FY 2016 Agency Financial Report—U.S. Department of Education iii

Message From the Secretary 

November 14, 2016 

Fiscal year 2016 has been an exciting year. I want to take a moment to 

share and celebrate what I have seen and learned and reflect on our 

progress across the country as our work continues on behalf of 

students, teachers, and families. 

Our mission at the Department is to promote student achievement and 

preparation for global competitiveness by fostering educational 

excellence and ensuring equal access. The Department’s FY 2016 

Agency Financial Report (AFR), presented here, contains the 

Department’s financial and performance highlights over the fiscal year 

ending September 30, 2016. During 2016, I set three priorities for the 

Department to focus on: first, we must provide continued support for states, districts, and 

educators in their work to advance educational equity and excellence for every child; second, 

we must be committed to lifting up the teaching profession; and third, we must continue to 

progress on advancing access, affordability, and completion in higher education. 

Thanks to the work of the Department, states, schools, students, educators, families, and 

communities, the country can demonstrate significant progress in education, from early learning 

through college. 

For example, more of our youngest learners have access to quality preschool than ever before, 

through $1.5 billion in federal investments from this agency and more robust state support for 

early learning. In 2016, the Department announced another important milestone: America’s 

high school graduation rate hit a record high at just over 83 percent, with more traditionally 

underserved students graduating. Dropout rates are at historic lows, and more students—

particuarly African-American and Hispanic students—are enrolling in and graduating from 

college, representing an expansion of opportunity for millions of students. 

Equality of opportunity is a core American value that helps form our national identity, solidify our 

democracy, and strengthen our economy. Despite progress, persistent educational opportunity 

gaps undermine that ideal across the country. In early FY 2016, however, the nation received a 

new tool to improve education for all: the Every Student Succeeds Act (ESSA), which was 

signed by the President on December 10, 2015. 

ESSA advances equity by upholding critical protections and maintaining dedicated resources for 

America’s most disadvantaged students. The law requires that action will be taken to improve 

outcomes for students in schools that chronically underperform, that do not improve low 

graduation rates over time, and that do not ensure progress for all students. Importantly, ESSA 

provides the chance to build on the progress we have made over the last eight years to improve 

our elementary and secondary schools, and to ensure that all children receive a rigorous, wellrounded education that prepares them to thrive in college and careers. 

Our public elementary and secondary schools have undergone some of the most significant 

changes in decades over the last eight years—work that is being led by educators who are 

retooling their classroom practices to adapt to new and higher standards. The Department 

continues to support these efforts and knows results will not be seen overnight, so we need to 

be patient but not passive in continuing to pursue the goal of preparing all students for success 

after high school. 
MESSAGE FROM THE SECRETARY

iv FY 2016 Agency Financial Report—U.S. Department of Education 

It is critically important to keep a college degree within reach for all families so that our 

institutions of higher education act as a bridge, not a barrier, to greater prosperity and selffulfillment. There is an urgent need to rein in the unsustainable cost of college and reverse the 

devastating slide in state support for higher education—a primary driver behind escalating 

tuition. 

When it comes to college success, the most expensive degree is the one you never get: an 

analysis by the Office of Federal Student Aid last year found that students who drop out of 

college with debt and no degree are three times more likely to default on their loans than 

borrowers who graduate. Although the percentage of young adults with some college 

experience has increased considerably, their likelihood of graduating strongly correlates with 

income or racial background, which means that we must shift our attention toward the more 

essential metric of success: completion of a high-quality degree. 

The good news is that we are making progress toward reimagining higher education in ways 

that can make it more accessible, affordable, and, most importantly, scholastically attainable. 

We are working to hold institutions accountable for students’ success, and we are working to 

provide tools (such as those listed in appendix A) that help students, educators, and 

researchers. 

Performance Highlights 

In the Department’s FY 2014–2018 Strategic Plan, our mission is defined in six strategic goals 

and 22 supporting strategic objectives, as well as six programmatic two-year Agency Priority 

Goals, which are posted on performance.gov and reported in the FY 2015 Annual Performance 

Report and FY 2017 Annual Performance Plan. The performance data the Department reports 

are often self-reported by states and other entities, although typically entities reporting the data 

provide assurances of the data’s accuracy to the Department. Also, grantees and other 

recipients of federal funds disbursed by the Department are subject to monitoring, third-party 

audits and reviews of program compliance, and in some cases, specific management 

certifications attesting to accuracy and compliance with the Department’s accountability 

standards. In addition, the Department uses data system edit checks and program reviews. 

The Government Performance and Results Act Modernization Act of 2010 requires agencies to 

describe the accuracy and reliability of data presented in the Annual Performance Report and 

the Annual Performance Plan. Details of how the Department assesses the completeness and 

reliability of the data are reported and presented as part of Appendix A of the FY 2015 Annual 

Performance Report and FY 2017 Annual Performance Plan, and known limitations of the data 

are also included. 

Financial Management 

The Department is the smallest of the cabinet-level agencies in terms of staff, with a staffing 

level of over 4,200 full-time equivalents (FTE), yet it has the third-largest grant portfolio among 

the 26 federal grant-making organizations. Our balance sheet now exceeds $1.1 trillion in 

assets, primarily from student loans. The Department had over $1 trillion in loans outstanding at 

the end of the year, including new loans made in FY 2016, as well as the balances of old loans 

less collections of interest and principal. 

Good stewardship of taxpayers’ funds is a priority for our Department, and I have been assured 

that the financial data included in this AFR are complete and reliable in accordance with federal 

requirements. We received our 15th consecutive unmodified or “clean” audit opinion and no 

reported material internal control weaknesses. The financial report includes information and 
MESSAGE FROM THE SECRETARY 

assurances about the Department's financial management systems and controls, as well as 

control and compliance challenges noted by the Department and its auditors. 

Management Challenges 

The Office of Inspector General's (OIG) review, included in the Other Information section of this 

report, identifies five FY 2017 management challenges: improper payments, information 

technology security, oversight and monitoring, data quality and reporting, and information 

technology system development and implementation. 

Management understands its challenges and remains committed to addressing them. In 

FY 2016, the Department implemented cross-cutting initiatives in partnership with internal and 

external stakeholders to address the management challenges both within the context of our 

agency and within that of the government as a whole. The Department has collaborated with 

both government and private sector partners to explore solutions to payment and data integrity 

issues, address fraud risk and provide better oversight of our programs. Specific initiatives are 

highlighted as applicable in the Management's Discussion and Analysis section of this report. 

Outreach and Partnerships 

While states and state-level agencies provide most of the education funding in our nation, the 

Department's role as a disseminator of information is critical. We are reaching out to our 

stakeholders across many platforms, including theed.gov website; biogs, such as the 

Department's main blog, Homeroom; the Department's YouTube channel; newsletters; Twitter; 

and the Department's Facebook page. 

The Department continually meets and engages with stakeholders, including parent and student 

advocates, national organizations that represent the interests of higher education, primary and 

secondary education stakeholders, and civil rights and advocacy organizations. Through faceto-face meetings, on line and digital engagement, and stakeholder forums, we and our national 

partners share updates with state and local affiliates. 

Looking Ahead 

The Department's Fiscal Year 2014-2018 Strategic Plan, available on ed.gov and 

performance.gov, will be updated and revised by the next presidential administration, but the 

agency's core mission of advancing educational excellence and equity and ensuring equal 

access to quality teaching and learning will remain, as it has for almost four decades. The 

commitment to creating more opportunities and encouraging solutions that drive equity and 

excellence in the education system is one that the Department takes seriously. Together, we 

can accomplish great things for all students. 

SincerelyJj' %.!· 

John B. King, Jr~{) I 

FY 2016 Agency Financial Reporl- U.S. Department of Education V