32 FY 2019 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

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. Credit Programs for Higher Education: Credit 

Program Receivables, Net and Liabilities for 

Loan Guarantees

Note 6. Liabilities Not Covered by 

Budgetary Resources

Note 7. Debt

Note 8. Subsidy Due to Treasury General Fund

Note 9. Other Liabilities

Note 10. Net Cost of Operations 

Note 11. Statements of Budgetary Resources

Note 12. Reconciliation of Net Cost to Net Outlays 

Note 13. Commitments and Contingencies

Note 14. Reclassification of Balance Sheet, Statement 

of Net Cost, and Statement of Operations 

and Changes in Net Position for FR 

Compilation Process

ABOUT THE FINANCIAL SECTION

FINANCIAL SECTION | ABOUT THE FINANCIAL SECTION

I

n FY 2019, 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.
ABOUT THE FINANCIAL SECTION | FINANCIAL SECTION

FY 2019 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 33

Supplementing state and local government funding, the 

Department utilizes its annual appropriations and outlay 

authority to foster human capital improvements across the 

nation by supporting programs along the entire spectrum 

of “cradle to career” education. Increased employability 

makes Americans more competitive in the global labor 

market, yielding lower unemployment, higher economic 

well-being, and greater security for the nation.

REPORT OF THE INDEPENDENT AUDITORS

The results of the audit of the Department’s financial 

statements for FY 2019 and FY 2018 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 (OIG) contracted with the 

independent certified public accounting firm of KPMG 

LLP to audit the financial statements of the Department 

as of September 30, 2019, and 2018, and for the years 

then ended. 

REQUIRED SUPPLEMENTARY 

INFORMATION (UNAUDITED)

This section contains the Combining Statements of 

Budgetary Resources for the Years Ended September 30, 

2019, and 2018.

REQUIRED SUPPLEMENTARY STEWARDSHIP 

INFORMATION (UNAUDITED)

Stewardship Expenses summarize spending and 

stakeholder relationships with state and local educational 

agencies. Stewardship resources are substantial investments 

by the federal government for the long-term benefit of the 

nation. Since costs of stewardship resources are treated as 

expenses in the financial statements in the year the costs 

are incurred, they are reported as Required Supplementary 

Stewardship Information to highlight the benefit nature of 

the costs and to demonstrate accountability.