awarded to SEAs to provide formula-based subgrants to LEAs. ESSER 

funds can be used to support a wide range of activities, including purchasing and using 

technology for online learning, coordinating efforts with public health departments, 

addressing the needs of underrepresented student subgroups, planning for both school 

closures and reopenings, purchasing cleaning supplies, providing mental health services, 

and implementing summer learning and supplemental after-school programs.

Higher Education Emergency Relief 

Fund (HEERF)

$76.2 

billion

HEERF funds are awarded to IHEs. HEERF funds can be used to assist students with 

expenses related to the disruption of campus operations due to the pandemic, such as 

tuition, food, housing, healthcare, childcare, technology, and course materials; and to 

help IHEs, including Historically Black Colleges and Universities and Minority Serving 

Institutions, cover costs associated with significant changes to the delivery of instruction due 

to the pandemic, reimburse themselves for lost revenue resulting from the pandemic, and 

defray other expenses, such as those for faculty and staff trainings, payroll, campus safety 

measures and protocols, and student support activities.

Emergency Assistance to Nonpublic 

Schools (EANS)

$5.5 billion Awarded to Governor’s offices. EANS funds can be used to provide services or assistance 

to nonpublic schools.

Governor’s Emergency Education Relief 

Fund (GEER)

$4.3 billion GEER funds are awarded to Governors’ offices to provide to LEAs, IHEs, or other 

education-related entities that each Governor determines to be most impacted by the 

pandemic or deems essential. GEER funds can be used to support these entities’ ongoing 

operations and efforts to provide educational services to students.
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The pandemic relief laws also provided about $2.8 

billion in funds for the Outlying Areas, Tribal education 

agencies and programs operated or funded by the Bureau 

of Indian Education, and homeless children and youth. 

The ARP provided an additional $3 billion to States 

to support infants, toddlers, children, and youth with 

disabilities served under the Individuals with Disabilities 

Education Act. 

Each of these programs must be effectively implemented 

and monitored by the Department to ensure that the 

legislation is followed, and that States, elementary and 

secondary schools, and postsecondary institutions and 

students receive support in response to the pandemic. 

Effective oversight and monitoring of pandemic relief 

funds are critical to ensure that they are used for the 

purposes intended. Because these programs have different 

purposes, allowable uses of funds, and grant recipients, it 

is vital that the Department provides effective guidance, 

training, technical assistance, and outreach. These 

additional responsibilities pose a significant challenge 

to the Department given the large amount of funding 

involved, the number of entities receiving funds, and the 

need to administer its existing programs. Additionally, 

the Department must ensure that the primary recipients, 

such as Governors’ offices and SEAs, effectively fulfill their 

critical role in overseeing and monitoring subrecipients, 

such as LEAs.

Student Financial Assistance Program 

Requirements

The CARES Act included student financial assistance 

provisions intended to provide emergency relief to 

borrowers and to allow institutions to meet student 

needs more easily. These provisions included borrower 

and teacher assistance provisions, waivers of student 

financial assistance refunds and loan cancellations, and 

adjustments to lifetime Federal Pell Grant (Pell) and 

subsidized William D. Ford Federal Direct Loan (Direct 

Loan) usage. The Department had to provide guidance 

to and rely on postsecondary institutions, contracted 

servicers, collection agencies, guaranty agencies, and 

accrediting agencies to effectively implement these and 

other provisions. The Department may be challenged 

to provide adequate oversight of existing student aid 

program participants while it implements and oversees the 

student aid provisions in the CARES Act. Additionally, 

the Department faces the challenge of ensuring that 

postsecondary institutions continue to meet financial 

responsibility requirements, as the pandemic may 

negatively impact the enrollment and financial health of 

many institutions.

Data Quality

The pandemic relief laws included several reporting 

provisions that were intended to provide transparency 

regarding the use of funds to alleviate the impact of the 

Coronavirus Disease 2019 (COVID-19). The Department 

also established additional reporting requirements for 

programs authorized under these laws. Grantees must 

report monthly on subcontracts and subgrants exceeding a 

certain threshold and submit annual performance reports. 

Administering the programs and operations funded by 

the pandemic relief laws requires the Department to 

collect, analyze, and report on data for many purposes, 

such as evaluating programmatic performance, assessing 

fiscal compliance, and informing management decisions. 

For this reason, the Department, its grant recipients and 

subrecipients, and other program participants must have 

effective systems, processes, and procedures in place to 

ensure that the reported data are accurate and complete. 

The Office of Inspector General’s (OIG) recent audit work 

within this area is shown in Table 5.
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Table 5

OIG’s Recent Reports Relating to Pandemic Relief Laws

Activities Reviewed Review Results

HEERF We have issued three reports relating to HEERF funds.

In the first two audits from a series of work on postsecondary schools’ use of HEERF funds, we found that two schools 

generally used the Student Aid portion of their HEERF funds for allowable and intended purposes but did not always use 

the Institutional portion of their funds in accordance with Federal requirements. We also found that both schools did not 

minimize the time between drawing down and disbursing HEERF funds nor deposit excess funds in an interest-bearing 

account, contrary to Federal regulations.

We issued a flash report on HEERF-related risks that shared observations on closed schools that received or had access 

to HEERF funds. We found that 17 schools that had closed on or before December 31, 2020, applied for and were 

awarded more than $4.9 million in HEERF funds. We also noted that eight of those schools had drawn about $1.26 million 

from these grants after closure dates listed in a Department system.

Student Financial 

Assistance Program 

Requirements

We found that Federal Student Aid (FSA) took quick action to implement processes that generally achieved positive results 

in suspending and refunding most involuntary collections on defaulted Department-held loans. We specifically determined 

that that FSA suspended administrative wage garnishments and the Treasury offsets for over 96 percent of the borrowers 

that FSA collected payments for within 90 days of the start of the suspension period. We also found that FSA refunded 

99 percent of administrative wage garnishments and Treasury offsets that were collected from March 13, 2020, through 

September 30, 2020. Although FSA refunded most administrative wage garnishments and Treasury offsets collected for 

the period of our review, it did not reprocess all refunds that were subsequently returned to Treasury and did not refund 

all wage garnishments and Treasury offsets collected. In addition, FSA did not develop procedures to obtain and track the 

U.S. Department of Justice’s progress on suspending and refunding involuntarily collections on defaulted Departmentheld loans.

Data Quality and 

Reporting

We issued a flash report on Education Stabilization Fund reporting in the Federal Audit Clearinghouse regarding 

the inconsistent reporting of subprogram expenditures by grantees and subgrantees. This included instances where 

subprograms were not identified and variations in the information that was used to identify subprograms. 

In our work relating to HEERF reporting requirements, we found that 81 of the 100 recipients included in our nonstatistical 

sample complied with HEERF Institutional portion reporting requirements. However, we were unable to locate Institutional 

portion reports on the websites of the 19 other recipients. As of September 30, 2020, those 19 recipients had drawn down 

over $5.5 million of the almost $29 million awarded to them. 

Our work on postsecondary schools’ use of HEERF funds also reviewed the timeliness and quality of the data that two 

schools reported on their use of HEERF funds. We found that the information in both school’s required HEERF reports 

were generally accurate, complete, and timely.

Department Operations Our assessment of the Department’s reconstitution plans following COVID-19 found the Department generally incorporated 

available guidance, which was intended to provide for a safe and gradual return to Federal offices, in its Workplace 

Reconstitution Transition Plan. However, we noted that the Department did not address anti-retaliation, including practices 

for ensuring that no adverse or retaliatory action is taken against an employee who adheres to guidelines or raises 

workplace safety and health concerns, and did not periodically reassess and update self-screening questions as suggested 

by available guidance.

We issued a Management Information Report that identified challenges that the Department may face as it implements 

and oversees the CARES Act. These included grantee oversight and monitoring, student financial assistance oversight 

and monitoring, and data quality and reporting. We noted that the Department should consider these persistent challenges 

and the lessons learned from its administration of the Recovery Act as it implements and administers the programs and 

provisions authorized under the CARES Act to reduce vulnerabilities to fraud, waste, abuse, noncompliance, and other 

issues that could impact a grantee’s or subgrantee’s ability to achieve intended programmatic results.

Ongoing and Planned Work

Our ongoing work in this area includes reviews of one State’s use of ESSER funds, LEAs’ use of ESSER funds for 

technology, the Department’s award of duplicate HEERF grants, a third school’s use of HEERF funds, the Department’s 

oversight of HEERF funds, States’ plans for using GEER funds, three States’ awarding and monitoring of GEER funds, and 

the Department’s processes for implementing flexibilities to Teacher Education Assistance for College and Higher Education 

grant service obligations.

Our planned projects relating to State and local programs within this area for fiscal year (FY) 2022 include reviews of 

additional States’ uses of ESSER funds, the Department’s oversight of ESSER funds, recipients processes for awarding and 

monitoring GEER funds, and recipients’ allocation and use of ARP homeless children and youth funds. 
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Our planned projects relating to student financial 

assistance and higher education programs within this area 

for FY 2022 include reviews of FSA’s transition of Federal 

student loan borrowers back into repayment after the 

relief measures implemented in response to the pandemic 

expire, FSA’s processes for the return of Title IV funds, 

cancellation of borrower loans, and exclusion of subsidized 

loan usage and Pell lifetime usage, and school’s compliance 

with the return of Title IV waiver requirements.

We also plan to perform work relating the Department’s 

use or planned use of its supplemental pandemic-related 

program administration funding. 

Progress in Meeting the Challenge 

Regarding new grant programs, additional Federal 

education funds, and related data quality, the Department 

stated that it took comprehensive steps to ensure 

appropriate interpretation of the legislative requirements 

and subsequent policy and operational implications. 

The Department noted that the Office of Finance and 

Operations and the Office of Planning, Evaluation, and 

Policy Development coordinated Department efforts to 

make COVID-19 relief awards on expedited grantmaking 

timelines on top of the ongoing administration of the 

agency’s more than $70 billion annual portfolio of existing 

programs. The Department further added that it leveraged 

the COVID-19 excepted service hiring authority to help 

address the additional administrative, monitoring, and 

oversight workload associated with administering the 

pandemic relief funding.

The Department identified strategies it had taken to 

provide support to grantees that included (1) establishing 

structured processes for data collection and reporting; 

(2) implementing preventative internal controls, (3) 

adopting risk-based approaches to administering funds 

and monitoring, (4) providing training, guidance, 

and technical assistance to new grantees, and (5) 

working to ensure relevant programs were included in 

guidance used by independent third-party auditors. The 

Department added that it issued early and comprehensive 

communications to grantees outlining data quality and 

timing expectations. It further noted that lessons learned 

from the initial ESF grantee data collection experience 

significantly informed the processes for the year two 

collection and that that these collections will enable it to 

better assess the use of funds and provide visibility into the 

equitable recovery of schools and students.

Regarding student financial assistance program 

requirements, the Department stated that it worked 

to implement COVID-19-related relief that included 

suspending Federal loan payments and stopping Federal 

wage garnishments and collection actions for borrowers 

with Federally held loans in default. The Department 

added that FSA worked with loan servicers to ensure all 

eligible borrowers received personalized communications 

informing them of these changes. With respect to the 

suspension of loan payments, the Department stated 

that it placed all borrowers in administrative forbearance 

status, which allowed them to temporarily stop making 

monthly loan payments. The Department added that once 

the payment suspension period ends, all non-defaulted 

borrowers in the Federal student loan portfolio will be 

in a current repayment status. With respect to stopping 

wage garnishments and collection actions, the Department 

stated that FSA refunded more than 99 percent of 

involuntary payments.

What the Department Needs to Do 

To effectively oversee the Pandemic Relief programs, the 

Department should assess the results of its monitoring 

efforts and information reported back from recipients 

to identify potential problem areas or areas that could 

benefit from additional guidance or technical assistance. 

Given the importance of spending these funds quickly and 

appropriately, it is important for the Department to obtain 

timely and accurate information and to respond quickly 

to emerging challenges identified by its monitoring and 

oversight, or work performed by Federal and non-Federal 

auditors. Continuing to use a lessons-learned approach, 

like the one cited above on its change to 2-year data 

collection strategy, is a good way for the Department to 

continue to learn from and act on emerging issues. 

To implement the student financial assistance related 

statutory provisions, waivers, and flexibilities, the 

Department needs to continue to provide guidance to and 

work with postsecondary institutions, contracted servicers, 

collection agencies, guaranty agencies, and accrediting 

agencies. The Department also needs to monitor and 

oversee these entities to ensure that the provisions 

are implemented effectively. Importantly, when these 

provisions expire, the Department will need to carefully 

reinstate the student loan provisions for which the relief 

was temporarily provided. 
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M A N AG E M E N T C H A L L E N G E 2 — OV E R S I G H T 

AND MONITORING

Effective oversight and monitoring of the Department’s 

programs and operations are critical to ensure that 

funds are used for the purposes intended and programs 

are achieving goals and objectives. This is a significant 

responsibility for the Department given the numbers of 

different entities and programs requiring monitoring and 

oversight, the amount of funding that flows through the 

Department, and the impact that ineffective monitoring 

could have on stakeholders. Two subareas are included in 

this management challenge: student financial assistance 

programs and grantees. 

Oversight and Monitoring—Student Financial 

Assistance Programs 

FSA, a principal office of the Department, seeks to ensure 

that all eligible individuals can benefit from Federal 

financial assistance for education beyond high school. 

FSA is the nation’s largest provider of student financial aid 

and is responsible for implementing and managing the 

Federal student financial assistance programs authorized 

under Title IV of the Higher Education Act of 1965, 

as amended. These programs provide grants, loans, and 

work-study funds to students attending colleges or career 

schools. FSA directly manages or oversees a loan portfolio 

of over $1.5 trillion, representing about 212 million 

student loans to more than 45 million borrowers. FSA also 

oversees more than 5,600 postsecondary institutions that 

participate in the Federal student aid programs. 

In FY 2020, FSA performed these functions with 

an administrative budget of $1.8 billion and about 

1,400 employees, along with contractors that provide 

outsourced business operations. From FY 2016 to 

FY 2020, FSA delivered an average of $121.6 billion in 

Federal student aid to an average of 12.0 million students.

Figure 13

Student Aid Delivered and Postsecondary Students Receiving Aid FYs 2016–2020

FY 2016 FY 2017 FY 2018 FY 2019 FY2020

 

Total Federal Student

Aid Delivered (in

billions of $)

$125.7 $122.5 $122.4 $121.8 $115.6

 

Total Postsecondary

Students Receiving

Aid (in millions)

13.2 12.9 12.7 10.4 10.8

Source: Federal Student Aid Annual Report FY 2020 
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Within the Department, FSA administers the Federal student assistance programs, and the Office of Postsecondary 

Education develops Federal postsecondary education policy and regulations for the Federal student assistance programs. 

The Office of Postsecondary Education also administers the review process for accrediting agencies to ensure that the 

Department recognizes only agencies that are reliable authorities for evaluating the quality of education and training 

postsecondary institutions and programs offer.

Why This Is a Challenge

The Department must provide effective oversight and monitoring of the student financial assistance programs to ensure 

that the programs are not subject to fraud, waste, and abuse. The Department’s responsibilities include coordinating and 

monitoring the activity of many Federal, State, nonprofit, and private entities involved in Federal student aid delivery, 

within a statutory framework established by Congress and a regulatory framework established by the Department. These 

entities include lenders, guaranty agencies, postsecondary institutions, contracted servicers, collection agencies, and 

accrediting agencies. 

Audits Relating to Student Financial Assistance Programs 

Our audits involving the oversight and monitoring of student financial assistance programs continue to identify instances of 

noncompliance as well as opportunities for the Department to further improve its processes. The OIG’s recent work within 

this area has covered a wide range of activities, as shown in Table 6.

Table 6

OIG’s Recent Reports Relating to the Oversight and Monitoring of Student Financial Assistance Programs

Activities Reviewed Review Results

Accreditation In an audit of the Department’s processes for accessing the Accrediting Council for Independent Colleges and School’s 

compliance with Federal regulatory criteria for recognition from 2016 through 2018, we determined that the Department did 

not comply with all regulatory requirements during its 2016 review of the Accrediting Council for Independent Colleges and 

School’s petition for recognition renewal because its process did not consider all available relevant information during its 

review as required. We also determined that the Department implemented a process for assessing the Accrediting Council 

for Independent Colleges and School’s compliance with recognition criteria following a court remand in 2018 that was 

permitted under applicable policies and regulations as well as the court’s remand order.

Contractor Oversight In our audit of FSA’s oversight of loan servicers, we found that FSA did not track all identified instances of loan servicer 

noncompliance and rarely held loan servicers accountable for noncompliance with requirements. We also noted that the 

information FSA collected was not always sufficient to ensure that loan servicers complied with requirements for servicing 

Federally held student loans. 

In an audit of FSA’s contractor personnel security clearance process, we found that FSA had not effectively implemented 

Department requirements to ensure that all contractor employees had appropriate security screening.

Heightened Cash 

Management

We found that FSA consistently administered its heightened cash monitoring payment methods when utilizing this process 

for one of the top five reasons. We also concluded that FSA’s use of heightened cash monitoring was an effective oversight 

tool. However, we noted opportunities for FSA to improve its controls to better ensure that it (1) consistently places schools 

on a heightened cash monitoring payment status when they submitted late annual financial statements or had composite 

scores that fell below the minimum financial responsibility score, (2) tracks a school’s method of payment status from 

the time of recommendation for heightened cash monitoring placement until the placement was made, and (3) retains all 

required documentation.

Professional Judgment In the first of a series of audit work in this area, we found that a school did not adequately document special circumstances 

for more than 90 percent of the students in our nonstatistical random sample for whom it applied professional judgment. 

Because the school did not adequately document special circumstances, its application of professional judgment was not in 

accordance with the Higher Education Act of 1965, as amended.
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Activities Reviewed Review Results

Sales of 

Postsecondary 

Schools

We found that the Department did not take actions sufficient to mitigate significant financial responsibility and administrative 

capability risks posed by buyer and the 13 for-profit postsecondary schools that were purchased in transactions occurring 

in November 2017 and February 2018. We also found that the Department did not follow several of its procedures 

relating to subsequent activities involving those schools. For example, the Department retroactively approved temporary 

interim nonprofit statuses for 2 of the 13 schools, to avoid a lapse in their eligibility to participate in the Title IV programs, 

without following its own procedures for ensuring that schools meet the regulatory definition of a nonprofit school. The 

Department also did not follow FSA’s financial analysis procedures when it limited a letter of credit requirement despite 

lacking certain documentation for a transaction involving the resale of 4 of the 13 schools in 2019. We also found that the 

Department did not follow FSA policy when it extended the temporary provisional program participation agreements for 

the four schools without receiving evidence that the accrediting agencies and all State authorizing agencies had approved 

the changes in ownership. We also determined that the Department allowed the use of surety funds to pay the operating 

expenses of schools that were planned to close in December 2018. Allowing surety funds to be used for such purposes was 

unprecedented, and neither the Department nor FSA had policies or procedures for such a situation. Finally, we found that 

the Department’s standard procedures were not rigorous enough to ensure the purchaser’s compliance with requirements 

for drawing down and disbursing Title IV funds, including the payment of credit balances. 

Satisfactory Academic 

Progress We found that FSA did not always ensure that schools completed corrective actions related to satisfactory academic 

progress findings that independent public accountants identified in compliance audits and FSA identified in 

program reviews.

Total and Permanent 

Disability (TPD) 

Discharges

We found that FSA appropriately approved and rejected TPD applications and its contractor generally serviced TPD 

accounts in accordance with Federal program requirements. However, we identified design weaknesses in FSA’s control 

activities for the TPD discharge application review process that may negatively affect the operating efficiency and 

effectiveness of the process and increase the risk that FSA approves applications that are inaccurate or incomplete. We 

also found weaknesses in FSA’s documented procedures and its quality control review for its TPD discharge application 

review process, as well as weaknesses in FSA’s monitoring of the TPD discharge process.

Verification of Free 

Application for Federal 

Student Aid (FAFSA) 

Data

We completed a series of eight audits within this area. 

In our review of FSA’s controls over the school verification process, we found that FSA implemented five significant control 

activities over schools’ processes for completing verification procedures and reporting verification results. However, we 

determined that FSA did not monitor 4 of those control activities on a regular basis and did not address all of the control 

issues identified in a separate internal evaluation of its processes to ensure schools performed verification. In a sperate 

audit, we found that FSA did not evaluate its process for selecting Free Application for Federal Student Aid data elements 

that schools were required to verify and generally did not effectively evaluate and monitor its processes for selecting 

students for verification. 

We also performed a series of external audits of selected schools to assess their compliance with Federal verification and 

reporting requirements. Of six schools covered by these audits, three did not always complete verification of applicant data 

in accordance with Federal requirements, and two did not always accurately report verification results to FSA.
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Investigations of Student Financial Assistance Program Participants

The OIG’s investigative recent work continues to identify fraud, waste, and abuse of student financial assistance program 

funds. This includes each of the areas in Table 7.

Table 7

OIG’s Recent Investigative Activity Relating to the Student Financial Assistance Programs

Area Example of Related Investigative Activity

Institutions OIG investigations have identified instances where schools violated the Federal ban on incentive compensation. Title IV of the 

Higher Education Act prohibits any institution that receives Federal student aid from compensating student recruiters with a 

commission, bonus, or other incentive payment based on the recruiters’ success in securing student enrollment. The incentive 

compensation ban protects students against admissions and recruitment practices that serve the financial interests of the 

recruiter rather than the educational needs of the student.

School Officials OIG investigations identified improper activities of school officials that included falsifying student eligibility information, 

embezzling portions of student’s Federal student financial assistance awards, using a corporate credit card for personal 

benefit, and overriding academic holds on students’ financial aid records to allow improper award and disbursement of Federal 

student assistance.

Program 

Participants

OIG investigations identified instances where program participants gave kickback payments in exchange for unjustified financial 

aid payments, used fraudulently obtained social security numbers to obtain direct loans, and made false claims of earning a high 

school diploma to receive student financial assistance.

Distance 

Education Fraud 

Rings

Fraud rings are large, loosely affiliated groups of criminals who seek to exploit vulnerabilities in distance education programs. 

The OIG has investigated numerous instances where these groups use the identities of others (with or without their consent) to 

fraudulently obtain Federal student aid.

Ongoing and Planned Work

Our ongoing work in this area includes reviews of three additional school’s use of professional judgment, FSA’s transition 

to the Next Generation Loan Servicing Environment, and a school’s compliance with career pathways and ability to benefit 

provisions. Additional planned projects for FY 2022 include reviews of FSA’s processes for overseeing proprietary school 

compliance with 90/10 revenue requirements, FSA’s oversight of its contractor’s acceptability review process for proprietary 

school annual audits, FSA outreach to individuals who belong to underserved communities, and the Department’s reporting 

on experimental sites initiatives. 

Progress in Meeting the Challenge

The Department identified actions it had taken or plans to take to improve its activities relating to the oversight and 

monitoring of the student financial assistance programs. This included items relating to IHEs participating in Title IV 

programs, accrediting agencies, and the FAFSA verification process. The Department also noted that recent legislation will 

allow it to better verify financial data and oversee the Pell program.

With respect to the oversight and monitoring of IHEs, the Department stated that FSA worked to address weaknesses in 

the single audit process to improve its use as an oversight and monitoring tool for IHEs’ disbursements of Pell Grants and 

Direct Loans. The Department also noted that FSA deployed an analytical model to continually monitor partner data and 

performance that improved its ability to identify IHEs most at-risk and allow more effective use of oversight resources.

Regarding accrediting agencies, the Department stated that it planned to implement additional risk-based procedures to 

evaluate an agency’s ability to effectively determine IHE compliance with standards and to identify agencies at higher risk 

of failing to meet statutory and regulatory requirements. These evaluations would allow FSA to prioritize the oversight of 

higher-risk agencies.
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The Department added that FSA implemented an 

improved model for verification selection and evaluation 

of data elements from the FAFSA that allows the 

Department to better identify applicants for whom 

errors will result in a change in their Federal aid award, 

potentially reducing improper payments.

The Department also stated that the Fostering 

Undergraduate Talent by Unlocking Resources for 

Education Act will help it ensure the accuracy of income 

information used for determining Pell Grant eligibility. 

The Department noted that the Act allows it to receive 

income tax data more easily from the Internal Revenue 

Service and related processes will be implemented in stages 

through FY 2023.

What the Department Needs to Do

The Department’s reported progress and actions are 

responsive to suggestions we have made in previous reports 

and indicate that it has made progress to improve oversight 

of its student financial assistance programs, participants, 

and partners. While there has been progress, this continues 

to be a challenge area as evidenced by our audit work. 

We reiterate that the Department further needs to 

ensure its oversight functions work together to effectively 

provide the intended additional protections to students 

and taxpayers. Also, while FSA’s Next Gen initiative has 

significant potential to improve FSA’s ability to oversee 

and hold accountable its key contractors servicing Federal 

student aid, it will be important for FSA to ensure that 

this initiative is effectively implemented, and once in place 

that it follows through to hold its contractors accountable 

for effectively administering their responsibilities. As 

the Department continues to make improvement in its 

oversight efforts, it will be important for it to assess the 

effectiveness of its initiatives by setting goals for and 

measuring results that demonstrate progress of its efforts. 

Our audits and investigations of student financial 

assistance program participants and audits of the 

Department’s related oversight and monitoring processes 

will continue to assess a variety of effectiveness and 

compliance elements. This area remains a management 

challenge given our continued findings in this area.

Oversight and Monitoring—Grantees

The Department is responsible for administering education 

programs that Congress authorized and the President signed 

into law. This responsibility includes awarding program 

funds to eligible recipients and monitoring their progress 

in meeting program objectives, ensuring that programs 

are administered fairly, ensuring grants are executed in 

conformance with both authorizing statutes and laws 

prohibiting discrimination in Federally funded activities, 

collecting data and conducting research on education, and 

helping to focus attention on education issues of national 

importance. The funding for many grant programs flows 

through primary recipients, such as SEAs, to subrecipients, 

such as LEAs or other entities. The primary recipients must 

oversee and monitor the subrecipients’ activities to ensure 

compliance with Federal requirements.

The Department’s early learning, elementary, and secondary 

education programs annually serve about 17,000 school 

districts and more than 56 million students attending 

more than 98,000 public schools and 32,000 private 

schools. The Department awards discretionary grants 

using competitive processes and priorities and formula 

grants using formulas established by Congress. In all cases, 

the Department’s activities are governed by the program 

authorizing legislation and implementing regulations. One 

of the key programs the Department administers is Title I, 

Part A, which provided about $16.5 billion in FY 2021 for 

local programs that provide extra academic support to help 

an estimated 25 million students in high-poverty schools 

meet State academic standards. Another key program is the 

Individuals with Disabilities Education Act, Part B Grants 

to States. This program provided more than $12.9 billion in 

FY 2021 to help States and school districts meet the special 

educational needs of an estimated 7.6 million students 

with disabilities.

Why This Is a Challenge

Effective monitoring and oversight are essential to ensure 

that grantees meet grant requirements and achieve program 

goals and objectives. Our recent audits related to several 

grant programs identified weaknesses in grantee oversight 

and monitoring that included concerns with SEA and LEA 

controls and Department oversight processes.
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Audits Relating to Federal Education Grant Programs 

Our recent audits at the SEA and LEA levels identified weaknesses that could have been limited through more effective 

oversight and monitoring. The internal control issues identified within these areas could impact the effectiveness of the 

entities reviewed and their ability to achieve intended programmatic results. This included work related to the programs and 

activities identified in Table 8.

Table 8

OIG’s Recent Reports Relating to SEA or LEA Implementation of Federal Education Grant Programs

Activities Reviewed Review Results

Charter Schools We have issued two audit reports relating to Charter Schools Program Grants for the Replication and Expansion of HighQuality Charter Schools. We found that two nonprofit charter management organizations did not fully comply with Federal 

grant reporting requirements and did not charge only adequately documented and allowable expenditures to their grants.

Disaster Recovery We have issued seven reports relating to disaster recovery funding authorized under the Bipartisan Budget Act of 2018. 

Our work at two SEAs relating to internal controls over the Immediate Aid to Restart School Operations (Restart) program 

identified weaknesses in programmatic monitoring processes, internal audit division staffing, processes to assess fraud 

risks, internal controls over procurement, and segregation of duties. 

Our work at two SEAs relating to Restart allocations and uses of funds found that one SEA established and implemented 

effective controls over Restart allocations and uses of funds. However, we identified instances of noncompliance that 

included one district inappropriately charging unallowable personnel expenditures to the program and failure by another 

entity to obtain control and ownership of materials at nonpublic schools funded by the Restart program. We found that 

another SEA also established and implemented effective controls over Restart allocations and uses of funds but could 

better maintain and manage its records for the Restart program.

Our work at two SEAs relating to the Temporary Emergency Impact Aid for Displaced Students (EIA) program found that 

both SEAs did not ensure that the displaced student count data provided to the Department were accurate and complete or 

that LEAs accounted for EIA program funds received for students reported as children with disabilities in accordance with 

Federal requirements. We also found that one SEA did not ensure that LEAs used Emergency Impact Aid program funds to 

pay salaries only for employees who supported schools with displaced students.

We issued a Flash Report on the risk of a SEA’s unallowable use of EIA funds. We found that the SEA may have charged 

up to $1.3 million in payrolls costs to the EIA program for employees who were not employed by the SEA during the accrual 

periods applicable to the payments.

Individuals 

with Disabilities 

Education Act

We have issued two audit reports relating to SEAs’ and selected LEAs’ development and implementation of individualized 

education programs (IEP) for children with disabilities who attend virtual charter schools. We found that both SEAs 

generally had sufficient internal controls to ensure that LEAs developed IEPs in accordance with Federal and State 

requirements for children with disabilities who attend virtual charter schools and that these students were provided with 

the services described in their IEPs. However, we identified weaknesses at selected LEAs that included insufficient 

written procedures for IEP development and documenting the delivery of services, not ensuring that they maintained IEPs 

that included all of the required information describing the services that students needed, and not maintaining sufficient 

documentation to support that all special education services that were outlined in IEPs were provided.
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Our recent audits of the Department’s oversight and monitoring processes over several grant programs identified internal 

control weaknesses and opportunities for improvement. These weaknesses could limit the Department’s ability to ensure 

that grantees demonstrated progress towards meeting programmatic objectives and properly safeguarded and used Federal 

education funds. As noted in Table 9, our work included audits within several areas.

Table 9

OIG’s Recent Reports Relating to the Department’s Oversight and Monitoring of Federal Education

Grant Programs

Area Reviewed Review Results

Disaster Recovery We found that the Department designed policies and procedures that should have provided reasonable assurance that it 

awarded and monitored Defraying Costs of Enrolling Displaced Students in Higher Education Program and Emergency 

Assistance to Institutions of Higher Education Program funds in accordance with applicable guidance. However, we found 

that the Department did not implement all processes and risk mitigation strategies as designed. As a result, the Department 

inappropriately awarded funds to some of the grantees whose applications we reviewed.

Every Student 

Succeeds Act

We found that the Department designed processes that would provide reasonable assurance of identifying and resolving 

potential instances of State plans’ noncompliance with applicable requirements and complying with Department policy. 

However, the Department did not always implement these processes as designed. As a result, we could not determine 

why the Department selected certain peer reviewers, could not ensure that the Department considered conflict of interest 

information it collected from peer reviewers before assigning them to panels, and could not always determine whether the 

Department considered the results of the peer review process when providing States feedback to strengthen the technical 

and overall quality of their plans.

Investigations of Federal Education Grant Program Participants

The OIG’s recent investigative work continues to identify fraud relating to Federal education grant programs. This includes 

the areas identified in Table 10.

Table 10

OIG’s Recent Investigative Activity Relating to Federal Education Grant Programs

Subject Area Example of Related Investigative Activity

Contractors OIG investigations identified instances where contractors invoiced for services that it did not perform, fraudulently obtained 

contracts, committed bribery, and made kickback payments.

LEA Officials OIG investigations identified instances where LEA officials allowed fraudulent credit card use in exchange for kickbacks, 

embezzled cash, and executed a scheme to obtain funds for personal use by creating false invoices and issuing 

fraudulent checks.

Charter School 

Officials

OIG investigations identified instances involving charter school founders and senior officials who participated in conspiracy, 

fraud, theft, money laundering, false bankruptcy declarations, and other scams, abusing their positions of trust for 

personal gain.

Ongoing and Planned Work

Ongoing work in this area includes reviews of two additional SEAs’ administration of the EIA program, a SEA’s allocation 

and use of Restart funds, selected schools’ use of Emergency Assistance to Institutions of Higher Education program funds, 

the effectiveness of Charter School Program grants, and the Department’s oversight of Charter School Program Grants for 

Replication and Expansion of High-Quality Charter Schools. Planned projects for FY 2022 include reviews of selected 

SEAs’ implementation of Statewide accountability systems and the Department’s implementation of its rule concerning 

equity in the Individuals with Disabilities Education Act. 
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Progress in Meeting the Challenge

The Department stated that it has continued to prioritize 

enhancing its processes related to grant oversight and 

monitoring to achieve positive program outcomes. 

The Department noted that it has strengthened and 

modernized the grants administration process through 

recent innovation, process overhauls, and technology 

improvements. The Department noted that these efforts 

emphasized capacity building and collaboration across 

grants staff to improve oversight and monitoring. 

The Department identified several strategic efforts 

within this area that included: identifying opportunities 

for coordination and information sharing across offices 

to improve efficiency and effectiveness, establishing 

new virtual monitoring and support approaches for 

discretionary and formula grant programs, developing and 

implementing in-house training resources, and leveraging 

contract support to increase online training resources 

for grantees.

The Department also noted that a grants management 

system modernization initiative was underway to better 

meet stakeholder needs throughout the grant lifecycle. 

The Department further stated that it has partnered with 

the Department of Health and Human Services to pilot 

emerging solutions that could further strengthen and 

streamline future risk-based monitoring strategies.

What the Department Needs to Do

The Department continues to report progress in enhancing 

its grantee oversight processes, citing numerous actions it 

has taken to address risks, including those identified in a 

number of OIG audit reports, and to improve outcomes 

across multiple program offices. Given our ongoing 

findings under this challenge area, we reiterate that the 

Department should continue its efforts to offer common 

training, encourage collaboration and communication 

within and across program offices, and take steps to ensure 

that its program offices are consistently providing effective 

risk-based oversight of grant recipients—to include both 

technical assistance and monitoring. The Department 

should especially focus on the actions taken by passthrough entities to provide oversight of their subrecipients. 

Lastly, it is important for the Department to continue 

to explore ways to more effectively leverage the resources 

of other entities that have roles in grantee oversight, 

including those conducting single audits under the Office 

of Management and Budget (OMB) 2 Code of Federal 

Regulations 200, Subpart F, given its generally limited 

staffing in relation to the amount of Federal funding that 

it oversees.

M A N AG E M E N T C H A L L E N G E 3 — D ATA 

Q U A L I T Y A N D R E P O R T I N G 

The Department collects, analyzes, and reports on 

data for many purposes that include enhancing the 

public’s ability to access high-value education-related 

information, reporting on programmatic performance, 

informing management decisions, and improving 

education in the United States. The Department collects 

data from numerous sources, including States, which 

compile information relating to about 17,000 public 

school districts and 98,000 public schools; about 6,000 

postsecondary institutions, including universities and 

colleges, as well as institutions offering technical and 

vocational education beyond the high school level; 

and surveys of private schools, public elementary and 

secondary schools, students, teachers, and principals. 

Why This Is a Challenge

The Department, its grantees, and its subrecipients must 

have effective controls to ensure that reported data are 

accurate and complete. The Department relies on program 

data to evaluate program performance and inform 

management decisions. 
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Audits and Inspections Involving Data Quality and Reporting 

Our recent audit work identified a variety of weaknesses in the quality of reported data and recommended improvements at 

the Department and at SEAs and LEAs. This included the following areas, as shown in Table 11.

Table 11

OIG’s Recent Data Quality Related Reports

Area Reviewed Review Results

Charter Schools We have issued two audit reports relating to Charter Schools Program Grants for the Replication and Expansion of 

High-Quality Charter Schools. We found that both recipients did not include complete and accurate information for all 

performance measures on which they were required to report in three annual performance reports. We also found that both 

recipients did not always retain records that supported the performance measures that they reported to the Department.

Clery Act We found that two postsecondary intuitions did not have effective controls to ensure they reported complete and accurate 

Clery Act crime statistics. We concluded that both school’s Clery Act crime statistics were not complete and accurate and as 

a result neither school provided reliable information to current and prospective students, their families, and other members 

of the campus community for making decisions about personal safety and security.

Disaster Recovery We found that two SEAs did not ensure that the displaced student count data provided to the Department under the EIA 

program were accurate and complete. This included instances where students who did not change schools or not did not 

transfer from a disaster area were included in displaced student counts.

Pandemic Relief We found inconsistent reporting of subprogram expenditures by grantees and subgrantees in the Federal Audit 

Clearinghouse. This included instances where subprograms were not identified and variations in the information that was 

used to identify subprograms. As a result, Federal award expenditure data at the subprogram level cannot be reliably used 

by the Department and associated data on areas such as audit results, audit findings, and corrective action plans are not 

consistently reported at the subprogram level. 

In our work relating to HEERF reporting requirements, we were unable to locate Institutional Portion reports on the websites 

of the 19 percent of the recipients included in our nonstatistical sample. We also found that 22 percent of the recipients in 

our sample that reported expenditures in the ‘Other Uses’ category did not follow Department instructions or did not provide 

sufficient detail.

Ongoing and Planned Work

Ongoing work in this area includes reviews of two additional SEAs’ reported displaced student count data under the EIA 

program, an SEA’s allocation and use of Restart funds, State plans for using GEER funds, the effectiveness of Charter School 

Program grants, and the Department’s compliance under the Digital Accountability and Transparency Act. Planned projects 

for FY 2022 include reviews of selected SEAs’ implementation of Statewide accountability systems. 

Progress in Meeting the Challenge

The Department stated that it is committed to improving the access, use, and dissemination of meaningful education data 

to inform decision making. The Department also noted numerous activities that it has taken to address this challenge and 

emphasized its commitment to protecting students’ education data. 

The Department’s actions included multiple internal activities such as formalizing data management functions through 

data governance policies, implementing data maturity assessments, and developing a data workforce plan. The Department 

identified additional activities such as developing a Data Quality Playbook that outlined authorities, tools, and resources for 

grant program managers. The Department further identified activities to collaborate and engage with external entities that 

included work with the IRS to implement programmatic changes to ensure accuracy of income data used for determining 

Pell Grant eligibility.

The Department stated that the National Center for Education Statistics continues to focus on models for data quality 

improvement to support Department-wide program data collections. This included efforts to improve the completeness and 

accuracy of EDFacts data and the timeliness of SEA’s submissions. The Department noted specific accomplishments that 

included the refinement of data collection guidance and the publication of a Business Rules Single Inventory.
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What the Department Needs to Do

The Department continues to take actions to improve 

the quality of data. While the Department has made 

progress in strengthening grantees’ data quality 

processes, we continue to report findings in this area. 

The Department should continue its efforts to promote 

strong data management practices across its program 

offices, from the development of sound data collection 

protocols to the implementation of comprehensive data 

verification processes.

As discussed in its response, the Department should ensure 

that it uses the results of its data maturity assessments 

to measure progress and growth toward its data quality 

goals. The Department should also continue performing 

outreach to States and other entities that report data to the 

Department to reinforce requirements and expectations 

around good data quality practices—of particular 

importance given the substantial amount of funding 

for new programs and emphasis on transparency and 

accountability under pandemic relief programs. Lastly, the 

Department should continue to monitor the quality of the 

data it receives, work to implement effective controls to 

address known weaknesses, and take steps to ensure that 

strong data management practices are implemented across 

the Department as well as by its grantees and subgrantees.

MANAGEMENT CHALLENGE 4—

IMPROPER PAYMENTS

“Improper payments” are payments the government 

makes to the wrong person, in the wrong amount, or for 

the wrong reason. Although not all improper payments 

are fraudulent or represent a loss to the government, all 

improper payments degrade the integrity of government 

programs and compromise citizens’ trust in government.

To reduce instances of improper payments, agencies must 

properly identify the cause of the improper payment, 

implement effective mitigation strategies to address 

the cause, and regularly assess the effectiveness of those 

strategies, refining them, as necessary.

The Payment Integrity Information Act of 2019 (PIIA), 

reorganized and revised several existing improper 

payments statutes, including the Improper Payments 

Elimination and Recovery Act of 2010 (IPERA). PIIA 

requires Federal agencies to reduce improper payments 

and to report annually on their efforts. It specifically 

requires that each agency, in accordance with guidance 

prescribed by OMB, periodically review all programs and 

activities that the agency administers and identify those 

that may be susceptible to significant improper payments. 

For each program and activity identified as susceptible 

to significant improper payments, the agency is required 

to produce a statistically valid estimate (or an estimate 

that is otherwise appropriate using a methodology that 

OMB approved) of the improper payments made by each 

program and activity. The agency must include those 

estimates in the accompanying materials to its annual 

Agency Financial Report. 

PIIA also requires each agency’s Inspector General to 

determine the agency’s compliance with the statute for 

each fiscal year. To be considered compliant with PIIA, 

an agency must (1) publish an Agency Financial Report; 

(2) conduct a program-specific risk assessment; (3) publish 

improper payment estimates; (4) publish corrective action 

plans to reduce improper payments; (5) publish improper 

payment reduction targets, demonstrate improvements, 

and develop a plan to meet reduction targets; and 

(6) report improper payment rates of less than 10 percent. 

Why This Is a Challenge

The Department must ensure that the billions of dollars 

entrusted to it reach the intended recipients. In FY 2020, 

the Pell and the Direct Loan programs continued to be 

susceptible to significant improper payments. In FY 2020, 

the Department also identified the EIA, Restart, and 

Emergency Assistance to Institutions of Higher Education 

programs as susceptible to improper payments because 

each of the programs met OMB criteria as disaster-related 

programs with $10 million or more in outlays in a given 

fiscal year. We found that the Department’s estimates for 

all five programs that required an estimate in FY 2020 

were unreliable. It is important for the Department to 

develop statistically valid and reliable estimates so that it 

can identify the root causes and take actions to prevent 

and reduce improper payments.
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Audits and Inspections Involving Improper Payments

The OIG’s review of the Department’s compliance with improper payment reporting requirements for FY 2020 found that 

the Department did not comply with PIIA because it did not meet two of the six compliance requirements. Specifically, the 

Department did not demonstrate improvement in reducing improper payments in the Direct Loan program. In addition, 

the Department reported improper payment rates that exceed 10 percent for the EIA and Restart programs. As shown in 

Table 12, our recent improper payment audits identified opportunities for improvement in multiple areas.

Table 12

Results of Recent OIG Statutorily Required Improper Payment Audits

FY of Department’s 

Reporting

Complied with 

Reporting 

Requirements

Identified Concerns

2020 No The Department published improper payment estimates for all five required programs. 

However, its estimates were unreliable because they were not statistically valid. We found 

that the development of these estimates included the use of nonrandom samples, unsuitable 

sample weighting, or inaccurate and incomplete population sampling frames. 

We also found that the Department’s improper payment risk assessment process needs 

strengthening. Specifically, the risk assessment performed for one program did not 

adequately support the Department’s conclusion regarding its level of improper payment risk 

and the risk assessment the Department conducted on its contracts management activity 

was incomplete. 

2019 Yes The Department published improper payment estimates for the Pell, Direct Loan, EIA, 

Restart, and Emergency Assistance to Institutions of Higher Education programs as required 

by IPERA. However, we found that the published estimates for three of these programs were 

unreliable because the methodologies used to develop them were not statistically valid.

2018 Yes The Department reported inaccurate and incomplete information regarding the amounts 

of identified and recaptured improper payments in its FY 2018 Agency Financial Report. 

As a result, we could not accurately evaluate the Department’s performance in recapturing 

improper payments for its programs and activities.

Other audit work has identified potential improper payments in the student financial assistance programs and by SEAs and 

LEAs. Our semiannual reports to Congress from April 1, 2018, through March 31, 2021, included more than $20 million 

in questioned costs from audit activity and more than $81 million in restitution payments ordered from investigative activity. These examples demonstrate that there may be other potential opportunities for the Department to identify and prevent 

improper payments.

Ongoing and Planned Work

Planned projects include our annual review of the Department’s compliance with the improper payment reporting 

requirements and its efforts to prevent and reduce improper payments. We will also complete the required risk assessment 

of the Department’s purchase card program and, if deemed necessary, conduct an audit of Department purchase card 

transactions. Our planned activities for FY 2022 include multiple projects involving grant recipients where improper 

payments could be identified.

Progress in Meeting the Challenge

The Department stated that it continued to prioritize efforts to ensure payment integrity and minimize improper 

and unknown payments across all programs in FY 2021. The Department noted that collaboration between financial 

management and grants administration staff facilitated its implementation of PIIA compliance activities. According to 

the Department, increased sophistication in estimation, detection, and data collection activities helped it to expeditiously 

identify and resolve improper payments. 
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The Department identified numerous activities in response 

to this challenge that included improvements relating to 

its improper payment estimate for the EIA program. The 

Department further noted that it implemented enhanced 

quality control procedures over FSA’s improper payment 

estimation process to ensure the completeness and 

accuracy of data and calculations used in the estimates. 

The Department also stated that it developed improper 

payment training for staff and refined its Payment 

Integrity Monitoring Application, a digital tool used to 

detect anomalies in grants payment data. 

What the Department Needs to Do 

As the Department continues to work to improve its 

payment integrity initiatives, it is important that the 

Department ensures that its estimation methodologies 

for the programs deemed susceptible to significant 

improper payments produce statistically valid improper 

payment estimates. In addition, the Department needs 

to properly implement its enhanced quality control 

procedures over its improper payment estimation process. 

The OIG has not assessed the Department’s FY 2021 

estimation methodologies or the accuracy and validity 

of the Department’s estimates. The OIG will review 

the accuracy and validity of these measurements as part 

of the FY 2021 PIIA audit. This is an annual focus of 

the OIG’s work, and we will continue to monitor and 

report on the Department’s progress on this Management 

Challenge Area.

MANAGEMENT CHALLENGE 5—

INFORMATION TECHNOLOGY SECURITY

The Department’s systems house millions of sensitive 

records on students, their parents, and others, and are 

used to process billions of dollars in education funding. 

These systems are primarily operated and maintained by 

contractors and are accessed by thousands of authorized 

people (including Department employees, contractor 

employees, and other third parties such as school 

financial aid administrators). As shown in Figure 14, as of 

September 30, 2021, the Department reported more than 

$1 billion in total information technology (IT) spending 

for FY 2021. 

Figure 14

Department Total IT Spending FY 2019–2021 

(Dollars in Millions) 

Source: Department of Education IT Agency Summary, ITDashboard.gov, as of 

September 30, 2021.

Through the Office of the Chief Information Officer 

(OCIO), the Department monitors and evaluates the 

contractor-provided IT services through a service-level 

agreement framework and develops and maintains 

common business solutions required by multiple 

program offices. OCIO is responsible for implementing 

the operating principles established by legislation and 

regulation, establishing a management framework to 

improve the planning and control of IT investments, and 

leading change to improve the efficiency and effectiveness 

of the Department’s operations. In addition to OCIO, 

FSA has its own chief information officer, whose 

primary responsibility is to promote the effective use of 

technology to achieve FSA’s strategic objectives through 

sound technology planning and investments, integrated 

technology architectures and standards, effective systems 

development, and production support.

The Federal Information Security Modernization Act of 

2014 (FISMA) requires the OIG to assess the effectiveness 

of the agency’s information security program. FISMA 

mandates that this evaluation includes (1) testing 

of the effectiveness of information security policies, 

procedures, and practices of a representative subset of 

the agency’s information systems and (2) an assessment 

of the effectiveness of the information security policies, 

procedures, and practices of the agency. 

Why This Is a Challenge

In light of increased occurrences of high-profile data 

breaches (public and private sector), the importance 
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of safeguarding the Department’s information and information systems cannot be understated. Protecting this complex 

IT infrastructure from constantly evolving cyber threats is an enormous responsibility and challenge. Without adequate 

management, operational, and technical security controls, the Department’s systems and information are vulnerable to 

attacks. Unauthorized access could result in lost data confidentiality and integrity, limited system availability, and reduced 

system reliability. For the last several years, IT security audits and financial statement audits have identified security controls 

that need improvement to adequately protect the Department’s systems and data. 

Audits Involving IT Security

Our recent reports on the Department’s compliance with FISMA, performed by the OIG with contractor assistance, noted 

that the Department and FSA made progress in strengthening their information security programs. However, as shown 

in Table 13, our recent FISMA audits included audit findings across all five cybersecurity framework security functions 

developed by the Council of the Inspectors General on Integrity and Efficiency, OMB, and the Department of Homeland 

Security and within each security function’s related metric domains. Our FY 2018 through FY 2020 FISMA audits 

concluded that the Department and FSA were not effective in any of the five security functions (Identify, Protect, Detect, 

Respond, and Recover) and we had findings in all eight metric domains.

Table 13

results of OiG fisMa audits—cybersecurity framework security functions and Metric Domains 

with audit findings

FY

Identify:

Risk 

Management

Protect: 

Configuration

Management

Protect:

Identity 

and Access 

Management

Protect:

Data 

Protection 

and Privacy

Protect:

Security 

Training

Detect:

Information 

Security 

Continuous 

Monitoring

Respond:

Incident 

Response

Recover:

Contingency 

Planning

2020 audit finding audit finding audit finding audit finding audit finding audit finding audit finding audit finding

2019 audit finding audit finding audit finding audit finding audit finding audit finding audit finding audit finding

2018 audit finding audit finding audit finding audit finding audit finding audit finding audit finding audit finding

Each of our recent FISMA reports recommended ways the Department and FSA could increase the effectiveness of their 

information security program so that they fully comply with all applicable requirements. Our FY 2020 FISMA audit 

specifically noted that the Department and FSA could strengthen their controls in several areas, examples of which are 

identified in Table 14. 

Table 14

results of the OiG’s fY 2020 fisMa audit—examples of areas where controls can be strengthened

Metric Domain Areas Where Controls can be Strengthened

risk Management • remediation process for plan of action and Milestones.

• it inventory reporting.

• required it security clauses for contracts.

Configuration 

Management

• Use of unsecure connections and appropriate application connection protocols.

• reliance on unsupported operating systems, databases, and applications in its production environments.

identify and access 

Management

• removing access of terminated users to the Department’s network and database management.

incident response • timely reporting of incidents.

• ensuring data loss prevention tools work accordingly.
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OTHER INFORMATION | OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2022

We noted that until the Department improves in these 

areas, it cannot ensure that its overall information security 

program adequately protects its systems and resources 

from compromise and loss. We made recommendations 

to help the Department and FSA fully comply with all 

applicable requirements.

Recent audits of the Department’s financial statements, 

performed by an independent public accountant 

with OIG oversight, have repeatedly identified IT 

controls as a significant deficiency. In its FY 2020 

report, the independent public accountant noted that 

the Department and FSA management demonstrated 

progress implementing corrective actions to remediate 

some prior-year deficiencies. However, they reported 

that management had not fully remediated prior-year 

deficiencies in areas such as logical access administration, 

separated or transferred user access removal, user 

access reviews and recertification, and configuration 

management. In addition, control deficiencies were 

reported for FY 2020 covering security management, 

segregation of IT duties, application change control, 

and logical access. As a result, the independent public 

accountant also reported that entity level controls were 

not designed and implemented appropriately to remediate 

identified internal control deficiencies in a timely manner. 

The independent public accountant concluded that 

ineffective IT controls increase the risk of unauthorized 

use, disclosure, disruption, modification, or destruction of 

information and information systems that could impact 

the integrity and reliability of information processed in the 

associated applications. 

Our investigative work in this area identified a fraud 

scheme targeting borrowers of Federal student financial 

assistance funds. The participants in this scheme feigned 

associated with the Department and, without authority to 

do so, guaranteed the borrowers enrollment in programs 

that would lower their monthly payments and result in 

loan forgiveness. The participants obtained and used 

borrowers’ personal identifying information to access 

and make changes to their FSA accounts without their 

consent. The impacted borrowers paid—or were scheduled 

to pay—upfront fees and additional monthly fees to the 

participants for services that Federal loan servicers provide 

at no cost. We also found that most borrowers believed 

that their payments to the participants would be applied 

toward their student loan debt, but they were not. This 

caused many of the borrowers to stop making monthly 

payments on their student loans, which resulted in late 

payment notifications, increased loan balances, and 

sometimes, defaulting on their student loans.

Planned projects in this area will determine whether the 

Department’s and FSA’s overall IT security programs and 

practices were generally effective as they relate to Federal 

information security requirements.

Progress in Meeting the Challenge

The Department identified numerous advancements in 

its IT security program in response to this challenge. 

The Department stated that it took a comprehensive 

approach to addressing this area and cited improvements 

in areas that included its technological capabilities and 

internal controls.

With respect to its technological capabilities the 

Department noted activities that included a major 

infrastructure upgrade that enhanced the security posture 

of its hosting environments. The Department also stated 

that took steps to improve its email security, expanded its 

Virtual Private Network capacity to effectively support its 

remote workforce during the pandemic, and delivered an 

alternative multi-factor authentication solution to provide 

continuity of critical business functions.

Regarding internal controls, the Department stated 

that it enhanced quality control standard operating 

procedures and checklists to ensure security incidents 

are consistently reported within required timeframes, 

consistently categorized, and include correct elements. The 

Department also noted that it worked to ensure its security 

assessment activities continue to align with Department 

of Homeland Security standards and conducted proactive 

outreach to employees regarding increased phishing and 

other cybercriminal scams.

The Department cited additional improvements that 

included establishing an Information Communications 

Technology Supply Chain Risk Management program, 

a Zero Trust strategic implementation plan, and 

Vulnerability Disclosure Policy that provides an open 

channel and legal safe harbor to engage external partners 

in discovering and reporting vulnerabilities.

What the Department Needs to Do

Managing IT security programs and practices to effectively 

reduce risk to the Department’s operations is a clear and 

ongoing management challenge. The Department relies 

on IT to manage its core business operations and deliver 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 133

OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2022 | OTHER INFORMATION

products and services to its many stakeholders. The OIG 

has consistently reported concerns regarding the overall 

effectiveness of the Department’s IT security program 

through our annual FISMA audits, financial statement 

audits, and management challenges reports. 

While we commend the Department for its efforts to 

address weaknesses and improve its IT security program, 

we continue to identify significant weaknesses in our 

annual FISMA audits—despite the Department’s reported 

corrective actions to address our prior recommendations. 

It is critical that the Department focus on the timely 

and successful implementation of corrective actions in 

response to our audit work. The Department also needs 

to continue its efforts to develop and implement an 

effective system of IT security controls, particularly in 

the areas of configuration management, identity and 

access management, data protection and privacy, and 

incident response.

The Fiscal Year 2021 Inspector General metrics include a 

new Supply Chain Risk Management domain within the 

Identify function area. However, since the new domain 

references Supply Chain Risk Management criteria in 

the National Institute of Standards and Technology 

Special Publication 800-53, revision 5, to provide 

agencies with sufficient time to fully implement it, the 

new metric was not considered for the purposes of the 

Identify framework function rating and was included for 

informational purposes only. However, past audit work 

identified deficiencies in this security area, and it presents 

a significant challenge to the Department as they address 

critical weaknesses.

Our FISMA audits will continue to assess the 

Department’s efforts within this area, and IT security 

will remain a management challenge until our work 

corroborates that the Department’s system of controls 

achieves expected outcomes. To that end, the Department 

needs to effectively address deficiencies, continue to 

provide mitigating controls for vulnerabilities, and 

implement planned actions to correct weaknesses.
134 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION | OFFIcE OF INspEcTOR GENERAl’s MANAGEMENT cHAllENGEs FOR FY 2022

400 MARYLAND AVE., S.W., WASHINGTON, DC 20202 

www.ed.gov

The Department of Education's mission is to promote student achievement and preparation for global competitiveness by 

fostering educational excellence and ensuring equal access. 

DEpARTMENT cOMMENTs

UNITED STATES DEPARTMENT OF EDUCATION 

OFFICE OF FINANCE AND OPERATIONS

November 2, 2021

TO: Sandra D. Bruce

Acting Inspector General

U.S. Department of Education

FROM: Denise L. Carter

Acting Assistant Secretary

Office of Finance and Operations

SUBJECT: Response to Office of Inspector General Draft Report, “U.S. Department of Education

FY 2022 Management Challenges”

Thank you for the opportunity to provide input on the Office of Inspector General (OIG) draft report,

U.S. Department of Education (Department) Fiscal Year (FY) 2022 Management Challenges.

The Department values the OIG’s perspective on risks and vulnerabilitiesrelated to programs and

operations. Similar to last year’s report, the inclusion of five challenges in areas of Implementing Pandemic

Relief Laws; Oversight and Monitoring; Data Quality and Reporting; Improper Payments; and Information

Technology Security are well-aligned with the Department’s own assessment of enterprise risks and 

respective targeted management efforts.

The Department continues to navigate the challenges of serving the public through a pandemic, and we are

pleased to reportseveralsignificantstepsto addressthe identified challenges. This memo contains a 

summary of the Department’s progress in meeting each of the five challenges, organized by challenge title.

Attached, you will find a supplemental document that provides proposed technical corrections to other

sections of the draft report.

We look forward to continued communication and collaboration on these issues.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 135

OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2022 | OTHER INFORMATION

CHALLENGE 1: IMPLEMENTING PA N D E M I C 

RELIEF LAWS

New Grant Programs and Additional Federal 

Education Funds; Data Quality

Congress passed multiple COVID-19 relief bills in FY 

2020 and FY 2021 (i.e., the Coronavirus Aid, Relief, and 

Economic Security Act of 2020, the Coronavirus Response 

and Relief Supplemental Appropriations Act of 2021, and 

the American Rescue Plan Act of 2021 that provided a total 

of $282.3 billion in education- related assistance to prevent, 

prepare for, and respond to the COVID-19 emergency. 

The Department took comprehensive steps to ensure 

appropriate interpretation of the legislations’ requirements 

and subsequent policy and operational implications.

The Office of Finance and Operations and the Office 

of Planning, Evaluation, and Policy Development 

coordinated Department efforts to successfully award an 

extraordinary number and size of COVID-19 relief awards 

on expedited grantmaking timelines on top of the ongoing 

administration of the agency’s $70+ billion annual 

portfolio of existing programs. Additional collaborations 

with Congressional Appropriations Committee staff 

and the Office of Management and Budget (OMB) 

helped ensure statutory requirements and program 

implementation priorities were met. The Department also 

participated in several accountability engagements with the 

OIG and the Government Accountability Office regarding 

the implementation of the pandemic relief laws, the 

programs that manage and execute the requirements, and 

the overall stewardship of the appropriations.

To address the additional administrative, monitoring, 

and oversight workload associated with administering the 

pandemic relief funding, the Department strategically 

leveraged the COVID-19 excepted service hiring 

authority, per the Office of Personnel Management, to 

augment staffing resources for the Office of Postsecondary 

Education and the Office of Elementary and 

Secondary Education.

To ensure effective and timely support to eligible 

applicants, grantees, and stakeholders while also 

balancing the need for high quality data collection and 

reporting processes, the Department implemented several 

strategies including:

• Establishing structured processes for data collection 

and reporting;

• Implementing preventative funds control measures for 

accurate tracking and reporting of funds in real time;

• Adopting risk-based approaches to administering 

program funding and comprehensive monitoring;

• Providing regulatory flexibilities, training, written 

guidance, webinars, direct technical assistance to 

new grantees;

• Reducing burdensome data collections, thorough 

progress reviews, and clear and transparent reporting 

(via the Education Stabilization Fund (ESF) 

Transparency Portal launched in November 2020). 

The Public Transparency Portal allows the Department 

to track performance, hold grantees accountable, and 

provide transparency to taxpayers and oversight bodies;

• Issuing early and comprehensive communications 

to grantees outlining clear data quality and timing 

expectations; and

• Working with OMB to ensure relevant programs were 

included in the 2021 Compliance Supplement, which 

issues guidance relied upon by independent third-party 

auditors who review or audit federal programs and 

negotiate “high-risk” designations for these programs.

Lessons learned from the initial ESF grantee data collection 

experience significantly informed the processes for the year 

two annual collection. Through these collections, the 

Department will be better able to assess the use of funds, 

providing visibility into the equitable recovery of schools 

and students as well as the capacity to promote learning.

Student Financial Assistance Program 

Requirements; Data Quality

The COVID-19 relief legislation and administrative 

actions also provided support for student loan borrowers 

primarily by suspending nearly all federal loan payments 

until January 31, 2022, interest free. The Department 

also stopped all federal wage garnishments and collection 

actions, as well as interest accrual, for borrowers with 

federally held loans in default.

DEPARTMENT COMMENTS
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In addition to COVID-19 relief, the Department 

provided targeted relief to thousands of borrowers by 

cancelling $11.5 billion of loans using authority previously 

authorized by Congress. The targeted beneficiaries include 

those who were:

• Qualified for total and permanent disability discharge.

• Defrauded by failed for-profit schools.

• Deployed to war zones (soldiers).

• Denied eligibility previously for forgiveness under the 

Public Service Loan Forgiveness Program.

The Department automatically placed all borrowers in 

administrative forbearance status, which allowed them to 

temporarily stop making monthly loan payments. Once 

the payment suspension period ends on January 31, 2022, 

all non-defaulted borrowers in the federal student loan 

portfolio will be in a current repayment status. Federal 

Student Aid (FSA) closely tracks data related to repayments 

to identify the impact of borrowers’ decisions regarding 

repayment to understand current revenue and cost to 

the federal government. FSA refunded more than 99% of 

involuntary payments made by borrowers with defaulted 

loans who were subject to having certain Treasury 

payments offset or wages garnished. Additionally, FSA 

worked with loan servicers to ensure all eligible borrowers 

received personalized communications informing them of 

the changes.

CHALLENGE 2: OVERSIGHT AND M O N I TO R I N G

Student Financial Assistance Programs

FSA improved oversight and monitoring of institutions 

of higher education (IHEs) participating in Title IV 

programs. In doing so, FSA worked to address weaknesses 

in the single audit process to improve its use as an oversight 

and monitoring tool for IHEs’ disbursements of Pell 

Grants and Direct Loans. They additionally deployed an 

analytical model to continually monitor partner data and 

performance, thus improving the ability to identify IHEs 

most at-risk and allow more effective use of oversight 

resources by informing and prioritizing support for IHEs.

Over the next several years, the Department will 

implement additional risk-based procedures to evaluate an 

accrediting agency’s ability to effectively determine and 

measure IHE compliance with accreditation standards and 

to identify accrediting agencies at higher risk of failing to 

meet statutory and regulatory requirements and additional 

procedures to prioritize oversight of those higherrisk agencies.

FSA implemented an improved model for verification 

selection and evaluation of data elements from the FAFSA 

that allows the Department to better identify applicants 

for whom errors will result in a change in their federal aid 

award, potentially reducing improper payments.

The President signed the Fostering Undergraduate Talent 

by Unlocking Resources for Education (FUTURE) 

Act in December 2019, which will help ensure the 

accuracy of income information used for determining 

Pell Grant eligibility. One of the primary causes of 

improper payments in the Pell Grant program is failure 

to accurately verify financial data. The FUTURE Act 

provides an exception to the Department of Education 

from restrictions of Section 6103 of the Internal Revenue 

Code to allow the Department to receive income tax data 

more easily from the Internal Revenue Service (IRS). 

Implementation of the FUTURE Act began in FY 2020 

and will continue through FY 2023. FSA has organized 

implementation into three phases:

1. Establishing FSA’s ability to request and receive 

certain Federal Tax Information from the Internal 

Revenue Service through the FUTURE Act Direct 

Data Exchange;

2. Updating FSA systems and processes to enable the 

provisions of the FUTURE Act; and,

3. Working with FSA’s partners—schools, state agencies, 

and designated scholarship organizations—as they 

update their systems and processes to fully implement 

the FUTURE Act.

Grantee Oversight

The Department continued to prioritize enhancing 

processes related to grant oversight and monitoring 

to achieve positive program outcomes. Recent 

innovative initiatives, process overhauls, and technology 

improvements further strengthened and modernized 

the grants administration process. During FY 2021, the 

Department continued to expand these efforts with a 

DEPARTMENT COMMENTS
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OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2022 | OTHER INFORMATION

critical emphasis on capacity building of and collaboration 

across grants staff to boost oversight and monitoring 

practices and effective stewardship of taxpayer funded 

investments. Several strategic efforts facilitated the swift 

response to the COVID-19 pandemic and associated 

administration of relief funding:

• Assessing the standard grantmaking process to identify 

opportunities to create operating efficiencies and 

increase program effectiveness through cross-POC 

coordination and information sharing;

• Establishing new virtual monitoring and support 

approaches for discretionary and formula 

grant programs;

• Developing and implementing comprehensive in-house 

training resources;

• Enhancing pre-award risk assessments by adding 

contextual information on individual grantees relative 

to parent institutions;

• Implementing a grants management acquisition 

program that includes post-award monitoring support;

• Leveraging contract support to increase online training 

resources for grantees, including key areas of risk such 

as Subrecipient Monitoring;

• Ensuring data systems effectively collect grantee data, 

analyze performance, detect risk, report progress, and 

serve as a catalyst for continuous improvement to all 

aspects of grant operations and program monitoring;

• Awarding a contract for the G5 Modernization 

Initiative to develop a modern, modular, secure, and 

user-friendly G5 grants management system to support 

the range of stakeholder needs throughout the grant 

lifecycle; and,

• Partnering with the Department of Health and 

Human Services to pilot emerging solutions that could 

further strengthen and streamline future risk-based 

monitoring strategies.

C H A L L E N G E 3: D ATA Q U A L I T Y A N D 

REPORTING

The Department is committed to improving access, use, 

and dissemination of meaningful education data while 

protecting privacy. Doing so enables the Department to 

provide education stakeholders with timely and accurate 

information to inform decisions.

In FY 2021, the Department took numerous steps 

to address this challenge and emphasize a strong 

commitment to protecting student’s education data both 

within the agency and at educational institutions by:

• Establishing a holistic agencywide framework that 

formalized data management functions through new 

Data Governance Policies to support data maturation 

across the Department (Data Governance Board);

• Implementing annual Data Maturity Assessments to 

evaluate office data strategies, data quality assessments, 

and data cleansing to help determine growth and gaps, 

identify priority areas for improvement, and drive 

relevant budgetary decisions and investments that 

support overall data management capabilities;

• Developing a Data Quality Playbook which 

outlined authorities, tools, and resources for grant 

program managers;

• Developing a comprehensive data workforce plan to 

better align the workforce with functional data needs;

• Implementing process improvements related to program 

performance and accountability measures;

• Collaborating with the IRS to implement 

programmatic changes to ensure accuracy of income 

data used for determining Pell Grant eligibility (see 

Challenge #2, above).

• Engaging with nearly 1,000 schools to build capacity to 

improve security of student financial and privacy data;

• Conducting more than 20 outreach activities in response 

to breach incidents, to improve compliance with 

cybersecurity safeguards; and,

DEPARTMENT COMMENTS
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OTHER INFORMATION | OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2022

• Conducting outreach to more than 500 IHEs in 

response to Microsoft Exchange Vulnerability to ensure 

awareness of the vulnerability and provide guidance for 

remediation or management of potential exposure.

Apart from FSA, the National Center for Education 

Statistics (NCES) operates the largest data collections 

within the agency and continues to focus on models for 

data quality improvement to support Department- wide 

program data collections. EDFacts, which contains both 

the statistical Common Core of Data release and data 

required for multiple ED programs, sought to improve the 

completeness and accuracy of data as well as the timeliness 

of submissions by K-12 state education agencies. Select FY 

2021 accomplishments include the refinement of NCES 

data collection guidance to establish reasonable due dates 

and timelines for state grantees and the publication of a 

Business Rules Single Inventory (available to all grantees 

and regularly reviewed by NCES staff).

The inception of ED’s OIG Management Challenges 

report in 2008 identified data quality as a significant 

challenge area, and it has remained one ever since. 

In August of 2021, the Department released its first 

Annual Evaluation Plan for FY 2022, as required by The 

Evidence Act, to delineate these activities. In addition to 

the continued deployment of the above initiatives, other 

foci for FY 2022 include updating the Department’s 

Information Quality Act Guidelines and the establishment 

of data quality plans.

CHALLENGE 4: IMPROPER PAY M E N T S

The Department continued to prioritize efforts to ensure 

payment integrity and minimize improper and unknown 

payments across all programs in FY 2021, including 

monitoring disaster-related programs in accordance with 

OMB Memorandum M-18-14. Collaborations between 

financial management and grants administration staff 

aimed to facilitate successful implementation of Payment 

Integrity Information Act compliance activities (e.g., 

improper payment estimations, as well as qualitative 

and quantitative improper payment risk assessments for 

programs and activities in scope). Increased sophistication 

in estimation, detection, and data collection activities 

helped expeditiously identify and resolve improper 

payments. Improvement action items included:

• Updating the methodology for the Emergency Impact 

Aid program and implementing written procedures 

regarding the processes of obtaining and validating 

population data including quality assurance steps to 

ensure the results of the test sample are calculated 

correctly to yield a reliable improper payment estimate;

• Establishing a process to introduce subject matter expert 

(SME) reviews of improper payment cases to make final 

determination when they cannot be resolved by the 

program offices;

• Developing and delivering improper payment training 

for staff;

• Refining the Payment Integrity Monitoring

Application, a digital tool to detect anomalies in grants

payment data (i.e., case management files for payment 

anomalies are established within the application for 

follow-up investigation by the Department’s grants 

program officials to validate improper payments and

determine root causes);

• Implementing enhanced quality control procedures 

over FSA’s improper payment estimation process to

ensure the completeness and accuracy of compliance

audit data and calculations used inthe estimates; and,

• Coordinating with OMB and the independent audit 

community to recommend and advocate for changes to 

the OMB Compliance Supplement to strengthen the 

quality of data used in improper payment estimates.

CHALLENGE 5: INFORMATION TECHNOLOGY 

SECURITY

FY 2021 advancements in the information technology 

security program encompass both technological 

capabilities as well as improvements in knowledge 

management and internal controls. The Department took 

a comprehensive approach to addressing this management 

challenge including:

• Establishing an Information Communications 

Technology (ICT) Supply Chain Risk Management 

(SCRM) program;

DEPARTMENT COMMENTS
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OFFICE OF INSPECTOR GENERAL’S MANAGEMENT CHALLENGES FOR FY 2022 | OTHER INFORMATION

• Releasing a strategic roadmap designed to provide a 

vision and action plan for the planning, preparation, 

implementation, and execution of ED’s ICT 

SCRM Program;

• Establishing a Zero Trust strategic implementation 

plan, addressing current issues with access, including 

unauthorized, and siloed single point solutions for 

data protection;

• Publishing a Vulnerability Disclosure Policy that 

provides an open channel and legal safe harbor 

to engage external partners in discovering and 

reporting vulnerabilities;

• Completing a major infrastructure upgrade to 

improve performance, dependability, capacity, and 

security to enhance the security posture of our 

hosting environments;

• Enhancing quality control standard operating 

procedures and checklists to ensure incidents are 

consistently submitted to United States Computer 

Emergency Readiness Team and the OIG within the 

required timeframes, and are consistently categorized, 

and include the correct vector elements as required;

• Deploying and monitoring the Office 365 email 

Data Loss Prevention (DLP) capability to bolster the 

Department’s email security;

• Ensuring the Department’s security assessment 

activities continue to align with DHS standards;

• Mitigating operational impacts of the COVID-19 

pandemic through delivery of Personal Identity 

Verification authentication as alternative multi-factor 

authentication solution providing continuity of critical 

business functions;

• Identified, analyzed, and recommended cloudbased solutions to provide rapid expansion of the 

Department’s Virtual Private Network capacity to 

effectively support our remote workforce during the 

pandemic; and,

• Conducting proactive outreach to employees regarding 

increased phishing and other cybercriminal scams 

yielding a 7% average reporting rate increase this year.

DEPARTMENT COMMENTS
140 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

Summary of Financial Statement Audit 

and Management Assurances

The following tables provide a summarized report on the Department’s financial statement audit and its management 

assurances. For more details, the auditors’ report can be found beginning on page 98 and the Department’s management 

assurances on page 23.

SUMMARY OF FINANCIAL STATEMENT AUDIT

Audit Opinion: Unmodified 

Restatement: No

Material Weaknesses Beginning 

Balance New Resolved Consolidated Ending Balance

Total Material Weaknesses 1 0 0 0 1

SUMMARY OF MANAGEMENT ASSURANCES

Effectiveness of Internal Control Over Financial Reporting—Federal Managers Financial Integrity Act 

(FMFIA) 2

Statement of Assurance: Unmodified

Material 

Weaknesses

Beginning 

Balance New Resolved Consolidated Reassessed Ending Balance

Total Material 

Weaknesses 0 0 0 0 0 0

The Department had no material weaknesses in the design or operation of the internal control over financial reporting.

Effectiveness of Internal Control Over Operations—FMFIA 2 

Statement of Assurance: Unmodified

Material 

Weaknesses

Beginning 

Balance New Resolved Consolidated Reassessed Ending Balance

Total Material 

Weaknesses 0 0 0 0 0 0

Conformance With Financial Management System Requirements—FMFIA 4

Statement of Assurance: The Department systems conform to financial management system requirements.

Nonconformances Beginning 

Balance New Resolved Consolidated Reassessed Ending Balance

Total 

Nonconformances

0 0 0 0 0 0

Compliance with Federal Financial Management Improvement Act of 1996 (FFMIA)

Agency Auditor

1. System Requirements No lack of compliance noted No lack of compliance noted

2. Federal Accounting Standards No lack of compliance noted No lack of compliance noted

3. U.S. Standard General Ledger at Transaction Level No lack of compliance noted No lack of compliance noted
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 141

Payment Integrity Information Act Reporting

All program outlays can be categorized into one of three 

payment type categories: proper payments, improper 

payments, and unknown payments. OMB Circular 

A-123, Appendix C, Requirements for Payment Integrity 

Improvement, defines an improper payment as a payment 

that was made in an incorrect amount under statutory, 

contractual, administrative, or other legally applicable 

requirements. The term improper payment includes any 

payment to an ineligible recipient; any payment for an 

ineligible good or service; any duplicate payment; any 

payment for a good or service not received, except for 

those payments where authorized by law; any payment 

that is not authorized by law; and any payment that does 

not account for credit for applicable discounts. OMB 

Circular A-123, Appendix C, also defines an unknown 

payment as a payment that could either be proper or 

improper, but it cannot be determined whether the 

payment was proper or improper because of insufficient or 

lack of documentation.

The Department places a high value on maintaining the 

integrity of all types of payments made to ensure that the 

billions of dollars in federal funds it disburses annually 

reach intended recipients in the right amount and for 

the right purpose. The Department ensures payment 

integrity by establishing effective policies, business 

processes, systems, and controls over key payment 

activities, including those pertaining to payment data 

quality, cash management, banking information, thirdparty oversight, assessments of audit reports, and financial 

reporting. The number and dollar value of improper 

and unknown payments are key indicators of payment 

integrity. Accordingly, the Department maintains a robust 

internal control framework that includes internal controls 

designed to help prevent, detect, and recover improper 

and unknown payments. In designing controls, the 

Department attempts to strike the right balance between 

making timely and accurate payments and ensuring 

that controls put in place are not too costly or overly 

burdensome and thereby deter intended beneficiaries from 

obtaining funds they are entitled to receive. Additionally, 

the Department must rely heavily on controls established 

by external entities that receive Department payments, 

including federal, state, and private organizations and 

institutions, because they further distribute funds they 

receive from the Department to subordinate organizations 

and individuals. Due to these third-party controls being 

outside of the Department’s operational management, 

they present a higher risk to the Department, as evidenced 

by its root cause analysis. When control deficiencies are 

detected, either within the Department or at external 

entities, the Department seeks to identify their root causes, 

develop corrective action plans, and track corrective 

actions through to completion.

To further promote payment integrity, the Department 

continues to develop its Payment Integrity Monitoring 

Application (PIMA), which detects anomalies in grants 

payment data. Case management files for payment anomalies are established within the application for follow-up 

investigation by the Department’s grants program officials 

to validate improper payments and determine root causes. 

Additionally, the Department continues to develop its 

internal control framework to address gaps, strengthen 

internal control processes, and align assessments with 

enterprise risk management. Both efforts reflect the 

Department’s recognition of the critical importance that 

payment integrity plays in demonstrating financial stewardship to the American taxpayer.

D E S C R I P T I O N O F R I S K- S U S C E P T I B L E A N D 

H I G H - P R I O R I T Y P R O G R A M S 

In FY 2021, the Federal Pell Grant and William D. Ford 

Federal Direct Loan programs continued to be susceptible 

to significant improper payments and remained OMBdesignated high-high priority programs. Also, in FY 2021, 

the Department continued monitoring outlays of grant 

programs receiving funding for disaster relief. According 

to OMB Memorandum M-18-14, Implementation of 

Internal Controls and Grant Expenditures for the DisasterRelated Appropriations, any disaster-related program with 

$10 million or more in outlays in a given fiscal year is 

deemed susceptible to significant improper payments. 

The Department identified three programs that met 

this criterion: the Temporary Emergency Impact Aid 

for Displaced Students (Emergency Impact Aid), 

Immediate Aid to Restart School Operations (Restart) 

and the Emergency Assistance to Institutions of Higher 

Education (EAI) program. Additionally, at the conclusion 
142 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

OTHER INFORMATION | PAYMENT INTEGRITY INFORMATION ACT REPORTING

of FY 2020’s improper payment risk assessment, the 

Department identified the Title I, Part A (Title I) as being 

susceptible to significant improper payments. 

The Department continues to place additional emphasis 

to ensure payment integrity and minimize improper 

and unknown payments in these important programs as 

required by OMB guidance. Readers can obtain a detailed 

breakdown of information on improper and unknown 

payment estimates, root causes, and corrective actions for 

the programs at https://paymentaccuracy.gov.

P E L L G R A N T 

The Pell Grant Program, authorized under Title IV 

of the Higher Education Act of 1965 (HEA), provides 

need-based grants to low-income undergraduate and 

certain post-baccalaureate students to promote access to 

postsecondary education. 

D I R EC T LO A N 

The Direct Loan Program, added to HEA in 1993 by 

the Student Loan Reform Act of 1993, authorizes the 

Department to make loans through participating schools 

to eligible undergraduate and graduate students and 

their parents.

T E M P O R A RY E M E R G E N CY I M PAC T A I D 

FOR DISPLACED STUDENTS

The Temporary Emergency Impact Aid for Displaced 

Students (Emergency Impact Aid) program awards 

emergency impact aid funding to state educational 

agencies (SEA). SEAs provide subgrants to local 

educational agencies (LEA) to reimburse the costs of 

educating students enrolled in public schools (both 

traditional and charter) and nonpublic elementary and 

secondary schools, who were displaced by a covered 

disaster or emergency.

I M M E D I AT E A I D TO R E S TA R T 

S C H O O L O P E R AT I O N S 

The Immediate Aid to Restart School Operations (Restart) 

program awards grants to eligible SEAs to assist eligible 

LEAs and nonpublic schools with expenses related to the 

restart of elementary schools and secondary schools in 

areas impacted by a covered disaster or emergency. Funds 

may be used to assist school administrators and personnel 

in restarting school operations, reopening schools, and 

reenrolling students.

EMERGENCY ASSISTANCE TO INSTITUTIONS OF 

HIGHER EDUCATION

The Emergency Assistance to Institutions of Higher 

Education (EAI) program awards grants for emergency 

assistance to eligible Institutions of Higher Education 

(IHE) for which a major disaster or emergency has been 

declared. Funds awarded assist activities directly related to 

mitigating the effects of a covered disaster or emergency 

on students and institutions. To the extent possible, EAI 

prioritizes projects that support students who are homeless 

or who are at risk of becoming homeless as a result of 

displacement related to a covered disaster or emergency; 

and IHEs that have sustained extensive damage by a 

covered disaster or emergency. 

TITLE I, PART A

Title I, Part A (Title I) of the Elementary and Secondary 

Education Act, as amended by the Every Student Succeeds 

Act (ESEA) provides financial assistance to LEAs and 

schools with high numbers or high percentages of children 

from low-income families to help ensure that all children 

meet challenging state academic standards. Federal funds 

are currently allocated through four statutory formulas 

that are based primarily on census poverty estimates and 

the cost of education in each state.

In FY 2021, the Department used statistically valid 

sampling and estimation methodologies to estimate the 

improper payment rates for the Pell Grant, Direct Loan, 

Emergency Impact Aid, Restart, EAI and Title I programs. 

The methodologies used for each of these programs 

are described in detail on the Department’s improper 

payments website.

For detailed information on Pell Grant, Direct Loan, 

Emergency Impact Aid, Restart, EAI, and Title I improper 

payment estimates in FY 2021 and prior years, please visit 

https://paymentaccuracy.gov.

AC T I O N S TA K E N TO A D D R E S S AU D I TO R 

RECOVERY RECOMMENDATIONS

Agencies are required to conduct recovery audits for all 

programs and activities that expend more than $1 million 

in a fiscal year, if conducting such audits would be costeffective. The Department determined that payment 

recapture audits would not be cost effective for any of its 

loan and grant programs or for contracts. A comprehensive 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 143

PAYMENT INTEGRITY INFORMATION ACT REPORTING | OTHER INFORMATION

report on the cost effectiveness of the various recapture 

audit programs can be found in the Department’s 

FY 2012 Report on the Department of Education’s 

Payment Recapture Audits.

The Department identifies and recovers improper 

payments through sources other than payment recapture 

audits and works with grantees and Title IV (FSA) 

program participants to resolve and recover amounts 

identified in compliance audits, OIG audits, and 

Department-conducted program reviews. The Department 

also analyzes the return of grant funds from recipients to 

determine if they are due to improper payments. When 

an improper payment is detected and deemed collectable, 

the Department establishes an account receivable and 

pursues collection. Recoveries are also made through 

grant program, payroll, and other offsets. Recipients of 

Department funds can appeal management’s decisions 

regarding funds to be returned to the Department 

or they may go bankrupt before the Department can 

collect, thereby delaying or decreasing the amounts 

the Department is able to collect. Additionally, the 

Department has wide discretion to decide not to collect 

improper payments from grantees in cases where it 

determines that pursuing collections would cause more 

harm to the federal interest. For these and other reasons, 

not all identified improper payments will ultimately be 

collected and collections will not necessarily be made in 

the same year the improper payments were identified. 

The Department continues to work to improve its 

methods to identify, collect, and report on improper 

payment collections. For detailed information on 

identified and recovered improper payments in FY 2021, 

readers can visit https://paymentaccuracy.gov.
144 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, as amended, requires agencies to make 

regular and consistent inflationary adjustments of civil monetary penalties to maintain their deterrent effect. To 

improve compliance with the act, and in response to multiple audits and recommendations, agencies should report annually 

in the Other Information section the most recent inflationary adjustments to civil monetary penalties to ensure penalty 

adjustments are both timely and accurate.

Location for Penalty Update Details:

https://www.federalregister.gov/documents/2021/02/03/2021-02231/adjustment-of-civil-monetary-penalties-for-inflation

Table 15

Penalty Authority Date of Previous 

Adjustment

Date of Current 

Adjustment

Current Penalty 

Level

Failure to provide information for cost of higher education 20 USC 

1015(c)(5) 1-14-20 2-03-21 $ 39,693

Failure to provide information regarding teacherpreparation programs20 USC 

1022d(a)(3) 1-14-20 2-03-21 33,062

Violation of Title IV of the HEA 20 USC 1082(g) 1-14-20 2-03-21 59,017

Violation of Title IV of the HEA 20 USC 

1094(c)(3)(B) 1-14-20 2-03-21 59,017

Failure to disclose information to minor children and parents 20 USC 

1228c(c)(2)(E) 1-14-20 2-03-21 1,742

Improper lobbying for government grants and contracts

31 USC 

1352(c)(1) and 

c(2)(A)

1-14-20 2-03-21

20,731

 to

207,314

False claims and statements 31 USC 3802(a)(1) 

and (a)(2) 1-14-20 2-03-21 11,803

Civil Monetary Penalty Adjustment for Inflation
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 145

The goal of the Grants Oversight and New Efficiency (GONE) Act of 2016 (Pub. L. No. 114-117) was to close out grants 

and cooperative agreements that are in manual closeout with zero dollars and undisbursed balances and whose period of 

performance has exceeded two years. Although the Grants Oversight and New Efficiency Act reporting requirements have 

expired, the Office of Management Circular A-136, Section II.4.9, Grants Programs (August 10, 2021) requires similar 

information to be reported in the Other Information section. See Table 16 below.

Starting with an October 3, 2016, baseline of 8,948 grants and cooperative agreements totaling approximately $2 billion 

in various statuses of the closeout process, the Department succeeded in closing out 100 percent of the required grants 

and cooperative agreements during FY 2018. As of September 30, 2021, the Department had 165 grants and cooperative 

agreements totaling approximately $59.7 million in various statuses of the closeout process. See Table 16 below.

In FY 2020, the Department’s Office of Inspector General (OIG) performed a risk assessment of the Department’s grant closeout 

process and issued their results via memorandum. They identified risks with the reliability of grant data and related GONE 

Act reporting, as well as the Department’s grant closeout policies and procedures, including a policy allowing older grants to be 

closed in compliance without required reports being provided by the grantee. In addition, the OIG found that both the volume 

of expired grants and amount of undisbursed grant funds significantly increased between the date of initial GONE Act reporting 

(September 30, 2017) and January 30, 2020, indicating that grant closeout is less of a focus now that GONE Act reporting is 

over. The memorandum is available at https://www2.ed.gov/about/offices/list/oig/auditreports/fy2020/s19u0002.pdf.

Overall, the Office of Finance and Operations (OFO) agreed with the OIG assessment and noted its intention to move 

forward with grant policy deliberation consistent with the results of the assessment. Approved in July 2020, the Handbook 

for the Discretionary Grants Process (Handbook) includes policy requiring program officials to provide to the Deputy 

Assistant Secretary of the Office of Acquisition and Grants Administration (OAGA) a report on the status of Federal grants 

or cooperative agreements in the Department’s grant management system, G5, that have been in manual closeout status for 

two years or more. The report will include a narrative of the challenges leading to delays in grant and cooperative agreement 

award closeout and the planned corrective action to address these challenges. OAGA is now receiving reports from the 

program officials and will monitor progress on the proposed corrective actions.

During the summer of 2020, OAGA offered a financial monitoring curriculum for formula and discretionary grants aligned 

with the Standards for Financial Management in 2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit 

Requirements for Federal Awards, addressing cash management and drawdown activity of grantees’ utilization of funds consistent 

with an approved scope of work aimed at reducing issues associated with grant closeouts. The content of the sessions included 

the Handbook policy referencing grants and cooperative agreements in manual closeout status for two years or more and the 

submission of reporting with corrective actions to the Deputy Assistant Secretary of OAGA.

Table 16

Category 2–3 Years FY 2018–19 3–5 Years Years FY 2017–18 > 5 Years before FY 2016

Number of Grants/Cooperative 

Agreements with Zero 

Dollar Balances

53 2 -

Number of Grants/Cooperative 

Agreements with Undisbursed 

Dollar Balances

110 - -

Total Amount of 

Undisbursed Balances $59,675,808 - -

Source: G5, grants management system linked to the Department’s general ledger system. Data is based on the performance end date of September 30, 2019.

The Grants Oversight and New Efficiency 

(Gone) Act of 2016 and Education’s Grant 

Closeout Process 
This page intentionally left blank.
APPENDICES
148 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

Appendix A: Selected Department Web Links 

and Education Resources

COLLEGE COMPLETION TOOLKIT

The College Completion Toolkit provides information 

that governors and other state leaders can use to help 

colleges in their state increase student completion rates. It 

highlights key strategies and offers models to learn from, 

as well as other useful resources. https://www.ed.gov/

college-completion/completion-toolkit

COLLEGE COST LISTS

The Department provides college affordability and 

transparency lists under the Higher Education Opportunity 

Act of 2008. Each list is broken out into nine different 

sectors to allow students to compare costs at similar types 

of institutions, including career and technical programs. 

http://collegecost.ed.gov/

COLLEGE FINANCING PLAN

The College Financing Plan is a consumer tool that 

participating institutions use to notify students about 

their financial aid packages. It is a standardized form that 

is designed to simplify the information that prospective 

students receive about costs and financial aid so that 

they can easily compare institutions and make informed 

decisions about where to attend school. https://www2.

ed.gov/policy/highered/guid/aid-offer/index.html

COLLEGE NAVIGATOR

College Navigator consists of the latest data from the 

Integrated Postsecondary Education Data System, and 

the core postsecondary education data collection program 

for the National Center for Education Statistics, as well 

as data from Federal Student Aid on cohort default rates, 

the Office of Postsecondary Education on campus safety 

and accreditation, and information on veterans from the 

Veterans Benefits Administration. https://nces.ed.gov/

collegenavigator/

COLLEGE PREPARATION CHECKLIST

This Department tool gives prospective college students 

step-by-step instructions on how to prepare academically 

and financially for education beyond high school. Each 

section is split into subsections for students and parents, 

explaining what needs to be done and which publications or 

websites might be useful to them. http://studentaid.ed.gov

These additional resources within the checklist assist 

students in finding scholarships and grants:

https://studentaid.ed.gov/sa/prepare-for-college/checklists

https://studentaid.ed.gov/sa/types/grants-scholarships/

finding-scholarships

COLLEGE SCORECARD

The Department’s College Scorecard makes it easier 

to find out more about a college’s affordability and 

value. The College Scorecard continues to be a tool that 

provides clear, accessible, and reliable data on college 

cost, graduation, debt, and post-college earnings. The 

College Scorecard continues to move the field forward in 

informing college choices with the help of technology and 

open data, making it possible for anyone—a student, a 

school, a policymaker, or a researcher—to decide which 

factors to evaluate. https://collegescorecard.ed.gov/

C O N D I T I O N O F E D U C AT I O N A N D D I G E S T 

OF EDUCATION STATISTICS

The Condition of Education is a congressionally mandated 

annual report that summarizes developments and trends 

in education using the latest available statistics. The report 

presents statistical indicators containing text, figures, and 

data from early learning through graduate-level education, 

as well as labor force outcomes and international 

comparisons. https://nces.ed.gov/programs/coe/
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 149

SELECTED DEPARTMENT WEb LINKS AND EDUCATION RESOURCES | APPENDICES

The primary purpose of the Digest of Education Statistics 

is to provide a compilation of statistical information 

covering the broad field of American education from 

prekindergarten through graduate school. The digest 

includes a selection of data from many sources, both 

government and private, and draws especially on the 

results of surveys and activities carried out by the National 

Center for Education Statistics. https://nces.ed.gov/

programs/digest/

E D U C AT I O N R E S O U R C E S 

INFORMATION CENTER

The Department offers Education Resources Information 

Center (ERIC)—the world’s largest free, digital 

library of education research. It is composed of 1.8 

million bibliographic records and 400,000 full-text 

materials indexed from 1966 to the present. Each ERIC 

bibliographic record contains an abstract of a journal 

article or grey literature document (for example, a 

technical report or conference paper), along with such 

indexed information as author, title, and publication date. 

https://eric.ed.gov

FEDERAL PROGRAM INVENTORY

The GPRA Modernization Act of 2010, P.L. 111-352, 

requires that the Office of Management and Budget 

(OMB) establish a single website with a central inventory 

of all federal programs, including the purpose of each 

program and its contribution to the mission and goals of 

the Department. The initial Federal Program Inventory 

was published in May 2013. The Department described 

each program within 27 budgetary accounts, as well as 

how the programs support the Department’s broader 

strategic goals and objectives.

Since that time, Congress passed the Digital Accountability 

and Transparency Act (DATA Act) requiring new public 

reporting requirements, which impact the definition 

of programs used in this guidance. OMB is currently 

working with agencies to merge the implementation 

of the DATA Act and the Federal Program Inventory 

requirements to the extent possible to avoid duplicate 

efforts. In December 2020 OMB launched an exploratory 

pilot as the next step towards creating a coherent and 

comprehensive inventory. This site provides the history of 

the Federal government’s efforts to create an inventory as 

well as key insights, data from the pilot, and planned next 

steps. https://fpi.omb.gov/

G OV E R N M E N T AC C O U N TA b I L I T Y O F F I C E 

The Government Accountability Office (GAO) supports 

Congress in meeting its constitutional responsibilities and 

helps improve the performance and accountability of the 

federal government for the benefit of the American people. 

https://www.gao.gov/agencies/department-education

GRANTS INFORMATION AND RESOURCES

In addition to student loans and grants, the Department 

offers other discretionary grants. These are awarded using 

a competitive process, and formula grants use formulas 

determined by Congress with no application process. This 

site lists Department discretionary grant competitions 

previously announced, as well as those grant competitions 

planned for later announcement, for new awards organized 

according to the Department’s principal program offices. 

http://www2.ed.gov/fund/grant/find/edlite-forecast.

html

For more information on the Department’s programs, see 

http://www2.ed.gov/programs

N AT I O N A L A S S E S S M E N T O F 

E D U C AT I O N A L P R O G R E S S 

The National Assessment of Educational Progress (NAEP) 

assesses samples of students in grades 4, 8, and 12 in 

various academic subjects. Results of the assessments are 

reported for the nation and states in terms of comparable 

scale scores and achievement levels—NAEP Basic, NAEP

Proficient, and NAEP Advanced. https://nces.ed.gov/

nationsreportcard/

O F F I C E O F I N S P EC TO R G E N E R A L 

The Office of Inspector General (OIG) conducts 

independent and objective audits, investigations, 

inspections, and other activities to promote the efficiency, 

effectiveness, and integrity of the Department’s programs 

and operations. http://www.ed.gov/about/offices/list/

oig/index.html

For a list of recent reports, go to http://www2.ed.gov/

about/offices/list/oig/reports.html

O N E - S TO P S H O P P I N G FO R 

STUDENT LOANS

The Department provides a site where students can 

manage their loans. http://studentloans.gov/
150 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

APPENDICES | SELECTED DEPARTMENT WEb LINKS AND EDUCATION RESOURCES

PERFORMANCE DATA

EDFacts is a Department initiative to put performance 

data at the center of policy, management, and budget 

decisions for all K–12 educational programs. EDFacts

centralizes performance data supplied by K–12 state 

educational agencies with other data assets within the 

Department, such as financial grant information, to enable 

better analysis and use in policy development, planning, 

and management. http://www.ed.gov/about/inits/ed/

edfacts/index.html

P R O J EC T I O N S O F E D U C AT I O N S TAT I S T I C S 

TO 2 0 2 8 

For the 50 states, jurisdictions, and the District of 

Columbia, the tables, figures, and text in this report 

contain data on projections of public elementary and 

secondary enrollment and public high school graduates to 

the year 2028. The report includes a methodology section 

that describes the models and assumptions used to develop 

national and state-level projections. https://nces.ed.gov/

pubs2020/2020024.pdf

R EG I O N A L E D U C AT I O N A L 

LAbORATORY PROGRAM

The Department administers the Regional Education 

Laboratory (REL) program to support the use of research 

and evidence to help states and school districts improve 

their education programs and, ultimately, student 

performance. To do this, each regional REL contractor 

works with teachers, administrators, and policy makers 

to identify “high-leverage” problems of practice and to 

build the research capacity of local stakeholders. Each REL 

develops partnerships with state- and local-level education 

agencies to gather and analyze data, conduct evaluations, 

and provide technical assistance that addresses these “highleverage” problems. https://ies.ed.gov/rels

R E S O U R C E S FO R A D U LT, C A R E E R , A N D 

T EC H N I C A L E D U C AT I O N 

The Department continues to support state and local 

efforts to implement high-quality secondary and 

postsecondary career and technical education programs 

under the nation’s $1.3 billion investment in funding 

under the Carl D. Perkins Career and Technical 

Education Act (Perkins V). Among the Department’s 

efforts is hosting the Perkins Collaborative Resource 

Network (PCRN) website that provides a one-stop 

shop for information, resources, and data pertaining to 

Perkins V CTE programs. The PCRN Website provides 

individual state profiles containing Perkins V State Plans, 

fiscal information, and accountability data; tools and 

resources from Department-sponsored national activities 

investments; and a Perkins V data explorer where users 

can run reports on trends in student participation and 

outcomes in CTE programs. http://cte.ed.gov

To support the Workforce Innovation and Opportunity 

Act (WIOA), the Department offers professional 

development resources through the Literacy Information 

and Communication System (LINCS). This initiative 

seeks to expand evidence-based practice in the field of 

adult education and literacy. LINCS serves as Office 

of Career, Technical, and Adult Education’s (OCTAE) 

primary outreach and dissemination mechanism to 

adult educators and provides high-quality, on-demand 

educational opportunities to practitioners of adult 

education and literacy, so those practitioners can help 

adult learners successfully transition to postsecondary 

education and 21st-century jobs. LINCS is comprised of: 

the LINCS Resource Collection, which provides online 

access to high-quality, evidence-based materials and 

instructional resources; the LINCS Community, a virtual 

professional learning space where adult educators can 

engage in discussions focused on critical topics to the field 

of adult education; a Learning Portal that offers anytime, 

anywhere professional development courses; a Professional 

Development Center that provides technical assistance 

to states in meeting the state leadership requirements set 

forth in WIOA; and the Learner Center, which provides 

access to federally developed or federally reviewed 

resources to assist adult learners in reaching their learning 

goals. http://lincs.ed.gov/

W H AT W O R KS C L E A R I N G H O U S E P R AC T I C E 

GUIDES FOR EDUCATORS

The Department offers practice guides and other resources 

that help educators address everyday challenges faced in 

classrooms and schools. Developed by a panel of nationally 

recognized experts, practice guides consist of actionable 

recommendations and strategies for overcoming potential 

roadblocks.; The practice guides also provide indication of 

the strength of evidence supporting each recommendation. 

The guides themselves are subjected to rigorous external 

peer review. Users can sort by subject area, academic level, 

and intended audience to find the most recent, relevant, 

and useful guides. https://whatworks.ed.gov
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 151

Appendix b: Glossary of Acronyms 

and Abbreviations

ABCP Asset-backed Commercial Paper

AFR Agency Financial Report

AP Acquisition Plan

APG Agency Priority Goals

APR Annual Performance Reports

ARP American Rescue Plan Act of 2021

BIE bureau of Indian Education

BOD binding Operational Directive

BPO business Process Operations

BPR business Processing Re-Engineering

CARES Coronavirus Aid, Relief, and 

Economic Security Act of 2020

CEAR Certificate of Excellence in 

Accountability Reporting 

CISA Cybersecurity and Infrastructure 

Security Agency

CIT Central Information Technology

COVID-19 Coronavirus Disease 2019

CPSS Contracts and Purchasing Support 

System

CRRSAA Coronavirus Response and Relief 

Supplemental Appropriation Act of 

2021

CSF Cyber Security Framework

CSRS Civil Service Retirement System

CTE Career and Technical Education

DATA Act Digital Accountability and 

Transparency Act of 2014

DCC Digital and Customer Care

DCIA Debt Collection Improvement Act of 

1996

DDB Death, Disability, and bankruptcy

Department U.S. Department of Education

DGB Data Governance board

DHS U.S. Department of Homeland 

Security

Direct Loan William D. Ford Federal Direct Loan

DL Direct Loan 

DLP Data Loss Prevention

DMA Data Maturity Assessment 

DOL U.S. Department of Labor

DQP Data Quality Plan

EAI Emergency Assistance to Institutions 

of Higher Education

ECASLA Ensuring Continued Access to 

Student Loans Act of 2008

EDCAPS Education Central Automated 

Processing System

EDGMSS-BPA Education Grants Management 

Support Services-blanket Purchase 

Agreement

EDMAPS Enterprise Data Management and 

Analytics Platform Services

EIA Emergency Impact Aid

ELG Evidence Leadership Group 

Emergency 

Impact Aid Temporary Emergency Impact Aid for 

Displaced Students

EO Executive Order’ 

EPM Enterprise Performance Management 

ERIC Education Resources Information 

Center

ERR Entity Risk Review

ERMWG Enterprise Risk Management 

Working Group

ESEA Elementary and Secondary 

Education Act

ESF Education Stabilization Fund

ESSA Every Student Succeeds Act

ESSER Elementary and Secondary School 

Emergency Relief

FAFSA® Free Application for Federal Student 

Aid
152 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

APPENDICES | SELECTED DEPARTMENT WEb LINKS AND EDUCATION RESOURCES

FASAB Federal Accounting Standards 

Advisory board

FCRA Federal Credit Reform Act of 1990

FECA Federal Employees’ 

Compensation Act

FERS Federal Employees Retirement 

System

FFB Federal Financing bank

FFEL Federal Family Education Loan

FFMIA Federal Financial Management 

Improvement Act of 1996

FIPSE Fund for the Improvement of 

Postsecondary Education 

FISMA 2014 Federal Information Security 

Modernization Act of 2014

FMFIA Federal Managers’ Financial Integrity 

Act of 1982

FMSS Financial Management Support 

System

FR Financial Report of the U.S. 

Government 

FSA Federal Student Aid

FUTURE Act Fostering Undergraduate Talent by 

Unlocking Resources for Education 

Act

FY Fiscal Year

G5 Grants Management System 

GAAP Generally Accepted Accounting 

Principles

GAO Government Accountability Office

GEER Governor’s Emergency 

Education Relief

GONE Act Grants Oversight and New Efficiency 

Act of 2016

GPO Grants Policy Office

GPRA Government Performance and 

Results Act of 1993

GSA General Services Administration

HBCU Historically black Colleges and 

Universities

HEA Higher Education Act of 1965

HEAL Health Education Assistance Loans

HEERF Higher Education Emergency Relief 

Fund

HHS U.S. Department of Health and 

Human Services

HTTPS Hypertext Transfer Protocol Secure

HVA High Value Asset

ICT Information Communication 

Technology

IDEA Individuals with Disabilities 

Education Act 

IDR Income-Driven Repayment

IEP Individualized Education Program 

IES Institute of Education Sciences

IET Integrated Education and Training

IHE Institutions of Higher Education

IPP Invoice Processing Platform

IPERA Improper Payments Elimination and 

Recovery Act of 2010

IPERIA Improper Payments Elimination and 

Recovery Improvement Act of 2012

IRS Internal Revenue Service

IT Information Technology

LEA Local Educational Agency

LINCS Literacy Information and 

Communication System

MSI Minority Serving Institutions

NAEP National Assessment of Educational 

Progress

NES National Engagement Strategy

Next Gen FSA Next Generation Federal Student Aid

NIST National Institute of Standards and 

Technology

NSLDS® National Student Loan Data System

OAGA Office of Acquisition and Grants 

Administration

OCDO Office of the Chief Data Officer 

OCIO Office of the Chief Information Officer

OCR Office for Civil Rights

OCTAE Office of Career, Technical, and 

Adult Education
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 153

SELECTED DEPARTMENT WEb LINKS AND EDUCATION RESOURCES | APPENDICES

ODP Open Data Platform

OEDARM Office of Enterprise Data Analytics 

and Risk Management

OELA Office of English 

Language Acquisition

OESE Office of Elementary and Secondary 

Education

OFM Office of Financial Management 

OFO Office of Finance and Operations

OGC Office of the General Council

OHR Office of Human Resources

OIG Office of Inspector General

OMB Office of Management and Budget

OPD Open Data Platform

OPE Office of Postsecondary Education

OPEN Open, Public, Electronic 

and Necessary

OPEPD Office of Planning, Evaluation, and 

Policy Development

OPM Office of Personnel Management

OS Office of the Secretary

OSERS Office of Special Education and 

Rehabilitative Services

P–12 Prekindergarten Through 12th Grade 

PAYE Pay as You Earn

Pell Federal Pell Grant

Pell Program Pell Grant Program 

PIIA Payment Integrity Information Act of 

2019

PIMA Payment Integrity Monitoring 

Application

PIV Personal Identity Verification

PIV-A Personal Identity Verification 

Alternative Solution

PLUS Parent Loan for Undergraduate 

Students 

PO Principal Office

POA&M Plan of Actions & Milestones 

President’s

Budget Budget of the United States 

Government

PSLF Public Service Loan Forgiveness

QSMO Quality Service Management Offices

REL Regional Educational Laboratory

Report Annual Performance Report and

and Plan Annual Performance Plan

RESTART Immediate Aid to Restart School 

Operations 

SBR Statement of budgetary Resources

SCRM Supply Chain Risk Management

SEA State Education Agency

SFS Scholarship for Services

SLA Service-Level Agreement

SSA Social Security Administration

STEM Science, Technology, Engineering, 

and Mathematics

TBMS Technology business Management 

Solutions

TCCU American Indian Tribally Controlled 

Colleges and Universities 

TEACH Teacher Education Assistance for 

College and Higher Education Grant

TEPSLF Temporary Expanded Public Service 

Loan Forgiveness

Title I Title I, Part A

TOP Treasury Offset Program

TPD Total and Permanent Disability 

TPDR Third-Party Debt Relief

Treasury U.S. Department of Treasury

VDP Vulnerability Disclosure Policy

VPN Virtual Private Network

WIOA Workforce Innovation and 

Opportunity Act
154 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

Acknowledgments

This Agency Financial Report was produced with 

the energies and talents of our employees and 

contract partners.

Within the Office of Finance and Operations (OFO), 

the Office of Financial Management is responsible 

for certifying, processing, reconciling, evaluating, and 

reporting all agency financial transactions; preparing 

annual financial statements and related notes and 

schedules; and coordinating the external audit of the 

agency’s financial statements.

Also, within OFO, the Office of Budget Service has lead 

responsibility for multiple functions, including developing 

and implementing the Department’s Budget. The Office of 

Acquisition and Grants Administration (OAGA) leads the 

Department toward effective, efficient, and accountable 

acquisition management, as well as develops, manages, 

and provides policy guidance and oversight of the 

Department’s grant management activities and operations.

The Contracts and Acquisitions Management Division, 

within OAGA, is responsible for the solicitation, award, 

administration, and closeout of all contracts and other 

acquisition instruments for the Department.

We offer our sincerest thanks and acknowledgment to 

staff of all participating principal offices. In particular, we 

recognize the following organizations for their contribution:

OTHER CONTRIbUTORS

Federal Student Aid

Office of Communications and Outreach

Office of Planning, Evaluation, and Policy Development

Office of the Chief Information Officer

Office of the Inspector General

Office of the Secretary

PARTNERS

Association of Government Accountants

Department of Treasury

Government Accountability Office

Office of Management and Budget

The following companies were contracted to assist in the 

preparation of the U.S. Department of Education 

FY 2021 Agency Financial Report:

FOR GENERAL LAYOUT AND WEb DESIGN

OmniStudio Inc.

FOR ACCOUNTING SERVICES

Cotton & Company LLP

FMR Consulting Inc.

Quality Software Services Inc.

The FY 2021 Agency Financial Report 

U.S. Department of Education

Office of Finance and Operations

An electronic version is available 

on the World Wide Web at 

http://www2.ed.gov/about/reports/annual/index.html

U.S. Department of Education, November 2021
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Our Mission is to promote student achievement and 

preparation for global competitiveness by fostering 

 educational excellence and ensuring equal access.

WWW.ED.GOV