MANAGEMENT’S DISCUSSION AND ANALYSIS 

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

About the Management’s Discussion and Analysis

The U.S. Department of Education (the Department) continued to enhance the usefulness of the 

Fiscal Year (FY) 2016 Agency Financial Report (AFR) by augmenting the report with relevant 

web content. To take advantage of the numerous hyperlinks embedded in the report, the 

Department recommends reading it on the Internet. The Department’s intent is to provide users 

with access to helpful information about the Department and its financial and performance 

activities. To help continue to improve the content of the AFR, readers are encouraged to 

provide their feedback 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. 

The Department has demonstrated its commitment to fortifying the education system by 

directing federal resources to, among other things: improve access to early learning programs, 

reform elementary and secondary education to strengthen critical outcomes, make higher 

education more accessible and affordable, and work to attract talented people to the teaching 

profession. The Department also demonstrated good stewardship of federal resources by 

producing complete and accurate financial reports and ensuring that its business and financial 

management systems and processes are well controlled and managed. 

Mission and 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, a map of 

its regional offices, and a link to the full list of Department offices with a description of selected 

offices by function. 

Discussion of Performance 

For the 8th year, the Department elected to produce separate financial and performance 

reports. The Agency Financial Report for FY 2016 provides a high-level description of 

performance measures and goals based on the FY 2014–18 Strategic Plan. A detailed 

discussion of performance information for FY 2016 will be provided in the Department’s Annual 

Performance Report to be released at the same time as the President’s FY 2018 Budget. The 

Department’s annual performance reports for prior years are available online at 

http://www2.ed.gov/about/reports/annual/index.html. 

The section includes an overview of performance reporting and a high-level discussion on the 

Department’s focus areas for FY 2016–17. The results achieved from Department expenditures 

are discussed at a high level in the AFR. For more details about performance, please refer to 

the Department’s budget and performance web page and performance.gov. Finally, the 

Forward-Looking Information section describes the challenges that the Department aims to 

address to achieve progress on Direct Loans, Shared Services, and Enterprise Risk 

Management (ERM). 

To view information on all Department programs, visit the Department’s website. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

FY 2016 Agency Financial Report—U.S. Department of Education 3 

Financial Highlights 

The Department expends a substantial portion of its budgetary resources and cash on multiple 

loan and grant programs intended to increase college access, quality, and completion; improve 

preparation for college and career from prekindergarten through 12th grade (P–12), especially 

for children with high needs; and ensure effective educational opportunities for all students. 

Accordingly, the Department has included more high-level details about sources and uses of the 

federal funds received and net costs by program. 

Analysis of Systems, Controls, 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. The revised OMB 

Circular A-123 is effective for FY 2016 and supersedes all previous versions. 

Because the Department produces an AFR, detailed performance reporting is included in the 

Annual Performance Report, as specified in OMB Circular A-11, Part 6, Section 260. A highlevel summary of performance is included in the AFR to provide context for reporting of financial 

data and assessment of controls. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

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

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. 

The Department makes funds and information available to individuals pursuing education, 

colleges and universities, state education agencies, and school districts by engaging in four 

major types 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; and 

 enforcing federal laws prohibiting discrimination in programs that receive federal funds. 

Our Public Benefit. The Department is committed to helping ensure that students throughout 

the nation develop skills to succeed in school, college, and the workforce. While recognizing the 

primary role of states and school districts in providing a high-quality education, the Department 

supports efforts to recruit, prepare, support, retain, and reward outstanding teachers and 

leaders in America’s schools. The Department supports efforts to help students succeed 

regardless of background or circumstance by establishing challenging content, setting high 

expectations for all students, and monitoring academic progress. 

The Department’s largest asset is the portfolio of student loans (see the Financial Highlights and 

Notes sections). Grants to states are the second-largest item, mostly for elementary and 

secondary education, awarded based on statutory formulas (see the chart on page 6). The third 

biggest item is student aid to help pay for college through Pell Grants, Work Study, and other 

campus-based programs (see the Notes section). The Department supports research, collects 

education statistics, enforces civil rights statutes, and also carries out competitive grant 

programs to promote innovation (see The Department’s Approach to Performance Management 

section).

Regional Offices. The Department has 10 regional offices that provide points of contact and 

assistance for schools, parents, and citizens. Regional offices offer support through civil rights 

enforcement and federal student aid services to promote efficiency, effectiveness, and integrity 

in the programs and operations of the Department. In addition to civil rights enforcement offices 

in federal regions, civil rights enforcement offices are located in Washington, D.C., and 

Cleveland, Ohio. 

Descriptions of the principal offices and overviews of the activities of the Department and its 

programs are available on the Department’s website. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

FY 2016 Agency Financial Report—U.S. Department of Education 5 

Our Organization in Fiscal Year 2016 

This chart reflects the coordinating structure of the U.S. Department of Education. 

Interactive and text versions of the FY 2016 coordinating structure of the Department are 

available. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

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

FY 2015 Actual Formula Grant Distribution by Region and State 

The figures in these tables are made up of funding from multiple programs allocated to 

states based on statutory formulas. These do not include discretionary grants, need-based 

grants, or federal loans. For more details, view the Department’s State Budget Tables.

West Grades K–12 Postsec All Other 

Alaska $ 266 $ 41 $ 12 

Arizona 820 1,259 78 

California 3,947 3,985 397 

Colorado 430 478 49 

Hawaii 150 77 16 

Idaho 161 163 20 

Montana 166 71 16 

Nevada 246 145 24 

New Mexico 355 205 27 

Oregon 362 385 56 

Utah 267 373 43 

Washington 647 454 65 

Wyoming 107 36 11 

TOTAL $ 7,926 $ 7,672 $ 814 

South Grades K–12 Postsec All Other

Alabama $ 517 $ 508 $ 70 

Arkansas 347 269 54 

Delaware 112 62 16 

Dist. of Columbia 91 141 20 

Florida 1,808 1,918 215 

Georgia 1,072 1,017 82 

Kentucky 488 401 57 

Louisiana 617 371 46 

Maryland 504 411 58 

Mississippi 403 308 52 

North Carolina 962 847 125 

Oklahoma 453 309 51 

South Carolina 504 395 66 

Tennessee 652 538 84 

Texas 3,111 2,213 301 

Virginia 690 687 86 

West Virginia 214 232 42 

TOTAL $ 12,542 $ 10,628 $ 1,424 

NOTES: Dollars in millions. Detail may not add to totals 

due to rounding. Data are current as of October 21, 2016. 

Midwest Grades K–12 Postsec All Other 

Illinois $ 1,471 $ 1,243 $ 133

Indiana 652 801 71 

Iowa 276 411 33 

Kansas 320 251 25 

Michigan 1,148 919 107 

Minnesota 462 544 59 

Missouri 612 581 73 

Nebraska 203 145 23 

North Dakota 117 46 12 

Ohio 1,246 854 128 

South Dakota 163 100 12 

Wisconsin 549 427 71 

TOTAL $ 7,218 $ 6,322 $ 747 

Northeast Grades K–12 Postsec All Other

Connecticut $ 319 $ 283 $ 32 

Maine 144 111 20 

Massachusetts 644 521 64 

New Hampshire 122 122 14 

New Jersey 871 601 76 

New York 2,420 1,933 189 

Pennsylvania 1,234 977 143 

Rhode Island 129 116 17 

Vermont 91 51 18 

TOTAL $ 5,973 $ 4,715 $ 573 

Other Grades 

K–12

Postsec All 

Other

American Samoa $ 24 $ 4 $ 1 

Freely Associated States 7 15 0 

Guam 41 14 3 

Indian Set Aside 240 n/a 37 

Northern Mariana Islands 17 3 1 

Puerto Rico 686 897 80 

U.S. Virgin Islands 26 4 3 

All Other 367 n/a 41 

TOTAL $ 1,408 $ 938 $ 167