fy 2023

AGENCY

FINANCIAL

REPORT

U.S. DEPARTMENT OF EDUCATION
FY 2023 AGENCY FINANCIAL REPORT 2 U.S. DEPARTMENT OF EDUCATION

U.S. Department of Education

Miguel A. Cardona, Ed.D.

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 16, 2023

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 2023 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 X 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 2023, 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 2025 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 2023 AGENCY FINANCIAL REPORT 3 U.S. DEPARTMENT OF EDUCATION

About This Report

The purpose of the U.S. Department of Education’s (Department’s) fiscal year (FY) 

2023 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 well-managed 

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.
FY 2023 AGENCY FINANCIAL REPORT 4 U.S. DEPARTMENT OF EDUCATION

How This Report Is Organized

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

the Department to support its mission, with an emphasis on the challenges ahead.

M A N A G E M E N T ’S 

DISCUSSION

and ANALYSIS

(unaudited)

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

(unaudited)

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

Consolidated Balance Sheet and related notes, and the report from the 

independent auditors.

OTHER INFORMATION

(unaudited)

This section provides the unaudited financial statements and related 

notes, required supplementary information, the Office of Inspector 

General’s Management and Performance Challenges for FY 2024, a 

summary of financial statement audit and management assurances, 

Payment Integrity Information Act reporting details, civil monetary 

penalty adjustment for inflation, Climate Related Financial Risk, and 

the Grants Oversight and New Efficiency Act of 2016 and grant closeout 

process reporting.

APPENDICES

(unaudited)

This section provides a listing of selected Department web links, 

education resources, and a glossary of acronyms and abbreviations.
FY 2023 AGENCY FINANCIAL REPORT 5 U.S. DEPARTMENT OF EDUCATION

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FY 2023 AGENCY FINANCIAL REPORT 6 U.S. DEPARTMENT OF EDUCATION

Message From the Secretary

November 16, 2023

The civil rights leader Benjamin Mays once said, “The 

tragedy of life is often not in our failure, but rather in our 

complacency; not in our doing too much, but rather in 

our doing too little.” 

While we had much to celebrate over fiscal year 2023, 

including unprecedented federal resources for education 

and important gains in recovering academic losses 

following the pandemic, there is room for even more 

progress and growth in fiscal year 2024. I have said 

that in our nation’s effort to move from pandemic 

recovery to thriving, the biggest barrier to our progress is 

complacency. Across America, we need the collective will to raise the bar for our students 

and our schools and the ambition to realize our nation’s full potential to lead the world.

At the U.S. Department of Education, we know there is work to do to expand equity and 

excellence throughout our nation’s education system and for every learner. 

That’s why we are laser-focused on our visionary initiative, “Raise the Bar: Lead the 

World.” This plan represents a once-in-a-generation opportunity to revolutionize our 

nation’s education system, from preschool through college and preparation for careers and 

lifelong learning. It is a bold agenda with an even bolder purpose: to reverse decades of 

neglect and underinvestment in critical support for our nation’s public school classrooms, 

colleges, students, and educators so America can continue leading the world in education 

and propel learners of every age and all walks of life to never-before-seen levels of success. 

This work has never been more urgent. 

Our plan consists of four key areas: achieving academic excellence, improving learning 

conditions, and preparing students for global competitiveness, and increasing college 

affordability and completion. 

We believe that if we invest in these building blocks of success, we will elevate our nation’s 

educational system and student outcomes to levels not seen in decades. For too long, we 

saw chronic underinvestment in education, much to the detriment of students, families, 

teachers, communities, and our nation’s future. When compared to other developed 

countries, students in the United States continue to underperform academically. What’s 

more, teachers remain underpaid, and in far too many instances, overworked and 

underappreciated with current system-wide conditions failing to attract a new generation 

of talented educators to the profession. We have an opportunity and an obligation—with 

a sense of urgency—to invest in what we know works to improve teaching and learning 

across the country.

As a former teacher and school principal, I have always believed and seen with my own 

eyes the transformative power of education to change lives. Raise the Bar has the power 

to do that and more. We owe it to the students, families, and educators of today and the 

leaders of tomorrow to see this work through. 
FY 2023 AGENCY FINANCIAL REPORT 7 U.S. DEPARTMENT OF EDUCATION

The following pages of this report highlight accomplishments from this past year, examine 

how the Department of Education is executing our ambitious plan, and outline the 

ways President Biden’s fiscal year 2024 budget proposal supports the advancement of 

educational equity and progress. 

Through the first pillar of Raise the Bar, achieving academic excellence, the Department 

is supporting state and local leaders to accelerate students’ learning and deliver a 

comprehensive, rigorous educational experience for every student. We’re working to 

ensure states and districts continue to deploy pandemic relief funds to improve student 

learning. These efforts build upon Congress’ appropriation of more than $190 billion 

(including funding provided through the American Rescue Plan) to help schools reopen 

and address learning loss.

The ARP investments allowed states and districts to hire additional teachers, school 

counselors, and other vital school professionals, offer tutoring and one-on-one support 

to students, and extend learning time through high-quality afterschool and summer 

learning programs. 

I’m encouraged that these historic investments and resources are showing positive results. 

Several states have returned to pre-pandemic achievement levels on state and literacy 

assessments, and we’re seeing promising results for the United States on international 

reading assessments. To date, schools have committed nearly 60 percent of their ARP 

funds to address lost learning time and accelerate academic recovery.

At the Department, we also are continuing to offer technical assistance, issue guidance, 

and hold convenings with educators, parents and families, communities, and other 

stakeholders to ensure they have the necessary tools and resources to improve students’ 

academic outcomes and tackle disparities in educational opportunity. 

To reverse decades of underperformance fueled by educational underinvestment and 

neglect, and to Raise the Bar for all students, we’ll need continued, collaborative action at 

every level. 

That’s why President Biden’s fiscal year 2024 budget calls for $20.5 billion for the federal 

Title I program to help states and districts close opportunity gaps and support academic 

recovery. The budget also includes $500 million to expand high-quality preschool for 

children eligible to attend Title I schools and an investment of an additional $2.7 billion 

for the Individuals with Disabilities Education Act (IDEA), including increasing 

funding for preschool programs, early intervention services, and recruiting special 

education personnel. 

Raise the Bar’s second pillar focuses on improving learning conditions for every student. 

Part of that effort includes ensuring that all children have the opportunity to be 

taught by excellent educators. And one of our most urgent priorities to fulfill that goal 

is to ensure our nation’s teachers receive equitable pay and ample opportunities for 

professional development.

Toward that end, in February of this year, the Department of Education announced 

$18 million for the inaugural Augustus F. Hawkins Centers of Excellence Program 

to address educator shortages, increase high-quality teacher preparation programs, 

and strengthen the pipeline for educators of color. The program provides funding to 

Historically Black Colleges and Universities (HBCUs), Tribal Colleges and Universities 

(TCUs), and Minority-Serving Institutions (MSIs) to recruit and prepare a new 

generation of diverse and talented individuals for the teaching profession. 
FY 2023 AGENCY FINANCIAL REPORT 8 U.S. DEPARTMENT OF EDUCATION

In a spirit of intentional collaboration, the U.S. Departments of Education and Labor 

have joined efforts to invest in teacher preparation programs and expand Registered 

Apprenticeships for educators. The Department of Education allocated more than 

$27 million to support educator preparation programs with $65 million from the 

Department of Labor to develop and scale apprenticeship programs across 45 states. Both 

departments have worked tirelessly to plan, launch, promote, and expand apprenticeship 

programs and support teacher recruitment, preparation, and retention. Thanks to these 

efforts, our nation went from just two states with registered apprenticeship programs for 

teachers to 25 in two years. 

In addition to accelerating learning and supporting our educators, the mental health 

and well-being of our students remains a top priority. I’m proud that the Bipartisan 

Safer Communities Act allocates $2 billion to state educational agencies for Stronger 

Connections Grants that help schools provide all students with safe and supportive 

environments for learning that are critical for their success, School-Based Mental Health 

Services grants to increase the capacity of school-based mental health service providers, 

and Mental Health Services Professional Development Grants to help states, school 

districts, and institutions of higher education train school-based mental health services 

providers for employment in schools and districts. 

At the Department, we believe that the best way to achieve academic excellence and 

advance educational equity across the country is to ensure students from all backgrounds 

and in every community have access to robust academic resources, programs, and 

opportunities. That’s why I’m proud that the fiscal year 2024 budget also allocates 

$38 million to significantly strengthen our Office for Civil Rights and recruit additional 

personnel to safeguard the civil rights of students in schools and on college campuses. I 

am heartened that funding is expected to create more than 150 new, critical positions for 

this work. 

Additionally, the Department is continuing our robust support for school communities. 

Under the Full-Service Community Schools program, we are providing $150 million 

to coordinate services for students and families, such as mental health supports, early 

learning programs and robust parent engagement strategies, nutrition services, and 

high-quality tutoring. In fact, in January 2023, the Department funded the largest 

cohort of grantees in the history of this program. And through $89 million in the 

Promise Neighborhoods program, we are supporting learners from cradle to career in 

underserved communities. 

Through our third Raise the Bar pillar, creating pathways for global engagement, we are 

focused on reimagining college and career pathways and providing more and better 

opportunities for our students to become multilingual.

For example, through our Unlocking Career Success initiative, we are working with states 

and districts to develop more accessible, flexible, and innovative pathways for students to 

contribute to the global workforce by increasing access to dual enrollment, work-based 

learning, workforce credentials, and career advising and navigation in high school. 

The Department has created a suite of tools and resources to complement our pathways 

work. We’ve launched a new website and organized multiple forums to gather input 

directly from stakeholders across the country, and we are catalyzing and mobilizing crosssector collaboration that transforms our nation’s high schools to become more studentcentered, community-engaged, and career-connected.
FY 2023 AGENCY FINANCIAL REPORT 9 U.S. DEPARTMENT OF EDUCATION

This spring, the Department also helped launch the Career Z Challenge, awarding 

$2.5 million for work-based learning innovation and opportunities. We also unveiled the 

Your Place in Space Challenge, which invites high school students to submit designs for 

a product or service to contribute to space missions and exploration—opening students’ 

minds up to the career possibilities that exist in the science, technology, engineering, and 

math fields. 

Importantly, in August, the Department launched the Career Connected High School 

Grant program, which will award $25 million to local educational agencies, institutions of 

higher education, and employers to pilot strategies that improve postsecondary education 

and career outcomes for students. 

At the Department, we also recognize that multilingualism is a superpower that provides 

students with advantages in our global society and economy—and that unless we act 

with urgency to provide pathways to multilingualism for every student and to support 

the 5 million English learners in our public schools, we will miss an opportunity to set 

our students up for success. That’s why, through our pathways work, we are proud to 

support states to develop and improve English Development Programs and Multilingual 

Language Programs.

Furthering our commitment to multilingual education, we’ve also invested $890 million in 

Title III grants to all 50 states, Washington, D.C., and Puerto Rico to support Language 

Instructional Educational Programs that empower our English learners and immigrant 

youth. That’s a $93 million increase since the Biden-Harris Administration took office. 

We are also continuing robust oversight of school’s obligations to serve English learners 

under Title VI of the Civil Rights Act of 1964 and taking affirmative steps to address 

language barriers and improve meaningful participation for every student in every school. 

Additionally, we are proactively highlighting states and districts that are implementing 

evidence-based dual language programs and seals of biliteracy. Similarly, our support 

of grow-your-own initiatives, teacher residencies, graduate fellowships, and Augustus 

F. Hawkins grants will continue to promote a more multilingual educator workforce.

Importantly, we also are making significant investments—including $8 million in grants

this summer—to promote and preserve Native languages and support Native teachers.

Through our final Raise the Bar pillar, we are working to make college more affordable 

and inclusive, and investing in student success. 

We continue to increase funds for the Pell Grant program. The fiscal year 2024 budget 

proposes increasing the Pell Grant to $8,215, with a commitment to doubling the 

maximum award by 2029. 

The fiscal year 2024 budget also recognizes that more resources are urgently needed to 

enhance and sustain institutional capacity at community colleges, HBCUs, TCUs, and 

MSIs and calls for free community colleges, requesting $90 billion over 10 years. To 

jumpstart these efforts, the Biden-Harris administration is requesting $500 million in 

discretionary funding to partner with states where free community college can lead to 

good jobs in high-demand industries. 

The fiscal year 2024 budget also makes significant investments in the Department’s Office 

of Federal Student Aid, providing $2.7 billion to support student loan borrowers, including 

critical improvements to financial aid program administration and student loan servicing. 
FY 2023 AGENCY FINANCIAL REPORT 10 U.S. DEPARTMENT OF EDUCATION

Importantly, the Department has been relentlessly focused on fixing the nation’s broken 

student loan system. Due to fixes to income-driven repayment, the Public Service Loan 

Forgiveness Program, and other actions the Department has taken, $127 billion in debt 

relief has been provided for nearly 3.6 million borrowers. This represents more student loan 

forgiveness than has been granted under any other presidential administration in history. 

Working to make college more affordable puts social mobility and the American Dream 

within reach—which benefits not only individuals, but also communities, our economy, 

and our entire country. 

In addition to funding, resources, and our work on student debt, we’re convening 

changemakers to recognize and promote institutions of higher education with 

demonstrated success, share promising practices for improving student outcomes, and 

support leaders who are raising the bar on college excellence and equity. 

For example, over this last year, the Department convened a second Raise the Bar: College 

Excellence and Equity Summit, which featured higher education leaders sharing their 

data-driven strategies to reduce equity gaps and bolster graduation rates with the longerterm goal of systematizing and scaling programs that help deliver equitable outcomes for 

every student who wants a college education. 

We know what works in education. If we marshal the collective will, our nation’s 65 million 

students will realize their full potential to lead the world. Through our Raise the Bar efforts 

and investments, we recognize that our nation already has what it takes to get there. 

For more on our plan and how we can continue to advance our shared priorities, 

visit: https://www.ed.gov/raisethebar/.

The Department continues to make stewardship of taxpayer funds and financial integrity 

top priorities. The 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 opportunities 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.

The internal control report identified one material weakness, “Controls Over the 

Relevance and Reliability of Underlying Data Used in Credit Reform Re-Estimates Need 

Improvement.” This year, the independent auditor issued a disclaimer of opinion on 

the Department’s FY 2023 balance sheet. The Department will develop and implement 

additional corrective action strategies to address the issues highlighted in the FY 2023 

report. We remain committed to continually evaluating our programs, current business 

processes, and our internal controls for improvement opportunities in FY 2024 and beyond. 

As we did in fiscal year 2023, we will keep working to ensure the future for our students, 

and our nation, is bright.

Miguel A. Cardona, Ed.D.

U.S. Secretary of Education
FY 2023 AGENCY FINANCIAL REPORT 11 U.S. DEPARTMENT OF EDUCATION

Contents

About This Report .................................................. 3

How This Report Is Organized .............................. 4

Message From the Secretary ................................ 6

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 (Unaudited) .................. 14

About the Department ......................................... 16

The Department in Fiscal Year 2023 ................... 17

The Department’s Approach to Performance ...... 18

Financial Highlights ............................................. 24

Analysis of Systems, 

Controls, and Legal Compliance ......................... 41

Secretary’s Statement of Assurance ................... 41

Forward-Looking Information............................... 58

F I N A N C I A L S E C T I O N 

(UNAUDITED)

About the Financial Section ................................. 76

Message From the Chief Financial Officer .......... 78

The Consolidated Balance Sheet ........................ 80

Notes to the Consolidated Balance Sheet ........... 81

Report of the Independent Auditors................... 100

OTHER INFORMATION

(UNAUDITED)

About the Other Information Section ..................116

The Consolidated Statement of Net Cost, 

Consolidated Statement of Changes 

in Net Position, and Combined Statement 

of Budgetary Resources (Unaudited) .................119

Notes to the Consolidated Statement of 

Net Cost, Consolidated Statement of Changes 

in Net Position, and Combined Statement 

of Budgetary Resources (Unaudited) ................ 122

Required Supplementary Information 

(Unaudited) ........................................................ 154

Memorandum from the Office 

of Inspector General .......................................... 156

Office of Inspector General’s (OIG) 

Management and Performance 

Challenges for Fiscal Year 2024 ....................... 158

Summary of Financial Statement 

Audit and Management Assurances .................. 195

Payment Integrity Information 

Act Reporting ..................................................... 196

Civil Monetary Penalty 

Adjustment for Inflation ...................................... 206

Climate Related Financial Risk.......................... 207

The Grants Oversight and New Efficiency 

Act of 2016 (GONE Act) and Education’s 

Grant Closeout Process .................................... 208

APPENDICES (UNAUDITED)

Appendix A: Selected Department 

Web Links and Education Resources................ 210

Appendix B: Glossary of 

Acronyms and Abbreviations ............................. 215

Acknowledgments ............................................. 220
FY 2023 AGENCY FINANCIAL REPORT 12 U.S. DEPARTMENT OF EDUCATION

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MANAGEMENT’S

DISCUSSION

and ANALYSIS

(unaudited)
Management’s Discussion and Analysis (Unaudited)

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) 2023 Agency Financial Report (AFR)

by refining graphics and providing more useful, balanced, and 

easily understood information about the Broad-Based Debt 

Relief, COVID-19 funding relief bills and 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 utility 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 specific challenges.

FY 2023 AGENCY FINANCIAL REPORT 14 U.S. DEPARTMENT OF EDUCATION
FY 2023 AGENCY FINANCIAL REPORT 15 U.S. DEPARTMENT OF EDUCATION

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

by function.

The Department’s Approach to Performance

This section provides a summary of the Department’s performance goals and results 

for FY 2023. Since the Department has chosen to produce separate financial and 

performance reports, a detailed discussion of performance information for FY 2023 

will be provided in the Department’s FY 2023 Annual Performance Report and FY 2025 

Annual Performance Plan to be released online at the same time as the President’s FY 2025

Budget of the United States Government (President’s Budget) in February 2024. 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 an analysis of key financial statement changes.

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 is 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 Direct Loans, Next Generation Federal Student Aid 

(Next Gen FSA), Leveraging Data as a Strategic Asset, and the new G6 modernization.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 16 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

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.

The Department makes funds and information available to individuals pursuing an 

education, colleges and universities, state educational 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 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.
FY 2023 AGENCY FINANCIAL REPORT 17 U.S. DEPARTMENT OF EDUCATION

The Department in Fiscal Year 2023

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

version of the FY 2023 coordinating structure of the Department is available.

* The White House Initiatives are: Office of Faith-Based and Neighborhood Partnerships; White House Initiative on Advancing Educational Equity, Excellence, and Economic 

Opportunity for Native Americans and Strengthening Tribal Colleges and Universities; White House Initiative on Advancing Educational Equity, Excellence, and Economic 

Opportunity for Hispanics; White House Initiative on Advancing Educational Equity, Excellence, and Economic Opportunity for Black Americans; and White House Initiative on 

Advancing Educational Equity, Excellence, and Economic Opportunity through Historically Black Colleges and Universities.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 18 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The Department’s Approach to 

Performance

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

2 The FY 2023 Statement of Net Cost and related notes align with the FY 2022–26 Strategic Plan.

Performance Management Framework

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

for performance management begins with the Strategic Plan, which serves as the 

foundation for establishing and implementing priorities, highlighting performance goals 

and objectives, and developing performance indicators to gauge progress and outcomes. 

Progress toward the Department’s strategic goals and its two-year Agency Priority Goals 

(APGs) are measured using data-driven review and analysis. Additional information 

on performance management is available in the Annual Performance Plans and Annual 

Performance Reports.

2

The FY 2022–26 Strategic Plan is comprised of five Strategic Goals and three FY 2022 

and FY 2023 APGs. The Strategic Plan aims to address administration priorities, such 

as recovering from the coronavirus disease 2019 (COVID-19) pandemic; ensuring 

high-quality, equitable secondary and postsecondary education; and providing diverse 

learning environments for all students, especially underserved ones. Each supporting 

strategic objective has corresponding performance indicators to assess the Department’s 

progress on achieving the Strategic Goals and objectives. For additional information 

about Performance Management at the Department, visit ED Strategic Plans and Annual 

Reports or email PIO@ed.gov.

FY 2022–26 Strategic Goals and Strategic Objectives

Strategic Goal 1: Promote equity in student access to educational resources, opportunities, and 

inclusive environments.

Strategic Objective 1.1 Prioritize the equitable and adequate distribution of resources to communities of 

concentrated poverty, in an effort to provide underserved students with highquality educational opportunities.

Strategic Objective 1.2 Ensure all students have access to well-rounded, rigorous, engaging, and diverse 

learning opportunities and environments to support their success in school.

Strategic Objective 1.3 Support states, school districts, and institutions of higher education to promote 

and protect students’ nondiscriminatory and equal access to education, as 

provided by Federal civil rights laws.

Strategic Objective 1.4 Promote greater access and supports for youth and adults to engage in learning, 

succeed in postsecondary education, and increase their employability in highdemand occupations.

Strategic Goal 1 focuses on outcomes related to improving and promoting educational 

equities for all students through adequate resources, opportunities, and supports. In 

FY 2023, $54.1 billion was appropriated to the Department in support of Strategic 

Goal 1. 

To thrive academically and be globally competitive, students require access to a broad and 

challenging education that provides equal opportunities to build deep knowledge and 

useful life skills across many disciplines. However, access to a comprehensive and rigorous 
FY 2023 AGENCY FINANCIAL REPORT 19 U.S. DEPARTMENT OF EDUCATION

education is not equitable across all students and communities. Research shows that 

when students have access to rich learning experiences across the spectrum of education, 

they are more likely to be engaged in school, get better grades, attend school more, and 

graduate on time.

In support of Strategic Goal 1, the Department continued to work with state and local 

leaders to expand access to high-quality early learning, rigorous science, technology, 

engineering, and mathematics (STEM) education and arts programming; protect 

students’ civil rights in schools; support students’ financial literacy; and emphasize the 

importance of focusing teaching and learning on the instructional core. In FY 2023, 

the Department hosted “YOU Belong in STEM” National Coordinating Conference 

in Washington, D.C. as a key initiative. The Raise the Bar: STEM Excellence for All 

Students initiative is designed to strengthen STEM education nationwide. This new 

initiative helps implement and scale equitable, high-quality STEM education for all 

students from PreK to higher education—regardless of background—to ensure their 21st 

century career readiness and global competitiveness.

The devastating and adverse impacts of the COVID-19 pandemic exacerbated previously 

documented gaps in educational opportunity. Supporting urgent and wise investing has 

been a major focus of the Office of Elementary and Secondary Education (OESE) State 

and Grantee Relations team’s work on the COVID-relief programs. Additionally, ensuring 

compliance with major fiscal equity provisions further supports student recovery from 

the impacts of the pandemic. In FY 2023, OESE monitored states’ compliance with 

the Maintenance of Effort and Maintenance of Equity provisions of the COVID-relief 

acts. The Department is committed to bring student learning beyond pre-pandemic 

levels and to help close underlying opportunity and achievement gaps by ensuring states 

and districts deploy federal pandemic relief funds in evidence-based ways, promoting 

promising practices, and providing technical assistance and opportunities for new or 

continued grant funding.

Strategic Goal 2: Support a diverse and talented educator workforce and professional growth to 

strengthen student learning.

Strategic Objective 2.1 Strengthen and diversify the educator pipeline and workforce.

Strategic Objective 2.2 Identify and promote evidence-based practices or strategies that support diverse 

districts (including rural districts) with high rates of poverty in recruiting, selecting, 

preparing, and retaining well-qualified (including in-field fully certified) and 

effective teachers, principals, paraprofessionals, and specialized instructional 

support personnel.

Strategic Objective 2.3 Support the professional growth, retention, and advancement of talented, 

experienced educators and other school personnel and their capacity to meet the 

social, emotional, mental health, and academic needs of underserved students.

Strategic Goal 2 focuses on outcomes related to supporting and increasing diversity and 

talent in the educator workforce and professional growth. Every student should have access to 

outstanding, well-prepared, well-supported educators who reflect the diversity of the students 

they serve. In FY 2023, $20.4 billion was appropriated to the Department in support of 

Strategic Goal 2. 

Due to the pandemic, from February to May 2020, the economy lost an estimated 

730,000 local public education jobs. As of March 2023, public education recovered 

600,000 of those jobs (82 percent). However, there are still 130,000 fewer people working 

in local public education than before the pandemic, and schools were already experiencing 

shortages before the pandemic began, with disproportionate impacts on students of 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 20 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

color, students with disabilities, and English learners. The Department is committed to 

working with state and local leaders to elevate the teaching profession by investing in 

and scaling up high-quality and affordable pathways to teaching. The Department also is 

supporting efforts to better prepare, develop, and retain talented and diverse educators in 

America’s schools. 

In support of Strategic Goal 2, the Department launched a partnership with Department of 

Labor to expand the number of registered apprenticeship programs for teachers. The registered 

apprenticeship programs allow teachers to gain robust experience in the classroom and make 

becoming a teacher more affordable. States with Teacher Registered Apprenticeship Programs 

have increased from 2 to 25 since the launch, and enrollees in these programs total more 

than 1,000.

In FY 2023, the Department announced first-ever awards, totaling over $15 million, for the 

Augustus F. Hawkins Centers of Excellence Program (Hawkins Program) grants to increase 

high-quality teacher preparation programs for teachers of color, strengthen the diversity of our 

teacher pipeline, and address teacher shortages. The Hawkins Program, named for Augustus F. 

Hawkins, the first Black politician elected to the U.S. House of Representatives from west of 

the Mississippi River, supports comprehensive, high-quality teacher preparation programs at 

Historically Black Colleges and Universities, Tribally Controlled Colleges and Universities, and 

Minority Serving Institutions.

Strategic Goal 3: Meet students’ social, emotional, and academic needs.

Strategic Objective 3.1 Support the development and implementation of multitiered systems of supports 

to increase students’ engagement; social, emotional, and mental health; wellbeing; and academic success.

Strategic Objective 3.2 Foster supportive, inclusive, and identity-safe learning environments and ensure 

the individual needs of underserved students are met through appropriately 

designed instruction, evidence-based practices, and related supports 

and services.

Strategic Objective 3.3 Strengthen learning environments, support professional development, 

and improve educator credentialing for emergent bilingual students and 

multilingual learners.

Strategic Goal 3 focuses on meeting students’ social, emotional, and academic needs. 

Learning and development across a student’s life span are influenced by several 

interrelated factors, including the individual’s social, emotional, academic, and career 

development. In FY 2023, $26.0 billion was appropriated to the Department in support 

of Strategic Goal 3. 

When students feel connected to school, their mental health and academic performance 

improve; however, the consequences of the pandemic—social isolation, illness, and family 

hardship among them—have led to decreased feelings of connectedness for students. For 

example, approximately 1 in 3 high school students have experienced poor mental health 

amid the pandemic, and rates of poor mental health have been higher for historically 

marginalized groups of students. For students to thrive in school, they need a strong 

foundation of overall wellness. The Department is committed to working with parents, 

families, educators, and others to meet students’ mental health needs.

In support of Strategic Goal 3, the Department announced awards of more than 

$188 million across 170 grantees in over 30 states to increase access to school-based 

mental health services and to strengthen the pipeline of mental health professionals in 

high-needs districts. With funding provided by the Bipartisan Safer Communities Act

(BSCA), these investments help advance the President’s Mental Health Strategy, which 
FY 2023 AGENCY FINANCIAL REPORT 21 U.S. DEPARTMENT OF EDUCATION

directly implements his Unity Agenda priority to tackle the mental health crisis in our 

school communities. These grants enable communities to hire approximately 5,400 

school-based mental health professionals and train an estimated 5,500 more to build a 

diverse pipeline of mental health providers in schools.

To support multilingualism, in FY 2023, the Office of English Language Acquisition 

announced awards of nearly $120 million over five years under the National Professional 

Development Program (NPD) to support educators of English learner students. The 

NPD program provides grants to eligible Institutions of Higher Education and public or 

private entities with relevant experience and capacity, in consortia with states or districts, 

to implement professional development activities that will improve instruction for 

English Learners.

Strategic Goal 4: Increase postsecondary value by focusing on equity-conscious strategies to 

address access to high-quality institutions, affordability, completion, post-enrollment success, and 

support for inclusive institutions.

Strategic Objective 4.1 Support educational institutions and state systems in efforts to raise academic 

quality and college completion for all students, especially for underserved 

students, such as first-generation students, students from low-income 

backgrounds, students of color, and students with disabilities.

Strategic Objective 4.2 Improve the administration of student aid programs to help eligible students 

receive aid; support borrowers in successfully repaying their loans, claiming 

loan forgiveness benefits, and mitigating student loan default; and hold 

contractors accountable.

Strategic Objective 4.3 Increase equitable access to secondary and postsecondary programs that 

have clear on-ramps to both high-quality jobs and additional high-quality 

postsecondary educational opportunities.

Strategic Objective 4.4 Improve the alignment across secondary, postsecondary, and career and 

technical education programs, including through transparent and effective 

transition processes, inclusive pathways, and clear credentialing requirements.

Strategic Goal 4 focuses on increasing the value of postsecondary education by addressing 

access, affordability, and degree and credential completion. This includes aligning our 

education and workforce systems to create college and career pathways that lead to 

industry-recognized credentials and opportunities to secure in-demand jobs. In FY 2023, 

$104.6 billion was appropriated to support Goal 4.

In support of Goal 4, the Department provided over $30 million to colleges and 

universities from five competitive grant programs of the Fund for the Improvement of 

Postsecondary Education (FIPSE), which aims to improve higher education opportunities 

and outcomes for students from underrepresented communities. The five grant programs 

that target critical needs in our higher education system include: Postsecondary 

Student Success Program, Basic Needs for Postsecondary Students Program, Open 

Textbooks Program, Centers of Excellence for Veteran Student Success Program, and the 

Transitioning Gang-Involved Youth to Higher Education Program. 

The Department has made a concerted effort to fix persistent problems in the student loan 

forgiveness and discharge process through regulatory changes and making investments in 

system and customer service upgrades. As of the end of FY 2023, 730,000 student loan 

borrowers were approved for Public Service Loan Forgiveness, compared to only 7,000 

applications that had been approved in total prior to 2021. As of July 2023, more than 

3.4 million borrowers qualified for automatic discharges, Public Service Loan Forgiveness 

benefits, total and permanent disability discharges, and closed school court settlements.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 22 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The Department is committed to supporting efforts to dramatically increase the number 

of Americans who possess postsecondary industry-recognized credentials. Education 

programs that incorporate the opportunity to earn an industry-sought credential can give 

students a successful onramp to the workforce when they graduate from high school. 

The Department aims to expand access to work-based learning programs and initiatives 

by helping states and districts identify workforce credentials that have value in the 

labor market, expand opportunities for students to earn these credentials, and eliminate 

barriers to credential attainment. In FY 2023, $1.46 billion was appropriated for Career, 

Technical, and Adult Education.

Strategic Goal 5: Enhance the Department’s internal capacity to optimize the delivery of its mission.

Strategic Objective 5.1 Manage information technology as a strategic resource and driver to 

promote the advancement of the missions executed by the Department’s 

21st-century workforce.

Strategic Objective 5.2 Strengthen agency-wide data governance and build capacity to improve 

data access, data management, and enterprise data analytics in support of 

agency goals. 

Strategic Objective 5.3 Recruit, retain, and develop the workforce needed to meet the Department’s 

mission now and into the future.

Strategic Objective 5.4 Deliver mission outcomes and value for taxpayers through efficient 

acquisition management and proactive industry partnerships while promoting 

small businesses.

Strategic Goal 5 is focused on continuously improving agency operations as the 

Department manages, engages, and empowers the workforce; purchases products and 

services; enhances and secures information technology resources; and leverages data to 

support evidence-based decision-making. In FY 2023, $72 million was appropriated to 

support Goal 5. 

Information technology security was identified as a top management challenge in 2023, 

and the Department has made great strides in strengthening cybersecurity, reliability, 

and privacy protections. In 2023, the Department received an overall Federal Information 

Security Modernization Act of 2014 (FISMA) assessment of “Effective,” or a Level 4 

Cybersecurity Maturity Level. This score was the highest achieved by the Department 

since the scoring metrics were established in 2014. 

The Department was the first cabinet-level Department to receive funding from the 

Technology Modernization Fund (TMF) and successfully adopted a secure access service 

edge (SASE) solution in support of advancing its Zero Trust Architecture (ZTA) capabilities 

in support of federal requirements as outlined in OMB Memorandum M-22-09.

In April 2023, the Office of Chief Data Officer staff received the Federal 2023 Chief 

Data Officers Council Award for Distinguished Achievement for improving data skills 

and culture at the Department and pioneering work in the federal space through the 

advancements of the Data Strategy Goal 2: Building Human Capacity to Leverage Data.

Strategic Goal 5 also prioritizes reducing potential procurement barriers and increasing 

procurement opportunities for small, underserved, and disadvantaged businesses. The 

Department established Creating and Leveraging Acquisition Small Business Strategies to 

elevate the Department’s small business achievement, which resulted in identifying 124 

small business set asides totaling $131 million. The Department also received an “A” on 

the U.S. Small Business Administration’s Federal Scorecard released in July 2023.
FY 2023 AGENCY FINANCIAL REPORT 23 U.S. DEPARTMENT OF EDUCATION

The Office of Business Support Services developed a robotic process automation tool or 

“bot” to automatically close out more than 50 percent of expired but open contracts in 

the Contracts and Purchasing Support System (CPSS). To date, the bot has closed 57 

percent of expired but open contracts, providing approximately $1.15 million in savings 

to the Department.

The Department’s Agency Priority Goals

The Department identified three Agency Priority Goals (APGs) for FY 2022 and FY 2023 

to address the impact of the COVID-19 pandemic, effectively manage federal student 

loans, and reduce disparities in attainment of high-quality degrees and credentials. These 

current APGs concluded in September 2023, and the status reports are available online. 

The Department will focus on three new APGs in FY 2024 and FY 2025.

APG 1 Address the impact of the COVID-19 pandemic on students, educators, and faculty. The Department will be a 

leader and partner in addressing the impact of the COVID-19 pandemic in educational areas. By September 30, 2023, 

the Department will respond to the impact of the COVID-19 pandemic and the need to continuously provide for highquality educational environments and capabilities by supporting state educational agencies, local educational agencies, 

and institutions of higher education to:

• Continue to support schools in maintaining safe, fully in-person instructions for students.

• Utilize COVID-19 relief funds on appropriate, effective, and evidence-based activities to reengage students, address

lost instructional time, and improve educational opportunities by offering 300+ Department-led technical assistance

engagements.

Related Strategic 

Objectives

Strategic Objective 1.1: Prioritize the equitable and adequate distribution of resources to communities of concentrated 

poverty in an effort to provide underserved students with high-quality educational opportunities.

Strategic Objective 1.2: Ensure all students have access to well-rounded, rigorous, engaging, and diverse learning 

opportunities and environments to support their success in school.

Strategic Objective 3.1: Support the development and implementation of multitiered systems of supports to increase 

students’ engagement; social, emotional, and mental health; well-being; and academic success.

Strategic Objective 3.2: Foster supportive, inclusive, and identity-safe learning environments and ensure the individual 

needs of underserved students are met through appropriately designed instruction, evidence-based practices, and 

related supports and services.

APG 2 Effectively manage federal student loans. The Department will provide effective customer service for borrowers to 

simplify the student loan repayment process. By September 30, 2023, Federal Student Aid will improve loan servicer 

quality and accuracy to levels at or above 95 percent, as defined in student loan servicer agreements.

Related Strategic 

Objective

Strategic Objective 4.2: Improve the administration of student aid programs to help eligible students receive aid; 

support borrowers in successfully repaying their loans, claiming loan forgiveness benefits, and mitigating student loan 

default; and hold contractors accountable.

APG 3 Reduce disparities in attainment of high-quality degrees and credentials. The Department will support institutions 

and states to assist low-income students and students of color to enroll in and complete high-quality postsecondary 

education programs, including at community colleges and through career and technical training. By September 30, 2023, 

the Department will increase the number and diversity of higher education grant applicants from community colleges, 

Historically Black Colleges and Universities, Tribally Controlled Colleges or Universities, Minority-Serving Institutions, 

and public four-year colleges by 5 percent to support and assist low-income students and students of color in attaining 

improved educational outcomes.

Related Strategic 

Objectives

Strategic Objective 4.1: Support educational institutions and state systems in efforts to raise academic quality and 

college completion for all students, especially for underserved students, such as first-generation students, students 

from low-income backgrounds, students of color, and students with disabilities.

Strategic Objective 4.2: Improve the administration of student aid programs to help eligible students receive aid; 

support borrowers in successfully repaying their loans, claiming loan forgiveness benefits, and mitigating student loan 

default; and hold contractors accountable.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 24 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Financial Highlights

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. A summary of significant changes in financial 

statement line-item balances is provided in Table 1.

The Department’s 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. An independent accounting firm with oversight provided by the OIG was 

engaged to audit the consolidated balance sheet, related notes, and underlying business 

processes, systems and controls. The Consolidated Balance Sheet and related notes for FY 

2023 are presented in the Financial Section. The Consolidated Statement of Net Cost, 

Consolidated Statement of Changes in Net Position, the Combined Statement of Budgetary 

Resources, and related notes for FY 2023 are presented in the Other Information section. 

Table 1. Key Financial Statement Changes

(Dollars in Billions)

Financial Statement Lines 

with Significant Changes

Amount Total Changes Changes Due to COVID-19

 FY 2023 FY 2022 Amount Percentage Amount Percentage

Balance Sheets

Fund Balance with Treasury $ 244.0 $ 317.0 $ (73.0) -23.0% $ (66.1) -20.9%

Loan Receivables, Net – Direct Loan Program 1,030.9 816.5 214.4 26.3% 294.4 36.1%

Debt Associated with Loans – Direct

Loan Program 1,127.0 837.4 289.6 34.6% 325.3 38.8%

Debt Associated with Loans – FFEL Program 60.9 67.0 (6.1) -9.1% 13.9 20.7%

Subsidy Due to Treasury 1.6 27.0 (25.4) -94.1% - 0.0%

Statements of Net Cost (Net Program Costs)

Promote Equity for Prekindergarten through Grade 

12 Students with Access to Educational Resources, 

Opportunities, and Inclusive Environments

 100.0 90.8 9.2 10.1% (14.0) -15.4%

Increase Postsecondary Value by Focusing on 

Equity Strategies to Address Access to Affordability, 

Completion, and Post-Enrollment Success

 (58.6) 472.6 (531.2) -112.4% (733.3) -155.2%

Statements of Budgetary Resources

Unobligated Balance from Prior Year Budget Authority 

(Net) 52.3 65.3 (13.0) -19.9% (18.0) -27.6%

Appropriations (Discretionary and Mandatory) 254.7 597.2 (342.5) -57.4% (424.1) -71.0%

Borrowing Authority (Discretionary and Mandatory) 472.7 178.7 294.0 164.5% 339.3 189.9%

Spending Authority from Offsetting Collections 

(Discretionary and Mandatory) 70.5 60.7 9.8 16.1% - 0.0%

New Obligations and Upward Adjustments (Total) 776.9 813.7 (36.8) -4.5% (442.0) -54.3%

Unobligated Balance, End of Year (Total) 73.3 88.3 (15.0) -17.0% (0.1) -0.1%

Outlays, Net 306.5 668.5 (362.0) -54.2% (438.6) -65.6%

Distributed Offsetting Receipts (347.6) (29.1) (318.5) 1,094.5% (333.1) 1,144.7%
FY 2023 AGENCY FINANCIAL REPORT 25 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The Consolidated Balance Sheet and related notes for FY 2023 are on pages 80–99, the

Independent Auditors’ Report begins on page 100, and the Other Information section 

begins on page 115.

The financial statements are prepared to report the financial position and results of 

operations of the reporting entity, consistent with the requirements of 31 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 understanding that they are for a component of the U.S. government.

Financial Statement Impacts of Debt Relief Actions 

During FY 2022 and FY 2023, the Department announced significant actions to 

provide relief to federal student loan borrowers, including extensions to the student loan 

repayment pause through August 31, 2023, and several additional debt relief actions. 

Targeted debt relief actions announced or taken during FY 2023 include:

• Fixing historical inaccuracies in the Income Driven Repayment (IDR) count system

for borrowers who earned forgiveness. These fixes, which were first announced by the

Biden-Harris Administration in April 2022, are part of the Department’s commitment

to address historical failures in the federal

student loan program. Borrowers are eligible

for forgiveness if they have accumulated

the equivalent of either 20 or 25 years of 

qualifying months.

• Creating the most affordable payment plan

ever—the Saving on a Valuable Education

(SAVE) plan. The SAVE plan cuts payments on

undergraduate loans in half compared to other

IDR plans, ensures that borrowers never see

their balance grow as long as they keep up with

their required payments, and protects more of

a borrower’s income for basic needs. A single

borrower who makes less than $15 an hour will

not have to make any payments. Borrowers

earning above that amount will save more than

$1,000 a year on their payments compared to

other IDR plans.

• Making improvements to the Public Service 

Loan Forgiveness (PSLF) program, including

helping borrowers earn progress toward 

PSLF, simplifying criteria to help borrowers 

certify qualifying employment, and providing 

opportunities for borrowers to get help correcting PSLF account problems. Borrowers 

with Direct Loans who work in public service are also likely to benefit from the onetime account adjustment announced by the Department last year, allowing borrowers 

to get credit for past periods of repayment on loans that would not otherwise qualify 

for PSLF.

Of the debt relief actions announced 

by the Biden-Harris Administration, as 

of September 29, 2023, 3.4 million 

borrowers have already had their debt relief 

approved, including:

• 1.3 million borrowers who were taken

advantage of by their school, saw their

school precipitously close, or are covered by

related court settlements.

•	More than 800,000 borrowers who

qualified for relief because of fixes to IDR 

plans implemented by the Biden-Harris 

Administration.

• More than 650,000 borrowers through

improvements to the PSLF program.

• Almost 500,000 borrowers who have a total

and permanent disability.
FY 2023 AGENCY FINANCIAL REPORT 26 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

• Approving borrower defense and school closure discharges for borrowers whose 

institutions took advantage of them, including borrowers who attended Coloradobased locations of CollegeAmerica, Ashford University, and the University of Phoenix.

• Instituting a 12-month “on-ramp” to repayment, running from October 1, 2023, 

to September 30, 2024, so that financially vulnerable borrowers who miss monthly 

payments during this period are not considered delinquent, reported to credit bureaus, 

placed in default, or referred to debt collection agencies.

• Providing additional pathways for borrowers who have a total and permanent 

disability to receive a discharge. This includes allowing borrowers who receive 

additional types of disability review codes from the Social Security Administration 

(SSA) to qualify for a discharge. This also includes borrowers who later aged into 

retirement benefits and are no longer classified by one of these codes. Borrowers who 

have an established onset date of their disability determined by SSA to be at least 5 

years in the past can also establish eligibility.

Although forgiveness of loan principal and interest associated with some of these actions 

will not occur until future fiscal years, these actions have already resulted in significant 

increases in cancellations of loan principal and interest for loans held by the Department. 

As shown in Figure 1, cancellations of loan principal and interest increased 222.3 percent 

during FY 2023, primarily for the Direct Loan Program. A large portion of cancellations 

of loan principal and interest during FY 2023 were associated with the PSLF and 

IDR programs, as they made up 39.7 percent and 41.6 percent of total cancellations, 

respectively. Other notable types of cancellation activity include borrower defense 

discharges, cancellations of loan principal and interest for loans in default status, and 

discharges for total and permanent disability.

Figure 1. Loan Cancellations

(Dollars in Billions)

FY 2023 Loan Cancellations

(Dollars in Millions)

FY 2023

Direct Loan 

Program FFEL Program

Loan 

Cancellation Type Principal Interest Principal Interest Fees Other Total

Discharges for 

closed schools $ 36 $ 2 $ 6 $ 1 $ - $ - $ 45 

Discharges due 

to death of the 

borrower

 619 47 41 5 - - 712 

Discharges 

for total and 

permanent 

disability

 2,799 228 458 99 - 1 3,585 

Public service loan 

forgiveness 35,789 1,563 4 - - 1 37,357 

Borrower defense 

discharges 7,210 1 2,362 66 - - 9,639 

Discharges for 

income driven 

repayment plans

 34,601 3,066 1,478 49 - - 39,194 

Cancellation of 

defaulted loans 

held by guaranty 

agencies or the 

defaulted loan 

servicer

 2,525 76 618 73 41 48 3,381 

Other 210 7 3 - - 10 230 

Total Loan 

Cancellations $ 83,789 $ 4,990 $ 4,970 $ 293 $ 41 $ 60 $ 94,143 
FY 2023 AGENCY FINANCIAL REPORT 27 U.S. DEPARTMENT OF EDUCATION

Financial Statement Impacts of COVID-19 Activities 

Many 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 

during FY 2023 for student loan borrowers by suspending nearly all federal student 

loan payments through August 31, 2023, interest free. Additionally, support for student 

loan borrowers was provided in previous fiscal years by the following COVID-19 relief 

legislative and administrative actions.

• Authorizing Guaranty Agencies to reimburse themselves from the Federal Student

Loan Reserve Fund for lost revenue that resulted from student loan repayment

deferrals. This reimbursement covers the share of what a guaranty agency might have

reasonably collected during the pandemic, but for the suspension.

• Making temporary changes to the PSLF program through a Limited PSLF Waiver

to allow student borrowers to get credit for payments made while working for a

qualifying employer, regardless of loan type or repayment plan.

• Addressing issues with IDR payment counting by allowing any borrower who made

IDR-qualifying payments to count toward IDR, regardless of repayment plan.

Funding for each of these actions was provided through indefinite appropriations. Cost 

impacts of the COVID-19 loan modifications were recorded as loan modifications and 

are a component of subsidy expense, which reduced the overall loan receivable balances 

for the student loan programs. Detailed explanations of the COVID-19 Direct Loan 

Program loan modifications are provided in the Analysis of Direct Loan Program Subsidy 

Expense section beginning on page 36 and in Note 13 in the Other Information section 

beginning on page 127.

The direct and indirect funding stemming from the combined COVID-19 relief legislative

and administrative actions is summarized in Figure 2. Obligated and unobligated

COVID-19 funds remaining to be disbursed as of September 30, 2023, totaled

$75.3 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

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 28 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

ESSER funding, subawardees may still be in the process of completing their obligations and 

requesting reimbursement from the states who will then in turn draw down the remaining 

undisbursed funds.

Figure 2. COVID-19 Funding Flow

(Dollars in Billions)

Elementary and Secondary School Emergency Relief (ESSER) Fund—Funds 

provided for state educational 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 childcare. 

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 2023 AGENCY FINANCIAL REPORT 29 U.S. DEPARTMENT OF EDUCATION

Balance Sheet

The consolidated balance sheet presents, 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 $1,318.0 billion as of September 30, 2023. As shown 

in Figure 3, most assets relate to loans receivables, $1,073.0 billion, which comprised 

81.4 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 30. 

All other assets totaled $245.0 billion, most of which was Fund Balance with Treasury, 

$244.0 billion, which decreased by $73.0 billion during FY 2023, largely due to a 

decrease in undisbursed COVID-19 funds as of September 30, 2023.

The Department’s liabilities totaled $1,213.7 billion as of September 30, 2023. As 

shown in Figure 4, 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 the Direct Loan Program totaled 

$1,127.0 billion as of September 30, 2023. Analysis of debt associated with the Direct 

Loan Program begins on page 33.

Figure 3. Assets by TypeFigure 4. Liabilities by Type

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 30 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Analysis of Direct Loan Program Receivables, Net

Figure 5 shows the changes in the Direct Loan Program receivable components over the 

past five years. The principal amount grew each year since 2019, except 2023, which saw 

a slight decrease. Although total principal has increased during these years, the rate of 

increase in principal slowed as enrollment stagnated and sometimes declined. Even so, 

new loan disbursements continued to exceed overall loan principal repayments—student 

loan borrowers have many options to stretch out their repayment terms and reduce their 

monthly payments, and student loan repayment deferrals were implemented in response to 

COVID-19. Accrued interest amounts have decreased in recent years due to COVID-19 

relief actions to temporarily set borrower interest rates to zero percent until August 31, 2023. 

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 from FY 2019 through FY 2022 is 

due primarily to higher subsidy costs, the main 

causes being high participation in IDR plans 

and the COVID-19 deferrals of student loan 

repayments. In addition to these factors, the 

increase in the negative allowance for subsidy 

during FY 2022 was also due to higher subsidy 

costs due to debt relief actions announced 

during the FY. The decrease in the negative 

allowance for subsidy during FY 2023 was 

largely due to a downward modification to 

reverse the inclusion of student loan debt 

relief from the baseline subsidy cost as a result 

of the Supreme Court’s ruling on Biden v. 

Nebraska on June 30, 2023 (see discussion in 

the Analysis of Direct Loan Program Subsidy 

Expense section on page 36).

 

Figure 5. Components of Direct Loan Receivables, Net

(Dollars in Billions)

Direct Loan 

Component

(Dollars in 

Billions)

Fiscal Year

2019 2020 2021 2022 2023

Principal $ 1,164.9 $ 1,224.8 $ 1,292.2 $ 1,341.8 $ 1,336.2 

Rate of 

Increase 

in 

Principal

7.5% 5.1% 5.5% 3.8% -0.4%

Accrued 

Interest $ 83.3 $ 92.1 $ 86.5 $ 86.7 $ $83.4 

Allowance 

for 

Subsidy

 $ (124.4) $ (216.4) $ (273.9) $ (611.9) $ (388.7)

Total No. 

of Direct 

Loan 

Recipients 

(in Millions)

35.1 35.9 37.0 37.1 38.1 
FY 2023 AGENCY FINANCIAL REPORT 31 U.S. DEPARTMENT OF EDUCATION

Table 2. Payment Status of Direct Loan Principal and Interest Balance

(Dollars in Billions)

Loan Status FY 2019 FY 2020** FY 2021** FY 2022** FY 2023**

Total No. of Direct Loan Recipients (in Millions) 35.1 35.9 37.0 37.1 38.1

Total Dollar Amount of Direct Loans Outstanding $ 1,248.1 $ 1,316.9 $ 1,378.7 $ 1,428.5 $ 1,419.6

Current Repayment1 $ 594.7 $ 14.2 $ 16.2 $ 11.8 $ 999.4

% Current Repayment 47.6% 1.1% 1.2% 0.8% 70.4%

In School, Grace Period, and Education Deferments $ 294.8 $ 282.8 $ 271.9 $ 259.5 $ 255.4

% In School, Grace Period, and Education Deferments 23.6% 21.5% 19.7% 18.2% 18.0%

Forbearance and Noneducation Deferments $ 133.2 $ 887.5 $ 967.8 $ 1,039.7 $ 57.4

% Forbearance and Noneducation Deferments 10.7% 67.4% 70.2% 72.8% 4.0%

Delinquent (Past Due 31–360 Days) $ 90.8 $ 0.5 $ 0.0 $ 0.0 $ 0.0

% Delinquent (Past Due 31–360 Days) 7.3% 0.0% 0.0% 0.0% 0.0%

Default/Bankruptcy/Other* $ 134.6 $ 131.9 $ 122.8 $ 117.5 $ 107.4

% Default/Bankruptcy/Other* 10.8% 10.0% 8.9% 8.2% 7.6%

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 through August 2023.

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.

COVID-19 student loan repayment deferrals were in effect from March 2020 through August 

2023, resulting in significantly lower reported balances for Current Repayment and Delinquent 

in FY 2020–2022. The COVID-19 student loan repayment deferrals placed loans in forbearance 

and subsequently cured delinquencies. As a result of the COVID-19 student loan repayment 

deferrals, the delinquent balances have been zero for FY 2021–2023. 

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.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 32 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

• 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.)

• 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 

the period of forbearance. 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.
FY 2023 AGENCY FINANCIAL REPORT 33 U.S. DEPARTMENT OF EDUCATION

Analysis of Debt Associated with Loans, Direct Loan Program 

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. 

The Department’s total debt associated with the Direct Loan Program was $1,127.0 

billion as of September 30, 2023, which was a $289.6 billion increase from FY 2022. 

Total debt increased largely because of new borrowings from Treasury during FY 2023 to 

fund the disbursement of new loans and downward modifications.

Figure 6 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 7 

on page 34 of this report.

 

Figure 6. Direct Loan Program Cumulative 

Financing Activity

(Dollars in Billions)

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 34 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

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

Fiscal Year 2019 2020 2021 2022 2023

Net Borrowing $ 41.5 $ (32.0) $ (17.9) $ (304.8) $ 289.5 

Borrowing from Treasury 137.6 116.9 120.0 162.8 445.0 

Debt Repayments to Treasury (96.1) (148.9) (137.9) (467.6) (155.5)

Interest Expense to Treasury (33.8) (34.7) (33.0) (30.6) (28.2)

Interest Earned from Treasury 4.1 4.8 4.2 7.6 6.3 

Cumulative Taxpayer Cost / (Savings) 124.4 216.4 273.9 611.9 388.7 

Current Subsidy Expense / (Revenue) 61.5 100.9 93.9 385.4 (116.5)

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

Fiscal Year 2019 2020** 2021** 2022** 2023**

Loan Disbursements $ 130.7 $ 117.4 $ 104.8 $ 120.4 $ 122.3 

Stafford Subsidized 20.0 19.1 18.3 15.7 15.7 

Stafford Unsubsidized 48.1 46.1 44.1 45.5 44.9 

Parent Loan for Undergraduate Students (PLUS) 22.7 21.7 20.8 22.2 23.9 

Consolidation1 39.8 30.4 21.5 36.9 37.8 

Loan Collections2 91.3 69.9 37.2 45.5 45.9 

Principal 67.0 55.3 33.3 41.3 42.1 

Interest 22.4 12.9 2.3 2.6 2.1 

Fees 1.9 1.7 1.6 1.6 1.7 

* Numbers may not add due to rounding.

** Student loan payment pause in effect from March 2020 through August 2023.

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 7. William D. Ford Federal Direct Loan Program: Follow the Funding

 

 
FY 2023 AGENCY FINANCIAL REPORT 35 U.S. DEPARTMENT OF EDUCATION

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. 

Exchange revenue is primarily interest 

earned on credit program loans. Figure 8 

shows the Department’s gross costs and 

earned revenue over the past five years. As 

discussed in more detail below, significant 

changes in the Department’s net costs 

for FY 2023 were primarily due to loan 

modifications and re-estimates (subsidy 

expense) and grant expenses related to 

COVID-19 activities. 

 

 

Figure 8. Gross Costs & Earned Revenue

(Dollars in Billions)

Gross Costs and Earned Revenue by Type 

As shown in Figure 9, 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 11)

 

Figure 9. Primary Components of Gross Costs and Earned Revenue 

(Dollars in Billions)

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 36 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Analysis of Direct Loan Program Subsidy Expense 

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 

exclude 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

10 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 are positive or negative.

The Direct Loan Program subsidy expense for new loans disbursed was negative in 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 since FY 2020 has been positive due in large part to rising enrollment

in IDR plans, which contributes 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 Department updates it subsidy cost estimates each year for outstanding loans disbursed

in prior years using a process referred to as a subsidy re-estimate. The total of Direct Loan

subsidy re-estimates during FY 2023 was a net $71.4 billion upward subsidy re-estimate.

The components of the Direct Loan Program subsidy re-estimates are summarized in

Figure 10.

The Department also updates previous cost estimates based on any new legislation or

other government actions that change the terms of existing loans and alter the estimated

subsidy cost. This process is referred to as a modification. During FY 2023, the Department

recorded a total of $204.2 billion net downward modifications. The modifications that were

recorded in FY 2023 are summarized in Figure 10. More detail about these modifications

and components of re-estimated subsidy cost can be found in the notes to the financial 

statements beginning on page 122.

The FY 2023 year-end subsidy re-estimates also resulted in a $25.4 billion decrease in the 

Subsidy Due to Treasury shown in Table 1 on page 24 of this report. This represents the 

amount of accrued downward re-estimates of subsidy expense that will be transferred to 

Treasury in the succeeding fiscal year upon receipt of authority from OMB. More detail 

on Subsidy Due to Treasury can be found in the notes to the Consolidated Balance Sheet 

beginning on page 81.
FY 2023 AGENCY FINANCIAL REPORT 37 U.S. DEPARTMENT OF EDUCATION

Figure 10. Direct Loan Program Subsidy

(Dollars in Billions)

FY 2019 FY 2020 FY 2021 FY 2022 FY 2023

Subsidy Expense for New Loans 

Disbursed in the Current Year $ (3.0) $ 5.1 $ 1.6 $ 7.3 $ 16.3 

Subsidy Re-Estimates 64.5 56.1 24.0 (21.9) 71.4 

Loan Modifications - 39.7 68.3 400.0 (204.2)

Total Subsidy Expense $ 61.5 $ 100.9 $ 93.9 $ 385.4 $ (116.5)

Subsidy Re-estimate Components FY 2023 FY 2022

Income-Driven Repayment (IDR) 

Model Changes $ 26.5 $ (24.0)

Prior Year’s Cohort Assumption Changes 0.2 7.7 

Interest on the Re-Estimate 16.8 (0.4)

Default (0.6) 3.0 

Repayment Plan Selection 4.2 (3.0)

Discount Rates 0.8 (16.6)

Non-IDR Discharges 29.9 2.9 

Deferment and Forbearance (2.3) 2.6 

Collections 16.4 (1.7)

Interactive Effects (18.2) 7.4 

Other Assumptions (2.3) 0.2 

Total Direct Loan Program Subsidy 

Re-Estimates $ 71.4 $ (21.9)

Modification Costs

Loan Modification Components FY 2023 FY 2022

Student Loan Repayment Deferrals $ 23.3 $ 48.6 

Broad-Based Debt Relief - 337.3

Shift to Business Process Operations - (9.1)

PSLF Waiver 4.1 9.1

IDR Waiver - 14.1

Total and Permanent Disability Discharges 4.4 -

Interest Capitalization 3.5 - 

Closed School Discharges 3.7 - 

Borrower Defense to Repayment & Arbitration 4.1 - 

IDR SAVE Regulation 70.4 -

Broad-Based Debt Relief Reversal (319.9) - 

Fresh Start/On Ramp 2.2 - 

Total Direct Loan Program 

Loan Modifications $(204.2) $400.0 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 38 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Grant Expenses

As shown in Figure 11, overall grant expenses changed primarily because of COVID-19

grants. More detail concerning COVID-19 grants can be found in Note 16 in the 

Other Information section beginning on page 142. In addition to COVID-19 funded 

grants, the Department has more than 100 other grant 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, or 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 assist 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.

The Department also 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 11. Grant Expenses by Program Areas

(Dollars in Billions)

 

 

COVID-19 Grant Expenses

(Dollars in Millions)

COVID-19 Grants FY 2023 FY 2022

Education Stabilization Fund:

Elementary and Secondary School 

Emergency Relief Fund $ 52,832 $ 48,502 

Higher Education Emergency 

Relief Fund 7,238 25,976 

Governor’s Emergency Education 

Relief Fund 2,354 2,654 

Outlying Areas & Discretionary Grants 406 312 

Total Education Stabilization Fund 62,830 77,444 

Other COVID-19 Grants 1,451 865 

Total COVID-19 Grants $ 64,281 $ 78,309 
FY 2023 AGENCY FINANCIAL REPORT 39 U.S. DEPARTMENT OF EDUCATION

Statements of Changes in 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 is the residual difference between assets and liabilities 

and 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 12 shows the components of the Department’s budgetary resources, which 

totaled $850.2 billion for FY 2023, decreasing from $902.0 billion, or 5.7 percent, 

from the prior year. This decrease was primarily due to a net $342.5 billion decrease 

in appropriations received, of which $337.7 billion was for a decrease in Direct Loan 

Program appropriations for subsidy re-estimates and modifications. The decrease in 

appropriations was offset by a new $293.9 billion increase in borrowing authority, 

primarily for the Direct Loan Program, which increased by $281.4 billion.

Other significant changes to the Department’s combined statement of budgetary resources 

compared to the prior year include the following:

• Unobligated Balances from Prior Year

Budget Authority (Net) decreased by

$13.0 billion, or 19.9 percent. Of this

decrease, ($18.0) billion was due to

COVID-19 funded balances.

• New Obligations and Upward

Adjustments (Total) decreased by $36.8

billion, or 4.5 percent, primarily due to a

net $20.1 billion decrease for the Direct

Loan program. The change in the Direct

Loan program includes the combined

effect of differences in subsidy cost reestimates and modifications that were

executed during the two fiscal years.

• Unobligated Balance, End of

Year decreased by $15.0 billion,

or 17.0 percent. This decrease

was largely due to a $13.6 billion

decrease in unobligated balances for

the FFEL guaranteed loan program

financing account.

 

Figure 12. Components of Budgetary Resources

(Dollars in Billions)

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 40 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The combined statements of budgetary resources also present the Department’s summary 

disbursement and collection amounts shown in Table 3.

Table 3. Outlays, Distributed Offsetting Receipts, and Disbursements, Net

(Dollars in Billions)

FY 2023 FY 2022

Outlays, Net

Credit Programs $ 155.6 $ 510.0 

Grants 147.6 155.3 

Contractual Services 2.5 2.5 

Personnel Compensation and Benefits 0.8 0.7 

Total Outlays, Net $ 306.5 $ 668.5 

Distributed Offsetting Receipts

Negative Subsidies and Downward Re-Estimates of Subsidies (346.7) (28.2)

Repayment of Perkins Loans and Capital Contributions (0.5) (0.7)

Other (0.4) (0.2)

Total Distributed Offsetting Receipts $ (347.6) $ (29.1)

Disbursements, Net

Direct Loan Program

Gross Disbursements $ 483.0 $ 177.6 

Offsetting Collections (195.5) (526.6)

Total Direct Loan Program Disbursements, Net 287.5 (349.0)

FFEL Program

Gross Disbursements 26.0 10.3 

Offsetting Collections (16.9) (43.6)

Total FFEL Program Disbursements, Net 9.1 (33.3)

Other Loan Programs

Gross Disbursements 0.3 0.5 

Offsetting Collections (0.2) (0.5)

Total Other Loan Program Disbursements, Net 0.1 - 

Total Disbursements, Net $ 296.7 $ (382.3)

Outlays, Net is comprised of gross outlays and offsetting collections in the Department’s 

budgetary funds. Outlays, Net decreased $362.0 billion (54.2 percent) due primarily 

to a decrease of $330.1 billion in Direct Loan Program outlays, including upward loan 

modifications and re-estimates. 

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 

modifications, and negative subsidies. Of the $318.5 billion net decrease in FY 2023 

versus FY 2022, $304.7 billion was attributed to the Direct Loan Program. 

Disbursements, Net is comprised of gross outlays and offsetting collections in the 

Department’s credit program nonbudgetary financing funds. Of the $679.0 billion net 

increase in FY 2023 versus FY 2022, $636.5 billion was attributed to the Direct Loan 

Program and primarily attributed to changes in the subsidy re-estimates and modifications 

during the fiscal years.
FY 2023 AGENCY FINANCIAL REPORT 41 U.S. DEPARTMENT OF EDUCATION

Analysis of Systems, Controls, and 

Legal Compliance

Management Assurances

Management Control Program

The Department’s system of internal control is comprehensive and requires all Department managers 

to establish cost-effective systems of management controls to ensure U.S. Government activities 

are managed effectively, efficiently, economically, and with integrity. All levels of management are 

responsible for ensuring adequate controls over all Department operations. As such, the Department’s 

management is responsible for managing risks and maintaining effective internal control.

The Federal Managers’ Financial Integrity Act (FMFIA) requires the head of each agency to conduct 

an annual evaluation in accordance with prescribed guidelines and provide a Statement of Assurance 

(SOA) to the President and Congress. The Secretary of the Department of Education’s Fiscal Year 2023 

SOA provided below is the final report produced by the Department’s annual assurance process.

SECRETARY’S STATEMENT OF ASSURANCE 

 FISCAL YEAR 2023 

November 16, 2023

The Department of Education’s (the Department’s) 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.

The Department’s management is responsible for managing risks and maintaining effective internal control 

to meet the objectives of Sections 2 and 4 of the FMFIA. The Department conducted its assessment of 

risk and internal control in accordance with OMB Circular No. A-123, Management’s Responsibility for 

Enterprise Risk Management and Internal Control. Based on the results of the assessment, the Agency can 

provide modified assurance that internal control over operations, reporting, and compliance were operating 

effectively as of September 30, 2023, due to the following material weakness:

The material weakness is related to the subsidy estimate for the Department’s Direct Loan (DL) and 

Federal Family Education Loan (FFEL) student loan portfolios. The Department is required to perform 

interest rate and technical re-estimates of the subsidy costs (commonly referred to as subsidy re-estimates) 

of its direct loan and loan guaranty programs as of September 30th every year. These subsidy re-estimates 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 42 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

are calculated using an internally developed cash flow model, the Student Loan Model 

(SLM). In FY 2023, the external financial statement auditor and FSA separately identified 

errors in the data in the system that was used in key assumptions for the SLM. FSA has 

corrected some of the identified errors and is continuing to research other known issues to 

identify and implement corrective actions.

Miguel A. Cardona, Ed.D.

Introduction

The FMFIA requires the Government Accountability Office (GAO) to prescribe standards 

of internal control in the Federal Government, which is titled GAO’s Standards for 

Internal Control in the Federal Government commonly known as the Green Book. These 

standards provide the internal control framework and criteria Federal managers must use 

in designing, implementing, and operating an effective system of internal control. The 

Green Book defines internal control as a process effected by an entity’s oversight body, 

management, and other personnel that provides reasonable assurance that the objectives 

of an entity are achieved. These objectives and related risks can be broadly classified into 

one or more of the following categories:

• Operations—Effectiveness and efficiency of operations.

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

• Compliance—Compliance with applicable laws and regulations.

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 and mission-support operations. This is achieved through implementation 

of ERM practices and by establishing, maintaining, and assessing internal control 

effectiveness. Furthermore, the guidance requires federal agencies to provide reasonable 

assurance that it has met the three objectives of internal control. This section describes 

the Department’s internal control framework and explains assurances provided by the 

Department’s leadership. 

Internal Control Framework

The Department’s internal control framework helps 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’s comprehensive internal control framework and assurance process is 

depicted in the following diagram in Figure 13.
FY 2023 AGENCY FINANCIAL REPORT 43 U.S. DEPARTMENT OF EDUCATION

Figure 13. Department of Education Internal Control Framework

 

 

The Department worked to evolve its existing internal control framework to be more 

value-added and provide for stronger risk management for the purpose of improving 

mission delivery. The Department’s Senior Management Council (SMC) oversees the 

Department’s management control program. Individual SOAs from Assistant Secretaries 

in Principal Office Components (POCs) serve as the primary basis for the Department’s 

FMFIA SOA issued by the Secretary. The SOAs are based on information gathered 

from various sources including managers’ personal knowledge of day-to-day operations 

and existing controls, management program reviews, and other management-initiated 

evaluations. In addition, the Office of Inspector General and the GAO conduct reviews, 

audits, inspections, and investigations that are considered by management.

The Department’s Office of Finance and Operations (OFO) employs an integrated 

process to perform the work necessary to meet the requirements of OMB Circular A-123’s 

Appendix A and Appendix C (regarding Payment Integrity), the FMFIA, and GAO’s 

Green Book. Green Book requirements directly relate to testing entity-level controls, 

which is a primary step in operating an effective system of internal control. Entity-level 

controls reside in the control environment, risk assessment, control activities, information 

and communication, and monitoring components of internal control in the Green 

Book, which are further analyzed by 17 underlying principles of internal control. For 

the Department, all five internal control components and 17 principles were assessed in 

support of the Department’s FY 2023 SOA. 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 44 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The Department employs a risk-based approach in evaluating internal controls over 

reporting on a multi-year rotating basis, which has proven to be efficient. Due to the 

broad knowledge of management involved with the Appendix A assessment, along with 

the extensive work performed by the divisions who assess key controls, the Department 

was able to evaluate issues on a detailed level. The Department’s management controls 

program is designed to ensure full compliance with the goals, objectives, and requirements 

of the FMFIA and various Federal laws and regulations. Numerous Department 

organizational entities provided oversight during FY 2023 for the internal controls 

over reporting program in place to meet the requirements of OMB Circular A-123, 

Appendix A. These entities include the Division of Enterprise Data Analytics and Risk 

Management (EDARM), Financial Data Integrity and Controls Division (FDICD), 

Contracts and Acquisitions Management (CAM), Office of the Chief Information Officer 

(OCIO), and Federal Student Aid (FSA). To that end, the Department has dedicated 

considerable resources to administer a successful management control program. As 

noted in the Secretary’s Statement of Assurance, the Department identified one material 

weakness in control operation and design. 

The Department also places emphasis on the importance of continuous monitoring. It 

is the Department’s policy that any organization with a material weakness or significant 

deficiency must prepare and implement a corrective action plan to correct the weakness. 

The plan, combined with the individual SOAs and Appendix A assessments, provide the 

framework for monitoring and improving the Department’s management controls on a 

continuous basis. Management will continue to direct and focus efforts to resolve any 

deficiencies in internal control identified by management and auditors. 

The Department continues to focus on streamlining and coordinating internal control 

activities to ensure efficiency of operations, recognize the connection points across areas, 

and enable transparency of information across the Department. This framework enables 

increased compliance, process efficiency, oversight, and more informed monitoring of 

internal controls and risk management by all offices and governance bodies, including 

the Department’s Senior Management Council. The framework also allows for the 

Department to obtain outcomes from an improved control system and 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. 

Additionally, during FY 2023, the Department continued taking important steps to 

advance its Enterprise Risk Management (ERM) program.

Enterprise Risk Management Framework

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 has established a systematic and 

deliberate view of risk into key management practices, ultimately yielding more effective 

performance and operational outcomes. 
FY 2023 AGENCY FINANCIAL REPORT 45 U.S. DEPARTMENT OF EDUCATION

The Division of Enterprise Data Analytics and Risk Management (EDARM), within the 

Office of Finance and Operations (OFO), leads the agency’s overall ERM strategy and 

formally aligns ERM and internal controls processes. EDARM 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.

The ERM Annual Assessment process includes the following key steps:

EDARM collaborated with every Principal Office Component (POC) to identify and 

evaluate risk priority within each POC and at the Department-wide level. The FY 2023 

Department of Education ERM profile was published with the aggregated result and 

analysis from the annual assessment process. This profile highlights the top 15 risks for the 

Department around the following 6 main functional processes:

• Financial Management: Student Loan Cost Estimation, Budget Formulation.

• Human Capital Management: Recruitment & Hiring, Workforce & Succession

Planning, Employee Training & Development, Employee Engagement & Retention.

• Information Technology Management: IT Process Governance, Cybersecurity, and

Infrastructure.

• Business Process Management: Acquisition/Budget Strategy.

• Data Management: Information Security and Data Protection, Data Quality.

• Oversight and Compliance: Grants and Contracts Management.

In FY 2023, after launching the ERM digital tool for collecting, analyzing, and reporting 

risk data, EDARM continued to enhance the tool based on user feedback and is building 

additional capabilities and visual analysis for all stakeholders to further monitor and 

evaluate trends and results.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 46 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

EDARM continues to make progress in developing and implementing new trainings, 

tools, and helpful content to better educate and promote healthy risk culture, 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.

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 provided for all employees—to demonstrate 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 Green Book and OMB Circular A-123, Management’s 

Responsibility for Enterprise Risk Management and Internal Control. 

In FY 2023, the Department and Federal Student Aid (FSA) did identify one material 

weakness related to the reliability of reporting. The Department acknowledges that it has 

areas of control that need further strengthening, as well as major challenges identified 

by the Department’s Office of Inspector General (OIG) in its FY 2024 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 program performance and inform management decisions. The 

establishment of a Data Quality Plan (DQP) integrated into testing of controls is helping 

to address this challenge identified by the OIG.

The Department maintains processes and procedures to identify, document, and assess 

internal control over reporting and operations. 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.

• Recommending and assisting with implementation of robust tools to design more

efficient and effective operating procedures.

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, 
FY 2023 AGENCY FINANCIAL REPORT 47 U.S. DEPARTMENT OF EDUCATION

operations, and compliance with key financial management laws and regulations, as 

described below. 

Internal Control Over Reporting 

Annually, the Department evaluates its POCs’ internal control system using the 17 GAO 

Green Book principles to ensure entity level control objectives are met. These evaluations 

assist POCs in producing a letter of assurance each year by September 30, documenting 

their internal control system, identifying any control deficiencies, and noting any major 

improvements or challenges.

In FY 2023, the external financial statement auditor and FSA separately identified 

errors in the data in the system that was used in key assumptions for the SLM. FSA has 

corrected some of the identified errors and is continuing to research other known errors to 

identify and implement corrective actions. 

In FY 2023, the Department tested a proportionate number of key financial controls in 

significant business processes based on qualitative process risk assessments and rotational 

test plans. The internal controls assessment did not find any material weaknesses. 

However, recommendations have been provided to process owners to strengthen internal 

controls, such as verifying immaterial differences, obtaining electronic signatures, and 

updating policies and procedures.

In addition, the Department’s shared service provider, the U.S. Department of the 

Interior (DOI)/ Interior Business Center (IBC), uses the Federal Personnel and Payroll 

System (FPPS) to process its payroll. DOI’s auditor tested FFPS and the results of 

their FY 2023 review indicated that the controls tested were operating effectively, 

providing reasonable assurance that the control objectives specified were achieved during 

that period.

Internal Control Over Operations 

In FY 2023, the Department reviewed a number of operational processes based on 

qualitative risk assessments (in alignment with the Department’s ERM profile) and 

detected some control deficiencies but none that would rise to the level of material 

weakness. As a result, tools have been developed in the areas of stakeholder outreach, 

acquisition planning and the procurement process to better utilize resources, improve the 

flow, timeliness, and quality of information, and allow for more effective decision-making. 

A significant achievement has been the creation of the acquisition portal and dashboard, 

which enhances and streamlines the acquisition management process by providing a 

solitary access point for gathering, editing, and reviewing submissions and enabling 

accountability and transparency throughout the Department. The dashboard provides the 

Department with the ability to present decision-makers with clearly understood data to 

spot important acquisition trends and resources across the agency.

Analysis of Financial Management Systems

The FFMIA requires management to ensure that the Department’s financial management 

systems consistently provide reliable data that comply with 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. 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 48 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

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 offthe-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.

• Receivables management.

• Cost management.

• Recipient management.

• Administrative processes (e.g., purchasing, travel, and miscellaneous payments).

EDCAPS is composed of five main integrated components: 

• Financial Management Support System (FMSS)—FMSS is the Department’s core

financial system. It provides financial management functions such as the general

ledger, financial statement preparation, funds control and budget execution, purchase

receiving, accounts receivable, and accounts payable.

• The FMSS Oracle E-Business Suite application resides behind the Department firewall

and is not an external-facing application.

• Contracts and Purchasing Support System (CPSS)—CPSS provides the Department

with a central repository to enter, retrieve, manage, and view acquisition/contractrelated data. The centralized data provides enhanced information dissemination, with

the ability to respond to both internal and external information requests.

• Grants Management System (G5)—G5 provides the Department with a platform

to manage all grant activities, from initial recipient contact to grant processing

to payments and grant closeout. This single-system approach provides improved

grant information management, recipient response time, and accuracy of financial

management information.

• E2 Travel System—E2 provides the Department, under a GSA contract with third

party, with a platform to manage travel functions. EDCAPS interfaces with E2 in

accordance with an established Memorandum of Understanding and Information

Security Agreement between the Department and the vendor.
FY 2023 AGENCY FINANCIAL REPORT 49 U.S. DEPARTMENT OF EDUCATION

The following diagram provides the data flow in and out of EDCAPS, including data flow 

with other Department applications/systems and external applications/systems.

 

 

 

Across all its components, EDCAPS is serving numerous Departmental internal users in 

Washington, D.C. and 10 regional offices throughout the United States and territories, 

as follows: 

• G5 – 825

• CPSS - 710

• FMSS - 400

• E2 – 3,720

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 50 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

EDCAPS is serving approximately 45,790 external users, mostly users of Grants 

Management System (G5). In FY 2023, the Department conducted an annual risk 

assessment of EDCAPS and tested 86 IT security controls out of a baseline of 630 IT 

security controls, as follows:

• EDCAPS—15

• FMSS—3

• CPSS—27

• G5—33

• E2—8

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 2023: 

• 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 and Digital Accountability 

and Transparency Act of 2014.

• 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).

– Fiserv Frontier.

– G5.

– CPSS.

• External Systems:

– Treasury systems (Invoice Processing Platform [IPP] invoices/receipts/obligation 

data, IPP invoice status, payment files, debt referrals, Centralized Receivables 

Service invoices, warrants, Treasury confirmations, Collections Information 

Repository collections and administrative return, collections/payments). 

– 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, except 

for the material weakness reported in the Secretary’s Statement of Assurance. The financial 
FY 2023 AGENCY FINANCIAL REPORT 51 U.S. DEPARTMENT OF EDUCATION

statement auditors, in their independent assessment, concluded that the Department did 

not substantially comply with FFMIA requirements, and the Department concurred. 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. However, the Department reports some areas of non-compliance:

The Federal Managers’ Financial Integrity Act (FMFIA)

Federal Managers Financial Integrity Act of 1982 (FMFIA), Pub. L. 97-255 – (H.R. 

1526) was enacted into law on September 8, 1982. 

The FMFIA establishes overall requirements with regard to internal control and requires 

the agency head to certify annually to the President and Congress whether there is 

reasonable assurance that the Department’s internal controls are achieving their intended 

objectives. This is also noted in the Office of Management and Budget Circular A-123 

(OMB A-123), Management’s Responsibility for Enterprise Risk Management and Internal 

Control, which implements the FMFIA. 

The Department’s management performed an internal control assessment as required 

under FMFIA; however, management’s assessment did not comply with limited 

requirements within the FMFIA and the related OMB A-123 requirements. Specifically, 

the Department did not identify and document specific and limited financial statement 

risks and the associated controls that were responsive to those specific risks. Additionally, 

the Department’s management internal controls did not properly identify specific risks 

impacting the data used to calculate the subsidy re-estimates used in the consolidated 

financial statement. This resulted in the lack of timely identification of errors in data that 

impacted subsidy re-estimates in the consolidated financial statements.

Federal Financial Management Improvement Act of 1996 (FFMIA)

Federal Financial Management Improvement Act of 1996 (FMFIA), Pub. L. 104-208, 

Title VIII (31 U.S.C. 3512 note) was enacted into law on September 30, 1996. 

The FFMIA requires the Department to establish and maintain financial management 

systems that comply substantially with Federal financial management systems 

requirements, applicable Federal accounting standards, and the United States 

Government Standard General Ledger at the transaction level. Appendix D to the Office 

of Management and Budget (OMB) Circular A-123 provides the FFMIA Compliance 

Determination Framework that is used in determining whether the Department’s financial 

management systems comply substantially with FFMIA requirements. Per section 806 

of the FFMIA, “financial management systems” includes the financial systems and the 

financial portions of mixed systems necessary to support financial management, including 

automated and manual processes, procedures, controls, data, hardware, software, and 

support personnel dedicated to the operation and maintenance of system functions. 

The Department did not meet limited FFMIA requirements due to an inadequate 

risk assessment over specific key processes and data used in the consolidated financial 

statement. As a result, the Department did not comply with FFMIA, increasing the risk 

that transactions are incorrectly recorded to the general ledger, impacting the completeness, 

existence, and accuracy of the balances in the consolidated financial statement.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 52 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

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 statutes,3

 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 Agency Financial Report (AFR) 

and accompanying materials, and to determine whether the agency has met six 

compliance requirements. 

In its annual improper payment compliance audit for FY 2022, the OIG concluded that 

the Department did not comply with the PIIA for the FY 2022 reporting period because it 

did not meet one of the six compliance requirements. Specifically, the Department reported 

improper payment and unknown payment estimate rates that exceeded 10 percent. 

For the Title I program, the Department reported an improper payment and unknown 

payment estimate that exceeded 10 percent for the second consecutive year. To comply with 

31 U.S.C. section 3351(2)(F), an agency must report an improper payment rate of less than 

10 percent for each program and activity for which an estimate was published. In addition, 

the Department’s OIG determined that the improper payment and unknown payment 

estimates for each of the five programs (Title I, Special Education, Education Stabilization 

Fund, Pell Grant, and Direct Loan) were not reliable. Specifically, for the Title I and 

Special Education programs, the improper payment and unknown payment estimates were 

based on inaccurate sampling populations. Further, for the Title I, Special Education, and 

Education Stabilization Fund programs, the Department’s testing results were inaccurate.

This determination of noncompliance with PIIA does not represent a material weakness in 

the Department’s internal controls. 

Additionally, auditors determined that the Department’s overall IT security program and 

practices are effective, as eight out of the nine FISMA domains met the requirements 

needed to operate at a Level 4 maturity rating, indicating the systems security is Managed 

and Measurable.

Federal Information Security Modernization Act of 2014 (FISMA)

The Federal Information Security Modernization Act of 2014 (FISMA) requires federal 

agencies to develop, document, and implement an agencywide program to provide security 

for the information and relevant information technology systems. The Act supports the 

operations and assets of the agency and helps to ensure the confidentiality, integrity, and 

availability of all system-related information.

The Department’s and FSA’s information security programs completed numerous 

significant activities in FY 2023 to improve cybersecurity capabilities and functions, some 

of which include:

• In FY 2022, the Department received an overall FISMA assessment of “Effective,”

or a Level 4 Cybersecurity Maturity Level. This score was the highest achieved by

3 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.
FY 2023 AGENCY FINANCIAL REPORT 53 U.S. DEPARTMENT OF EDUCATION

the Department since the scoring metrics were established in 2014. In FY 2023, 

the Department was again assessed to be overall “Effective.” However, in FY 2023, 

all five cybersecurity functions were assessed to be operating at Level 4. This is the 

first time the Department has achieved such a result which reflects significant strides 

in advancing the Department’s cybersecurity maturity and effectiveness across all 

functions and 8 of 9 security domains which make up those functions as supported by 

information in the graphics below.

Security 

Function Metric Domain Maturity Level Change 

from 2022

Met Federal 

Goal

Identify Risk Management Managed and Measurable ▲ 

Identify Supply Chain Risk Management Managed and Measurable ▲ 

Protect Configuration Management Managed and Measurable = 

Protect Identity and Access Management Consistently Implemented =

Protect Data Protection and Privacy Managed and Measurable ▲ 

Protect Security Training Managed and Measurable = 

Detect Information Security Continuous 

Monitoring Managed and Measurable = 

Respond Incident Response Managed and Measurable = 

Recover Contingency Planning Managed and Measurable = 

 

IG FISMA Audit Recommendations

  

IG FISMA Metrics at Effective Maturity

 

Security Domains at Effective Maturity

 

 

Cyber Functions at Effective Maturity

 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 54 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

• In FY 2023, the Department continued advancing its cybersecurity capabilities, 

policies, and procedures as well as implementing priority capabilities to reduce risk 

in support of requirements levied from Office of Management and Budget (OMB) 

and Department of Homeland Security (DHS), including those documented 

within Executive Order on Improving the Nation’s Cybersecurity (EO 14028). The 

Department was the first cabinet-level Department to receive funding from the TMF 

and successfully adopted a SASE solution in support of advancing its ZTA capabilities 

in support of federal requirements as outlined in OMB Memorandum M-22-09. 

SASE has modernized the Department’s cybersecurity posture through migrating away 

from legacy Virtual Private Networks (VPN). The new solution leverages cloud native 

capabilities to enhance the teleworking employees’ experiences, including providing 

10x faster connection speed than the legacy VPN access, reducing the number 

of logins required for applications, and increasing performance for tools such as 

Microsoft Teams, Outlook, Zoom, and other applications and data while modernizing 

the Department’s Cybersecurity posture. 

• The Department issued a contract with a professional service provider to modernize 

and enhance its Enterprise ICAM (Identity, Credential, and Access Management) 

solution beginning in September 2022 and aligns with the OMB Memorandum 

M-22-09, Moving the U.S. Government Toward Zero Trust Cybersecurity Principles 

requirements to meet specific cybersecurity standards and objectives by the end of 

FY 2024. The ICAM program continues to provide improved security features and 

functionality which enhance the security posture of the Department. The Enterprise 

ICAM service has been working to integrate all Department information systems with 

modern, phishing resistant authentication services, and has instituted a single signon (SSO) capability through a centralized user portal for Department employees and 

contractors to access their Microsoft Office 365 applications. 

– Enterprise ICAM provides the following new capabilities to the Department: 

self-service password reset functionality and security information registration; 

certificate-based authentication to support native personal identity verification 

(PIV) in cloud service provider SSO; and identity lifecycle management 

capabilities to enable automated user account provisioning and deprovisioning. 

Enterprise ICAM has also integrated with the ED Cyber Data Lake (EDCDL) 

to develop a centralized identity dashboard to improve transparency into 

identity related metrics that align with OMB Memorandum M-22-09, Moving 

the U.S. Government Toward Zero Trust Cybersecurity Principles, and OMB 

Memorandum M-21-31, Improving the Federal Government’s Investigative 

and Remediation Capabilities Related to Cybersecurity Incidents, for user and 

privileged user logging requirements.

– The Department’s ICAM program was successful in integrating with Login.

gov for public users and was integral to instituting multifactor authentication 

(MFA) deployment across the Department through integrating PIV validation 

of Department organizational users. Through the implementation of ICAM, 

Department online resources are more secure for users to access through 

implementation of phishing resistant authentication and improved visibility. 

Implementation also strengthens the Department’s access management 

capabilities by reducing the risk of successful phishing cyber-attacks across the 

Department’s enterprise and ensuring the right people have the right level of 

access to Department resources. Users experience a superior interaction with the 

Department’s services as they will log on substantially fewer times and will need to 

remember fewer passwords and pins.
FY 2023 AGENCY FINANCIAL REPORT 55 U.S. DEPARTMENT OF EDUCATION

• The Department’s accomplishments in maturing its risk management capabilities,

specifically the maturation of the Cybersecurity Framework (CSF) Risk Scorecard,

has been recognized by other Federal Agencies, including OMB, as an optimized

capability in managing and communicating cybersecurity risk. The Department of

Commerce, Department of Justice, Department of Transportation, and Nuclear

Regulatory Commission have all requested playbooks for the development and

implementation of CSF-based risk scoring capabilities in their environments based

upon our constructs. Released in November 2022, version 3.0 of the ED CSF Risk

Scorecard now aligns National Institute of Standards and Technology (NIST) Special

Publication (SP) 800-53, Revision (Rev.) 5 security and privacy controls to the NIST

CSF objectives as well as the NIST Privacy Framework (PF) Ver. 1.0. The ED CSF

Risk Scorecard provides continuous measurement and risk prioritization of key metrics

for system stakeholders, POC leadership, and Department executive leadership on a

daily, monthly, and quarterly basis.

• On April 14, 2022, the Department’s CISO issued a memorandum for Recission

of Department Standard PR.AC: Emergency PIV Alternative. On May 5, 2020, to

address the closure and limited operating capacity of Federal Government badging

offices due to the coronavirus 2019, OCIO issued Standard PR.AC: Emergency PIV

Alternative Standard. This standard provided authorization to access Department

systems for those who did not hold a valid PIV but have been cleared by the

Department’s Office of Personnel Security. OCIO has determined Standard PR.AC:

Emergency PIV Alternative Standard is now unnecessary as Federal Government

badging offices are now open and are at normal operating capacity. This memo serves

to drive actions necessary to ensure the Department’s workforce is using the strongest

multifactor authentication possible in alignment with Executive Order 14028.

• The integration of supply chain risk management (SCRM) assessments with the

Department’s Enterprise Architecture Technology Insertion process, also known as the

(EATI) process, successfully identified 15 CFR Part 7 concerns with Eclipse DB and

7-zip resulting in Deep Dive reviews and the creation of plan of action and milestones

for mitigation. SCRM has also been integrated into the CSF Risk Scorecard to

strengthen the ability to measure and monitor supply chain risk. This integration has

allowed the Department to identify risks and empowered senior leadership the ability

to accept, mitigate, or transfer supply chain risk appropriately within the Department.

• The Department continued to build on FY 2022 awards and received multiple

recognitions and multiple awards in FY 2023 from the Federal Information

Security Educators Association (FISSEA). FISSEA is an organization run by and for

Federal government information security professionals to assist Federal agencies in

strengthening their employee cybersecurity awareness and training programs. These

awards include Awareness Training Category award for the Cybersecurity and Privacy

Awareness Escape Room course; Innovative Solutions award for badges awarded for

high levels of symposium participation and top reporters of phishing exercises; and

Awareness Newsletter award for the Department’s Bits and Bytes awareness newsletter.

Following receipt of these awards, the Department of Energy, Postal Regulatory

Commission, Social Security Administration, Department of Health and Human

Services, Department of Labor, Department of Commerce, and Consumer Financial

Protection Board reached out to the Department and requested meetings to learn

more about the Department’s program and obtain guidance and direction on how to

build and maintain an effective training program.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 56 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

• From an incident response perspective, there have been no major cybersecurity

incidents across the Department in FY 2023. To bolster collaboration and interagency

coordination, the Department has also allocated a dedicated resource to work with law

enforcement and the National Cyber Investigative Joint Task Force. The Department

also continued maturing its cyber threat intelligence and cyber hunt capabilities by

establishing dedicated resourcing to interface with the intelligence community for

Department of Education-specific threat indicators.

• The Department, in coordination with 18 Federal agencies through the Memorandum

21-31 (M-21-31) working group, is leading the government’s efforts to determine

impact, applicability, and legal ramifications for statistical data collection for event

logging. Adhering to Executive Order (EO) 14028 (Section 8) to improve the Nation’s

Cybersecurity, the implementation M-21-31 will strengthen the Department’s event

logging capabilities to better identify, investigate and prevent cyber-attacks such as data

breaches, identity theft, and other types of cybercrime. Without this capability, the

Department will be unable to aid law enforcement and national security partners when

a cyber-attack impacts the Department. This can lead to prolonged attacks degrading,

disrupting, and limiting services. Furthermore, Department staff will be unable to

answer questions to Congress and oversight bodies about what happened, when it

started, and how staff resolved the issue in cybersecurity breaches and incidents.

• On February 27, 2023, OMB Memorandum M-23-13, “No TikTok on Government

Devices” Implementation Guide, was issued. The Department issued the appropriate

CISO memorandum to all Department employees and contractors to remove TikTok

and any successor application or service developed or provided by ByteDance Limited

or subsidiary from ED devices and providing instructions and deadlines for its

removal. Further the Department was able to leverage its newly deployed ZTA tools,

SASE, to begin blocking TikTok by its application identifier.

• In support of the Department’s maturation plan for the Education’s Security

Operations Center (EDSOC), efforts are underway to build out a consolidated and

centralized SCIF for use by the Department and FSA. This new SCIF will provide a

secure room for classified briefings as well as serve as a disaster recover site to ensure

continuity of business operations in the event of an emergency and deemed necessary.

– In February 2023, the Department and FSA combined Security Information and

Events Management licenses and migrated FSA’s data to the EDCDL in August

2023. In doing so, the Department saved in FY 2023, this migration drastically

increased the opportunity for information sharing between EDSOC and FSA

Security Operations Center incident response analysts allowing the Department to

adhere to EO 14028 and OMB M-21-31.

– The Department also enhanced its data loss prevention (DLP) capability through

an engagement with DHS CISA under the Secure Cloud Business Applications

project which provided guidance and capabilities to secure cloud business

application environments and protect federal information that is created, accessed,

shared, and stored. The Department has also gone above and beyond by taking

the next steps to include DLP looking for things like Federal Tax Information and

Employer Identification Number.
FY 2023 AGENCY FINANCIAL REPORT 57 U.S. DEPARTMENT OF EDUCATION

• The Department’s Information System Security Support Services (I4S) executed

a Blanket Purchase Agreement (BPA), as well as I4S BPA Call Order1 to provide

Support Services related to Program Management Support, Governance, Risk and

Compliance Tool (CSAM) Support, and Contractor Information System Security

Officer (ISSO) Support. The Department will now be able to execute call orders

against this BPA to procure Information System Owner, ISSO, and Vulnerability

Management and Security Engineering services.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 58 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Forward-Looking Information

4 https://www.stlouisfed.org/publications/regional-economist/2023/mar/return-investing-college-education

This section summarizes information pertinent to the Department’s future progress 

and success.

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,4

 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 75 percent of the direct loan portfolio was in mandatory administrative

forbearance when the student loan repayment deferral period ended on

August 31, 2023.

• As of September 2023, more than 9.9 million direct loan recipients were enrolled in

IDR plans. Overall, as of September 2023, about 50 percent of direct loan dollars

and more than 32 percent of direct loan 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.

• Work to improve customer service and student aid systems and processes by

implementing FSA’s Next Gen FSA, see page 63.

• 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.
FY 2023 AGENCY FINANCIAL REPORT 59 U.S. DEPARTMENT OF EDUCATION

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 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. There are 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:

Return to Repayment: 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 ended. Interest began accruing on September 1, 2023, 

and the first payments were due in October. To help borrowers successfully return to 

repayment, the Department created a temporary on-ramp period through September 30, 

2024. This on-ramp period protects borrowers from having a delinquency reported to 

credit reporting agencies. This prevents the worst consequences of missed, late, or partial 

payments. While payments will be due and interest will accrue, interest will not capitalize 

for the duration of the on-ramp period. There is uncertainty regarding cost estimates as 

millions of borrowers have not been required to make monthly payments on their federal 

student loans since March 2020 and a large portion of those borrowers have no previous 

experience in making loan payments.

Income-Driven Repayment Plans: On July 10, 2023, the Department published a Final 

Rule to revise the current Revised Pay As You Earn (REPAYE) repayment plan which 

may also be referred to as the Saving on a Valuable Education (SAVE) plan. The revised 

plan will result in lower monthly payments for nearly all qualifying borrowers (among 

those who did not already have a $0 monthly payment). Provisions of the plan are being 

implemented on a tiered schedule with some provisions currently effective and others 

effective July 1, 2024. 

IDR plans tend to be more costly to the government than non-IDR plans. For the 2023 

loan cohort, it is estimated that the government will recover 57 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 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 60 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

borrower and may not always be entirely clear. In general, however, the introduction of 

the SAVE plan has made IDR terms more generous and 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.

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 from the borrower. 

The changes included a limited PSLF waiver that allows all payments by student 

borrowers to count toward PSLF, regardless of loan program or payment plan and a 

review of denied PSLF applications for errors, giving borrowers the ability to have 

their PSLF determinations reconsidered. Borrowers who have not previously certified 

employment have been able to apply for the waiver. Two permanent changes to military 

borrowers working toward PSLF were also implemented. This opportunity ended on 

October 31, 2022. 

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. 

Data on approved PSLF applications first became available in FY 2018 since borrowers 

first became eligible for PSLF discharges starting October 1, 2017, after having made 

120 qualifying payments. As of September 30, 2023, the total number of borrowers who 

received forgiveness from the PSLF waiver exceeded 673,000. The value of this forgiveness 

totaled $46.6 billion. Including TEPSLF and PSLF discharges processed before the waiver 

period, the value of forgiveness exceeded $52.1 billion and included 730,000 borrowers.

As of September 30, 2023, the number of borrowers with certified employment totaled 

2.09 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. Borrowers may certify public service employment one year at a

time, rather than certifying all 10 years at once, and this process also makes the number
FY 2023 AGENCY FINANCIAL REPORT 61 U.S. DEPARTMENT OF EDUCATION

of borrowers with certified employment higher than the number who have received 

forgiveness. Any future congressional or regulatory action that may affect eligibility for 

PSLF continues to be an area of uncertainty.

Broad-Based Debt Relief: On June 30, 2023, the Supreme Court ruled that the 

Secretary does not have authority under the Higher Education Relief Opportunities for 

Students Act of 2003 (HEROES Act) to establish a student loan forgiveness program. In 

response, the Secretary initiated a rulemaking process aimed at opening an alternative 

path to debt relief using the authority under the Higher Education Act.

Borrower Defense to Repayment: On June 22, 2022, the Department and the 

plaintiffs reached a proposed settlement in the case titled Sweet v. Cardona (formerly 

Sweet v. DeVos). The court granted final approval to the settlement as fair, adequate, 

and reasonable on November 16, 2022. In the settlement, if the borrower defense 

application is related to federal student loans taken out to pay for attendance at any 

school on the list of schools attached to the settlement agreement, the borrower will 

receive “Full Settlement Relief.” Full Settlement Relief means that the federal student 

loan(s) associated with the borrower’s attendance at the school will be discharged, the 

Department will refund any amounts paid to it on those loans, and the credit tradeline 

for those loans will be deleted from the borrower’s credit report.

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 2023 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. Lastly, the direct loan 

portfolio has grown from approximately $356 billion in FY 2011 to more than $1.3 

trillion as of the end of FY 2023. 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.

From the second quarter of 2020 until the expiration of the federal Public Health 

Emergency on May 11, 2023, the COVID-19 pandemic caused 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 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 62 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Security were also suspended. However, the ultimate impact of the pandemic on longterm Direct Loan Program costs will depend on, among other things, short- and longterm 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. The exact impact on the cost estimates from the current 

period remains an 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 2018–22, resulted in a projected increase in the re-estimate of 

$3.0 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 continue to closely monitor wage growth following the pandemic. The 

estimates are sensitive to slight changes in model 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 timeline for implementation of the FUTURE Act is uncertain. 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 
FY 2023 AGENCY FINANCIAL REPORT 63 U.S. DEPARTMENT OF EDUCATION

disbursements are processed. Hence, there is an inherent risk that future, unpredictable 

disruptions in the administrative status quo may impact student loan cost estimates.

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 in recent years. 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, Federal 

Student Aid (FSA) delivers approximately $114.1 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 and career school. 

FSA’s loan portfolio has grown to more than $1.6 trillion. FSA also provides oversight of 

approximately 5,400 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

Through the Next Generation Federal Student Aid (Next Gen FSA) initiative, the 

Department continues to modernize FSA’s programs, technology, processes, and 

operations to improve student, parent, and borrower experiences and outcomes, as well 

as those of student aid partners. Moreover, through Next Gen FSA, the Department 

continues to strengthen cybersecurity protections for students, parents, borrowers, 

institutions, and other financial partners.

Legacy Environment

In the legacy federal student aid environment, students and families navigated a complex 

and fragmented landscape and interacted with multiple systems, vendors, processes, 

and interfaces across a multitude of brands and user experiences. This poor customer 

experience created confusion and resulted in customers failing to understand how to apply 

for and maintain their aid eligibility. As a result, federal student loan borrowers often do 

not know for which loan forgiveness and repayment options they qualify. Additionally, 

operational complexities resulted in higher administrative costs and hindered effective 

oversight of the Department’s vendors. 

Next Gen FSA Environment

As part of the Next Gen FSA initiative, FSA combined multiple websites, contact centers, 

and other customer interfaces into a simplified, consistent, and engaging customer 

experience, which has been enhanced by standardized training and tools. FSA’s website—

StudentAid.gov—continues to be customers’ single front door on the web. In addition, 

the FSA Partner Connect website—fsapartners.ed.gov, which was launched as a part 

of the Next Gen FSA initiative—serves as a resource for entities that participate in the 

federal student aid programs. FSA also continues to enhance its modern self-service and 

consumer information tools that help customers understand the aid they have received, 

their remaining eligibility, for what loan forgiveness programs they may be eligible, and 

how they can manage loan repayment in a way that meets their goals. 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 64 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

During FY 2023, FSA enhanced many of its Digital and Customer Care (DCC) tools, 

including the Public Service Loan Forgiveness (PSLF) Help Tool, Loan Simulator, Aidan® Virtual Assistant, and the Federal Student Aid Estimator. In FY 2023, FSA significantly 

updated the PSLF Help Tool to allow users, for the first time, to fully complete the PSLF 

application process digitally using the new digital signature and submission components 

of the PSLF Help Tool. Previously, borrowers had to follow multiple, disjointed steps 

to complete the PSLF Form, including printing and signing the form and having their 

employers sign the paper form as well. Digital signature and submission created a faster, 

more straightforward, and more transparent process for borrowers applying for PSLF. FSA 

updated Loan Simulator to improve borrowers’ experience and allow users to compare 

different repayment plans more easily. FSA enhanced Aidan to give borrowers information 

about a wider range of topics. 

FSA also updated the Federal Student Aid Estimator, which helps students determine how 

much and for what types of federal student aid they may be eligible. The newly updated 

tool now provides an estimate of the amount of federal student aid that a student may be 

eligible to receive using criteria that align with the 2024-25 Free Application for Federal 

Student Aid (FAFSA®) form. 

Finally, FSA enhanced other resources and tools across StudentAid.gov to help borrowers 

prepare for student loan payments to restart when the COVID-19 payment pause ended 

in fall 2023. 

Throughout FY 2023, FSA completed several updates to the Enterprise Data 

Management and Analytics Platform Services (EDMAPS), including three successful 

packages of updates that support tools on StudentAid.gov, including the PSLF Help Tool 

digital signature and submission functionality and updates to the IDR application.

As a part of the Next Gen FSA initiative, FSA also successfully awarded new contracts to 

five companies to modernize and enhance servicing for federal student loan borrowers. 

These contracts, awarded during FY 2023 through the Unified Servicing and Data 

Solution (USDS) solicitation, mark the first step toward implementing the new servicing 

environment during FY 2024, which will be FSA’s long-term loan servicing solution. This 

new servicing environment will replace the legacy loan servicing environment, which can 

be confusing for borrowers as legacy loan servicers operate under their own brands. 

The new environment is designed to provide all federal student loan borrowers with a 

high-quality customer experience, deliver enhanced support for at-risk borrowers, and 

ensure vendor accountability. FSA’s goals for the new loan servicing environment include:

• providing all federally managed borrowers with complete account management

capabilities on StudentAid.gov;

• increasing servicer accountability to reduce loan delinquencies and defaults and other

customer service benchmarks through clear, measurable service-level agreements and

performance incentives;

• allowing FSA to collect more and better data from legacy loan servicers to improve

account transfers, borrowers’ access to information, and FSA’s ability to monitor

servicer performance; and

• bringing legacy loan servicers up to enhanced cybersecurity standards.
FY 2023 AGENCY FINANCIAL REPORT 65 U.S. DEPARTMENT OF EDUCATION

Awarding the contracts for the new loan servicing environment is the culmination of 

nearly a decade of work to overhaul federal student loan servicing, and borrowers will 

begin to see the benefits when the new servicing environment goes live in spring 2024. 

The Next Gen Business Process Operations (BPO) vendors continue to provide support 

for customers by answering questions through the Federal Student Aid Information 

Center. In FY 2023, BPO vendors handled a higher volume of calls and chats, exceeding 

forecasted volumes in summer 2023, despite reduced hours of operations that went 

into effect earlier in FY 2023 due to budget reduction. BPO vendors provided efficient 

and effective customer experiences about topics that include return to repayment; the 

SAVE Plan and other IDR plans; PSLF, including processing employer adjudication 

cases; and borrower defense to repayment. In addition, BPO vendors also staffed FSA’s 

debt relief hotline, which received a significant number of inquiries, and supported 

users who needed to reset their StudentAid.gov accounts. Finally, the BPO team hosted 

an all-BPO vendor meeting in June 2023 to focus on vendors’ concerns and explore 

BPO recommendations. 

The FSA Partner Connect website, fsapartners.ed.gov, 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. During FY 2023, FSA further 

updated the website by transitioning the FSA Conference website and the FSA Learning 

Management System (LMS) to the Partner Connect website. The new website aligns with 

the overall design of FSA Partner Connect and the new look and feel provide an improved 

user experience for partners. Conference information and resources that were available 

on the FSA Conference website—including session materials and recordings from past 

conferences—were also moved into Partner Connect. 

Finally, during FY 2023, FSA began work on the Title IV Origination and Disbursement 

(TIVOD) Modernization Project. This project will award one or more contracts to 

replace contracts expiring in January 2025. The project will ensure the continuation of 

functionality delivered by Common Origination and Disbursement (COD), the National 

Student Loan Data System (NSLDS®), EDMAPS, and critical back-end services, such as 

data integration and customer service for schools and other partners.

Leveraging Data as a Strategic Asset

The Department continues its focus on leveraging its data as a strategic asset by 

continuing to implement requirements in the Foundations for Evidence-Based Policymaking 

Act of 2018 (Evidence Act; P.L. 115-435) and the Federal Data Strategy. Throughout 

FY 2023, the Department continued to strengthen data governance while overseeing an 

unprecedented investment in students and schools through the Education Stabilization 

Fund, created and subsequently augmented through the triad of COVID relief laws. 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.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 66 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The Department’s Data Strategy

The Department’s inaugural Data Strategy (December 2020) and the agency’s updated Data 

Strategy—published in August 2023—collectively set forth the agency’s plan to meet its 

longstanding vision: to realize the full potential of data to improve education outcomes and 

lead the nation in a new era of evidence-based policy insights and data-driven operations. 

The mission of the Data Strategy is to optimize the Department’s ability to provide trusted 

data and insights to internal and external stakeholders, guided by the principles of ethical 

governance, conscious design, and a learning culture. The four goals of the Data Strategy 

focus the Department’s efforts on strengthening agency-wide data governance, building 

human capacity to leverage data, advancing the strategic use of data, and improving 

data access, transparency, and privacy. These interconnected goals continue to build the 

Department’s capacity for data governance and management to promote evidence-based 

decision-making. 

Since the publication of the agency’s inaugural Data Strategy in 2020, the Department 

has established an agency-wide data governance program and released foundational 

governance policies, created a data skills training program, made progress on essential 

data infrastructure modernization projects, developed guidance around data quality, data 

privacy, open data, performance measures, and other topics, and built staff capacity for 

data visualization and storytelling. By the end of FY 2023, the Department had made 

substantial progress toward completing planned activities and action plans aligned with 

each of the 19 objectives established in its inaugural Data Strategy. Specifically, the agency 

fully executed 16 of 19, or 84 percent of the original Data Strategy objectives, exceeding 

the Department’s FY 2022–2026 Strategic Plan Objective 5.2 performance metric for 

FY 2023.

The 2023 Data Strategy establishes 16 new objectives that reflect the agency-wide progress 

to date to build data maturity, processes, and outcomes. For example, buttressed by the 

progression achieved through the inaugural Data Strategy, the Department is now focused 

on advancing agency-wide data maturity, developing a data valuation methodology to 

ensure strategic data investments, fully implementing a cohesive data quality plan, and 

improving intra- and inter-agency data sharing as part of the Goal One focus for the next 

few years. Under Goal Two, the data workforce plan aspires to address agency staffing and 

training needs while the Department continues to build out the pioneering Data Literacy 

and Data Science training programs to tailor support for all proficiency levels and help staff 

develop data visualization and storytelling capacity. To advance the strategic use of data 

under Goal Three, the agency will strengthen the evidence-building pipeline by addressing 

the Learning Agenda’s priority learning questions and identifying gaps in Department data 

while supporting the agency’s grant management and student loan servicing systems. Finally, 

under Goal Four, the agency plans to publish and implement an Open Data Plan, continue 

to expand the comprehensive data inventory, enhance transparency through access to agency 

administrative data, and strengthen the data release and disclosure review processes. 

The agency’s pioneering work and accomplishments continue to be recognized by other 

federal agencies and affiliates. For example, in April 2023, the Department’s Data Skills 

Team—leading Data Strategy Goal Two—was bestowed the 2022 Federal Chief Data 

Officers Council (CDOC) Distinguished Achievement in Federal Data Award. The 

Federal CDOC Awards recognize both civilian and military employees and teams 

of federal agencies that demonstrate innovative data policy and practices to advance 

government mission achievement and increase the benefits to the Nation through 

improvement in the management, use, protection, dissemination, and generation of data 
FY 2023 AGENCY FINANCIAL REPORT 67 U.S. DEPARTMENT OF EDUCATION

in decision-making and operations. The award category for Distinguished Achievement in 

Federal Data highlights individuals or teams who make truly exceptional contributions to 

Federal Data and the use of data in policymaking. 

Open Data

Improving access to Department data, while maintaining its quality and confidentiality, 

is key to expanding the agency’s ability to generate evidence to inform policy and 

program decisions. Increasing access to data for Department staff, federal, state, and local 

lawmakers, and researchers can help the Department make new connections and foster 

evidence-based decision making. 

The Department’s Open Data Platform (ODP) at https://data.ed.gov/ was publicly 

launched in December 2020, with an initial population of public data profiles. A central 

repository for Department 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 

Title II of the Foundations for Evidence-Based Policymaking Act of 2018 and guided by 

Data Strategy Goal Four, throughout FY 2023, the Department continued to advance 

toward the development of the comprehensive data inventory by further 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 

growing the number of Department open data assets listed in the Federal Data Catalogue. 

In FY 2023, the number of data assets categorized in the agency’s comprehensive data 

inventory grew to over 800, demonstrating the Department’s commitment to providing 

the public with quality data that can be freely accessed and used. Progress attained 

exceeded the FY 2023 target for performance indicator 5.4.5 in the Department’s FY 

2022–2026 Strategic Plan.

In FY 2023, ODP was upgraded to support accounts for public users through the General 

Services Administration’s login.gov service. This innovation allows participating users to 

follow offices or specific data assets and receive notifications when the items they follow 

are updated. Future public engagement features through the Open Data Platform are 

planned to build on this foundational capability.

Future Open Data activities include the development, publication, and implementation 

of an Open Data Plan aligned with ED’s Data Strategy, further detailing the agency’s 

efforts to make government data open for the public. Aligned with statutory 

requirements, the following four goals will guide the development of the agency’s Open 

Data Plan: 1) to improve the usability of ED’s data assets, 2) to identify what data assets 

are being used, and how they are being used, 3) to grow the data inventory to help the 

agency find and use available data, and 4) to create processes to improve the quality, 

completeness, accuracy, and timeliness of ED’s data. The agency conducted an OMBapproved public Customer Survey in the summer of 2023, engaged CFO Act agencies, 

and collaborated with stakeholders across the Department to garner input on the 

development of the Open Data Plan and ways to improve the agency’s comprehensive 

data inventory.

The Department awaits further guidance from OMB through the annual Federal Data 

Strategy Action Plan—the last one was published in 2021—as well as the next phase 

of guidance on Title II of the Foundations for Evidence-Based Policymaking Act of 2018, 

known as the OPEN Government Data Act.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 68 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Education Stabilization Fund Public Transparency Portal

The Department launched the Education Stabilization Fund Transparency Portal in 2020 

to provide transparency into how the $263 billion investment in education provided for 

state and institutional COVID-19 recovery and rebuilding efforts was awarded and spent. 

The ESF Transparency Portal was established by the Coronavirus Aid, Relief, and Economic 

Security Act (CARES Act) in March 2020, with subsequent allocations to the Fund codified 

through the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA Act), 

signed into law in December 2020, and the American Rescue Plan Act (ARP Act), signed 

into law in March 2021. The ESF Transparency Portal includes four primary emergency 

relief funds: (1) the Elementary and Secondary School Emergency Relief (ESSER) Fund, 

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

Assistance to Non-Public Schools (EANS) Fund, and (4) the Higher Education Emergency

Relief (HEER) Fund. In September 2023, the Department upgraded the website to

improve overall usability and public accessibility of the site’s data assets and reports.

Throughout FY 2023, the work to communicate ESF award expenditures by states, 

local school districts, and institutions of higher education, continued unabated but with 

a renewed focus on improving data collection and accurate and timely reporting via 

the ESF Transparency Portal. In December 2022 and January 2023, the Department 

publicly released, via the ESF Transparency Portal, the Calendar Year (CY) 2021 

Annual Performance Reports (APRs) received from more than 4,600 institutions of 

higher education and 52 FY 2021 APRs for the ESSER Fund grantees. In addition, 

the Department published reports summarizing expenditures and highlighting how 

funds were used to support students, schools, institutions, and their communities while 

spotlighting grantees’ work to reengage students and address learning needs. 

Throughout the spring and summer of 2023, the agency coordinated, planned, and 

conducted the CY 2022 (Year 3) APR data collection for nearly 4,000 institutions of 

higher education. In the summer of 2023, the APR data collections for FY 2022 ESSER 

Fund Year Three, ESF-SEA Fund Year Three, GEER Fund Year Three, and EANS Fund 

Year Two State and outlying area grantee submissions were conducted. To support 

grantees and improve data quality in FY 2023, the agency provided enhanced technical 

assistance through increased customer communications, live webinars, published business 

rules and forms, and the provision of grantee-specific Help Desk support.

The outcome of these interventions and initiatives was a distinguishable increase in the 

timeliness of grantee submission of APR data. In 2023, 100 percent of ESSER grantees 

reported during the allotted initial reporting period and for HEERF, 400 fewer IHEs 

failed to submit their HEERF reports during the allotted initial reporting period than in 

2022. Through the end of FY 2023, the Department continued to work with grantees 

to address data quality issues to provide the public with more accurate information 

on the expenditure of the education relief funds. These FY 2023 initiatives to improve 

communications and the quality of the data the agency receives from ESF grantees 

increases the reliability of and promotes greater transparency into the expenditures of 

CARES, CRRSA, and ARP funds.

Additionally, in July 2023, an audit report managed by the Pandemic Response 

Accountability Committee in coordination with the Department’s Office of Inspector 

General (OIG) and other Inspector Generals across a host of agencies studying the 

sources, intended purpose, and impacts of federal pandemic response program funds 

provided to six select geographic areas, acknowledged ED’s ESF Transparency Portal
FY 2023 AGENCY FINANCIAL REPORT 69 U.S. DEPARTMENT OF EDUCATION

for “clearly distinguishing ESF funding by subprogram, like HEERF, and for providing 

information on how funds are being used by recipients and subrecipients, i.e., local school 

districts, which supports increased public transparency of specific programs.” 

Data Quality

The Department’s Data Quality Program aims to improve the quality of data collected 

and published by the agency, serves as a component part of the response to OIG’s 

annual Management Challenges report, and will be executed in concert with supporting 

initiatives. The agency has published a data quality playbook for grant staff, a data quality 

plan template and instructions for POCs, and offered data quality trainings to support 

the procedures outlined in the agency’s revised Information Quality Act (IQA) guidelines 

which were published in September 2023. 

The agency has determined that there are three root causes to the persistent data quality 

challenges, identifying them initially in the 2020 response to the Department OIG’s 

findings in the Data Quality and Reporting section of its Management Challenges 

report. The first root cause is prime grant recipients’ capacity, as they are focused on 

programming to serve students. They have limited time and fiscal resources to improve 

data quality and reporting. Additionally, prime grantees are responsible for the quality 

of data reported to them by their own subgrantees. Data errors in subgrantee reporting 

become aggregated to larger errors in prime grantee reporting. Second, grants staff 

at the Department have large portfolios, in which looking at data quality is just one 

responsibility during the limited time they must spend monitoring, providing technical 

assistance to grantees, preparing required paperwork, and taking training on grants 

administration. Third, the agency has worked on this issue over the past three years, 

the Department has acknowledged the need to communicate to grantees that there are 

credible consequences for failing to report accurate data at an acceptable level of quality.

The agency is working to implement data quality policies that encourage and support 

principal offices to establish a data quality plan in advance of seeking internal approvals 

for collecting, creating, processing, storing, or otherwise managing data. Additionally, 

the agency has developed and, throughout FY 2024, will deploy templates, training, and 

other resources to support agency staff that are engaged in implementing these policies.

Further progress in improving data quality is reliant on the FY 2023 publication of the 

revised IQA Guidelines. The FY 2023 Guidelines revision reflects in-depth collaboration 

and consultation with leaders across the agency. The Guidelines encourage offices to 

establish and publish data quality plans for all agency data assets disseminated to the 

public. These plans will set measurable data quality targets that are appropriate for how 

the data will be used. Principal offices will also set explicit data quality expectations so 

the data they disseminate will be fit for its intended purpose and, accordingly, those 

offices will need to figure out how to resource their efforts to meet those expectations. 

Publication of the revised IQA Guidelines publication will initiate review of a new Data 

Governance Policy on Data Quality by the agency’s Data Governance Board. The policy 

describes actions offices can take at each stage of the data management lifecycle so that the 

agency uses data for decision making to best serve our nation’s students and educators.

The agency has consolidated access to a suite of data quality resources for staff with a new 

Data Quality page on the agency’s internal website, connectED. The Department released 

a Data Quality Playbook that provides practical strategies, or plays, to improve data 

quality across the data management lifecycle, including checklists and questions to guide 

staff planning data collections for grants programs. The Department also conducted the 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 70 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

first quarterly instructor-led training on the Playbook in August 2023, and, in addition, 

on-demand, self-paced training has been posted to the agency’s Learning Management 

System, FedTalent. Beginning in FY 2024, the agency plans to pilot a Data Quality 

Plan Template and instructions for completing the Data Quality Plan. The plan will 

help ensure that the quality of a Department data asset is planned for, documented, and 

assessed throughout the data management lifecycle. 

Current data quality capacity is not sufficient to support principal offices as they start to 

use these resources to ensure their data quality is high enough for their intended uses. An 

additional agency staffer hired to lead the Data Quality Initiative, an agency-wide data 

quality coordinator, will serve a vital role in coordinating implementation and assessment 

of these policies and resources. The incumbent in that role will be responsible for 

reviewing data quality plans and providing feedback and technical assistance to principal 

offices, developing and monitoring the inventory of data quality plans, and reviewing 

the impact of these policies against both the agency’s desired near-term and longerterm outcomes.

The Department’s Learning Agenda 

The Department’s FY 2022–FY 2026 Learning Agenda was published in July 2022 

in conjunction with the release of the Department’s Strategic Plan. It establishes the 

plan for how the agency will improve high-quality evidence building to strengthen the 

nation’s education system. The Learning Agenda is aligned to the Department’s goals and 

strategic objectives, reflecting the Secretary’s priorities 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 and is released in conjunction with the President’s Budget 

request each spring. Both the Learning Agenda and the Department’s Annual Evaluation 

Plan can be found at https://evaluation.gov/agencies/department-of-education.

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 

and the Director of the Department’s Grants Policy Office (GPO) and includes members 

from the Department’s primary grant-making offices as well as mission-support units, 

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

ex-officio representatives such as the Chief Data Officer, the Statistical Official, and 

the Performance Improvement Officer. Feedback from OMB and consultation with 

stakeholders across government, education, and the general public was also used to inform 

the Department’s Learning Agenda. 

In collaboration with the Department’s Data Governance Board, the Evidence Leadership 

Group has begun work to align the Department’s evidence-building and data strategies. 

This includes considering whether and how new information collections can be used to 

address agency priority learning questions; how existing collections might be put to use in 

new ways to build evidence related to the Department’s Learning Agenda; and where gaps 

in Department data may suggest the need to collaborate with other partners to meet the 

Department’s learning goals. 
FY 2023 AGENCY FINANCIAL REPORT 71 U.S. DEPARTMENT OF EDUCATION

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 the new G6 modernization is 

one of the Department’s key initiatives.

G5 Modernization/G6 

The G5 modernization project is an initiative that started in 2019 to develop a new 

grants management system that will support the Department’s grant programs and the 

broader grants community. G6 is the modernized system that will replace G5, allowing 

users to apply, track, and manage all grants through an improved user experience. It 

will modernize and consolidate existing business processes and manual workarounds 

into one platform and streamline the grants management lifecycle, improving oversight 

and monitoring. 

Project Objectives 

The Department’s Grants Management System, G5, is a custom-built, full life cycle 

grants management and payment system that has reached the end of life. Despite years 

of ongoing G5 maintenance, stakeholders continue to identify concerns regarding the 

system’s functionality and/or ease of use. The Department’s current grant processes rely on 

multiple systems utilizing various technologies. Much of the data is duplicated, there is a 

lack of visibility, and there are ad-hoc workarounds. 

To effectively address the needs of all users, the Business Systems Support Division within 

the Office of Finance and Operations initiated the G5 Modernization Initiative to replace 

G5 and implement a state-of-the-art grants management system. The objective of this 

program is to implement an enterprise-wide grants management platform that achieves 

the following objectives: 

1. Improved effectiveness of grant programs by streamlining grant processes, tools, and

technology agency wide.

2. Enhanced and modularized grants platform with superior customer experience using

industry best practices.

3. Reduced cost by minimizing disjointed grants systems, lowering maintenance, and

reducing paper.

4. More informed decision-making by Program Offices by utilizing advanced analytics

and collaboration tools.

5. An evergreen platform capable of easily incorporating future technology

advancements and compliance requirements.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 72 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

System Components 

The “system” consists of two main components. 

Education Grants Platform (EGP). The EGP will serve as the foundation for the 

entire Grants Segment Portfolio of Systems. The EGP, implemented as a “Platform 

of Platforms,” will house Grants Management functionality and capabilities needed 

across the Department. The EGP, depicted below, is a grants platform that incorporates 

Infrastructure as a Service provided by Amazon Web Services, Platform as a Service 

provided by Red Hat OpenShift, and a host of Software as a Service and traditionally 

deployed tools that establish a framework for advanced analytics, technology 

development, and data integration for improved grant operations. Over time, the EGP 

will be used to both develop and host the Department’s grants ecosystem (technology and 

services). G6 is considered the nucleus of the EGP. 

G6. The Department’s Grants Modernization Initiative will implement an incremental 

modern, modular, and secure application that segments the grants process into granular 

modules using microservices that are interdependent, yet autonomous enough to be 

maintained separately. Managing the end-to-end grants process, G6 will combine stateof-the-art Interactive Experience and Customer Experience frameworks to provide users 

with a cognitive grants experience powered by Artificial Intelligence, Natural Language 

Processing, and advanced analytics.

Agile Development 

The Grants Modernization Initiative is developing G6 through a user-centered and 

incremental approach using the Agile methodology over multiple years. The subsequent 

years will be used to roll out G6 capabilities in an incremental manner to production 

and retire the corresponding capabilities from the legacy G5 system. As functionality is 

built, groups of grant users will test and validate what is built prior to it being released in 

the system. OFO has facilitated multiple working groups, user research interviews, and 

outreach sessions that all keep stakeholders informed and include them in the planning 

efforts around development. 

 

 
FY 2023 AGENCY FINANCIAL REPORT 73 U.S. DEPARTMENT OF EDUCATION

G6 Capabilities 

G6 is being developed to execute the G5 business processes and functionality across the 

grant lifecycle. The G6 system will: 

• Include all the Department’s core requirements.

• Maintain an advanced security posture for the data and infrastructure.

• Utilize Advanced Business Intelligence and Collaboration features to allow Program

Officers to make more informed decisions with increased communication and

visibility into data.

• Provide an intuitive user experience.

The G6 system will have the following characteristics:

• Modular with the ability to turn off or restrict a module or sub-module as needed.

• Based on an open architecture and OMB-approved grant standards.

• Built to ensure flexibility, adaptability, interoperability, and configurability.

• Built using a modern technology stack that ensures the underlying technology

components do not become outdated before reaching their end of life.

• Mobile-enabled.

• Highly automated.

• Compliant with legislative changes.

• Roles-based and rules-driven.

Timeline 

In Year 1 (FY 2022), the modernization program implemented the EGP. 

In Year 2 (FY 2023), the program began its first phase of the G5 modernization to G6. 

The team is implementing the Pre-award phase of the grants’ lifecycle, including Planning 

and Scheduling, Applications, Application Packages (Grants.gov, Impact Aid, Fellowship), 

Discretionary Grants, Formula Grants, and Loans. These capabilities are identified 

based on what is available in the current G5; however, the Department expects that the 

implementation team will design the G6 system with a much superior user experience 

using the industry best practices, human-centered design, and federal guidelines. 

The Department is planning for the development effort for the remaining years and 

capabilities. FY 2024 to FY 2025 will be dedicated to Phases 2, 3 and 4, when we will 

migrate different modules to the new platform and decommission the corresponding 

modules from the legacy system, therefore stabilizing the G6. In FY 2026, we envision 

decommissioning the legacy G5 and moving into steady state G6.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 74 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

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FINANCIAL

SECTION

(unaudited)
Financial Section (Unaudited)

About the Financial Section

In FY 2023, the Department prepared its Consolidated Balance Sheet as a critical 

aspect of ensuring accountability and stewardship for the public resources entrusted 

to it. Preparation of this statement is an important part of the Department’s financial 

management goal of providing accurate and reliable information for decision-making.

Message From the Chief Financial Officer

The Chief Financial Officer message summarizes the Department’s FY 2023 

accomplishments and audit opinion.

Consolidated Balance Sheet and Related Notes

The Consolidated Balance Sheet summarizes 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 Notes to the Consolidated Balance Sheet provide information to explain the basis 

of the accounting and presentation used to prepare the statement and to explain specific 

items in the statement. They also provide information to support how particular accounts 

have been valued and computed.

FY 2023 AGENCY FINANCIAL REPORT 76 U.S. DEPARTMENT OF EDUCATION
FY 2023 AGENCY FINANCIAL REPORT 77 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

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. Commitments and Contingencies 

Report of the Independent Auditors

The results of the audit of the Department’s Consolidated Balance Sheet for FY 2023 

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 KPMG LLP to audit the Consolidated Balance Sheet of the Department as of 

September 30, 2023.
FY 2023 AGENCY FINANCIAL REPORT 78 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Message From the Chief Financial Officer

The Office of Finance and Operations (OFO) is committed to supporting the 

Department of Education’s mission to “promote student achievement and preparation 

for global competitiveness by fostering educational excellence and ensuring equal access.’’ 

Our Fiscal Year (FY) 2023 Agency Financial Report is a valuable tool the public can use 

to better understand the Department’s programs and how they effectuate this critical 

mission. In FY 2023, the Department continued to implement new programs geared 

toward improving student educational outcomes and helping student loan borrowers 

transition to their new loan repayment status. 

On January 24, 2023, Secretary Cardona announced the “Raise the Bar: Lead the 

World” initiative. This plan represents an opportunity to improve the nation’s education 

system from preschool through college. It focuses on three major areas: achieving 

academic excellence, boldly improving learning conditions, and creating pathways for 

global engagement. 

The Administration is also taking additional steps aimed at providing debt relief to 

eligible borrowers. Specifically, the agency initiated a rulemaking process aimed at offering 

an alternative path to debt relief for many working and middle-class borrowers. The 

Department also instituted a 12-month “on-ramp” to repayment, running from October 

1, 2023, to September 30, 2024, so that financially vulnerable borrowers who miss 

monthly payments during this period are not considered delinquent, reported to credit 

bureaus, placed in default, or referred to debt collection agencies.

OFO supports these initiatives by providing human capital, financial, acquisition and 

grants management services across all Departmental offices. In addition to supporting 

these programs, OFO continued working with leaders across the agency to ensure effective 

financial stewardship of taxpayer dollars. Over the course of FY 2023, the Department 

made process improvements to address issues identified in the FY 2022 financial statement 

audit. The FY 2022 disclaimer of opinion was largely related to the Broad-Based Debt 

Relief program and its impact on the agency’s financial statement re-estimates. This year, 

the independent auditor issued a disclaimer of opinion on the Department’s FY 2023 

balance sheet. The Department will develop and implement additional corrective action 

strategies to address the issues highlighted in the FY 2023 report. We remain committed to 

continually evaluating new programs, current business processes, and our internal controls 

for improvement opportunities in FY 2024 and beyond.

Through the hard work and dedication of our employees and partners we will continue 

to make improvements in our programs and operations. 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 L. Carter

Delegated the authority to perform the functions and duties 

of the position of Chief Financial Officer

November 16, 2023
FY 2023 AGENCY FINANCIAL REPORT 79 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

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FY 2023 AGENCY FINANCIAL REPORT 80 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

U.S. Department of Education

Consolidated Balance Sheet

As of September 30, 2023

(Dollars in Millions)

FY 2023 (Unaudited)

ASSETS (Note 2)

Intragovernmental:

Fund Balance with Treasury (Note 3) $ 244,029 

Other Assets (Note 4) 153 

Total Intragovernmental 244,182 

Other than Intragovermental:

Loan Receivables, Net (Note 5)

Direct Loan Program 1,030,912 

Federal Family Education Loan (FFEL) Program 39,314 

Other Credit Programs for Higher Education 2,766 

Cash and Other Monetary Assets 564 

Other Assets (Note 4) 311 

Total Other than Intragovermental 1,073,867 

Total Assets $ 1,318,049 

LIABILITIES (Note 6)

Intragovernmental:

Debt Associated with Loans (Note 7)

Direct Loan Program $ 1,127,011 

FFEL Program 60,896 

Other Credit Programs for Higher Education 1,056 

Accounts Payable 1 

Other Liabilities:

Subsidy Due to Treasury (Note 8) 1,630 

Guaranty Agency Funds Due to Treasury 564 

Other Liabilities (Note 9) 1,332 

Total Intragovernmental 1,192,490 

Other than Intragovermental:

Accounts Payable 3,895 

Loan Guarantee Liabilities (Note 5) 11,197 

Other Liabilities:

Accrued Grant Liabilities 5,137 

Other Liabilities (Note 9) 964 

Total Other than Intragovermental 21,193 

Total Liabilities $ 1,213,683 

Commitments and Contingencies (Note 10)

NET POSITION

Unexpended Appropriations $ 171,562 

Cumulative Results of Operations (67,196)

Total Net Position $ 104,366 

Total Liabilities and Net Position $ 1,318,049 

The accompanying notes are an integral part of this statement.
FY 2023 AGENCY FINANCIAL REPORT 81 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Notes to the Consolidated Balance Sheet for

the Year Ended September 30, 2023 

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. The Consolidated Balance Sheet should be read with the realization that it is 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 Loans. 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 provide loan guarantees on loans made by private lenders to eligible 

students with reinsurance and interest subsidies provided by the Department. 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 
FY 2023 AGENCY FINANCIAL REPORT 82 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

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 

IHEs for the building and renovating of their facilities. (See Note 5)

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 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. 

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 Note 3)

The COVID-19 relief legislation and administrative actions also provided support for 

student loan borrowers by: 

• Temporarily suspending nearly all federal student loan payments, interest free.

• Authorizing Guaranty Agencies to reimburse themselves from the Federal 

Student Loan Reserve Fund for lost revenue that resulted from student loan 

repayment deferrals.

• Making temporary changes to the PSLF program to allow student borrowers to get 

credit for payments made while working for a qualifying employer.

• Addressing issues with IDR payment counting. 

Funding for these actions was provided through indefinite appropriations. 

Other regulatory flexibilities and incentives provided to help students through 

COVID-19 included:

• Stopping all federal wage garnishments and collection actions for borrowers with 

federally held loans in default.
FY 2023 AGENCY FINANCIAL REPORT 83 U.S. DEPARTMENT OF EDUCATION

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• Federal Supplemental Educational Opportunity Grants to provide emergency aid 

to students.

• Continuation of work-study payments, 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 educational 

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 states, 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 through the vigorous 

enforcement of civil rights and the collection of data from public schools, promotes 

educational excellence throughout the nation, and serves student populations facing 

discrimination and the advocates and institutions promoting systemic solutions to civil 

rights issues. 
FY 2023 AGENCY FINANCIAL REPORT 84 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Basis of Accounting and Presentation

The Consolidated Balance Sheet was prepared to report the financial position of the 

Department, as required by the Chief Financial Officers Act of 1990 and the Government 

Management Reform Act of 1994. The Consolidated Balance Sheet was 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. FSA also 

issues a stand-alone Consolidated Balance Sheet that is 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 

Balance Sheet. 

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.

Accounting for Federal Credit Programs 

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 (expense) 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). 

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 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. 

• 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 reestimates of the subsidy cost of existing loans. 
FY 2023 AGENCY FINANCIAL REPORT 85 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

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 for all loan types except subsidized Direct Loans. 

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 

income-driven repayment plans under which borrowers may receive forgiveness of the 

remaining balance of their loans after 10, 20 or 25 years under certain rules.

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 other federal agencies 

(intragovernmental) and the public (other than intragovernmental). Other than 

intragovernmental receivables 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.
FY 2023 AGENCY FINANCIAL REPORT 86 U.S. DEPARTMENT OF EDUCATION

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The balance of guaranty agencies’ federal funds represents consolidated reserve balances of 

the 15 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 other than intragovernmental non-entity 

assets 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 

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)

Loan Receivables, Net and Loan Guarantee Liabilities 

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 represent 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)
FY 2023 AGENCY FINANCIAL REPORT 87 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Property and Equipment, Net 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 contractor-owned, 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 10)

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-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 re-estimates 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 
FY 2023 AGENCY FINANCIAL REPORT 88 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

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. Other than 

intragovernmental accounts payable include in-process grant and loan disbursements. 

Accrued Grant Liabilities

The Department records grant expenses as grantees drawdown funding on their available 

grant balances. Some grant recipients incur allowable expenditures as of the end of an 

accounting period but have not yet drawn on their available balances to be reimbursed 

by the Department. The Department accrues liabilities for these allowable expenditures. 

The liability amounts are estimated using a combination of historical data and a statistical 

sample survey of current unliquidated balances. Some grantees drawdown funding in 

advance of incurring grant expenditures. A statistical estimate is made for these advance 

drawdowns and is recorded as other than intragovernmental advances (see Note 4).

Personnel Compensation and Other 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.

Contributions for CSRS, FERS, and other retirement benefits are insufficient to fund the 

programs fully and are subsidized by the Office of Personnel Management (OPM). The 

Department imputes its share of the OPM subsidy, using cost factors provided by OPM, 

and reports the full cost of the programs related to its employees in the Department’s 

Statements of Net Cost. These OPM imputed costs are offset by imputed financing 

sources from costs absorbed by others in the Department’s Statements of Changes in 

Net Position.
FY 2023 AGENCY FINANCIAL REPORT 89 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

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, 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 an other than intragovernmental liability, 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)

Net Position

The components of net position are classified on the Department’s Consolidated Balance 

Sheet as follows:

Unexpended Appropriations. Unexpended Appropriations is the portion of the 

Department’s appropriations received that are represented by undelivered orders or 

are unobligated.

Cumulative Results of Operations. Cumulative Results of Operations represents the 

accumulated net difference since inception between (1) expenses and (2) revenues and 

financing sources.

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 activity (e.g. movement 

of unexpended appropriations which affect cumulative results of operations) performed by 

the child entity are charged to this allocation account as they execute the delegated activity 

on behalf of the parent entity. 

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.
FY 2023 AGENCY FINANCIAL REPORT 90 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

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 the 

Consolidated Balance Sheet in conformity with GAAP. These estimates are reflected in the 

assets, liabilities, and net position of the Consolidated Balance Sheets 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 Consolidated Balance Sheet include: allowance for subsidy for 

direct, defaulted guaranteed, and acquired loans; the liability for loan guarantees; and 

grant liability and advance accruals. (See Notes 4 and 5)

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)
FY 2023 AGENCY FINANCIAL REPORT 91 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

NOTE 2. Non-Entity Assets

(Dollars in Millions)

2023 (Unaudited)

Intragovernmental

 Other than 

Intragovernmental 

Non-Entity Assets

Fund Balance with Treasury $ 862 $ - 

Loans Receivable, Net - 1,386 

Cash and Other Monetary Assets - 564 

Accounts Receivable, Net - 36 

Total Non-Entity Assets 862 1,986 

Entity Assets 243,320 1,071,881 

Total Assets $ 244,182 $ 1,073,867 

The Department’s FY 2023 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 other 

than intragovernmental assets primarily consist of guaranty agency reserves (28.4 percent), 

reported as cash and other monetary assets, and Federal Perkins Loan program loan 

receivables (69.8 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)

2023 (Unaudited)

Appropriated Funds $ 102,088 

Revolving Funds 65,913 

Special Funds 9 

Non-Budgetary: Trust Funds 1 

COVID-19 Funds 75,263 

All Other Funds 755 

Total Fund Balance with Treasury $ 244,029 

In FY 2023, $523 million of unused funds from canceled appropriations was returned 

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

Treasury in accordance with Treasury guidelines.
FY 2023 AGENCY FINANCIAL REPORT 92 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

NOTE 4. Other Assets 

(Dollars in Millions)

2023 (Unaudited)

Intragovernmental

 Other than 

Intragovernmental 

Accounts Receivable, Net $ 6 $ 307 

Advances to Others and Prepayments 145 2 

Property and Equipment, Net - 2 

Other 2 - 

Total Other Assets $ 153 $ 311 

Included in the other than intragovernmental accounts receivable 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, 2023, related to criminal 

restitutions totaled $138 million, and $127 million, respectively.

NOTE 5. Loan Receivables, Net and Loan Guarantee Liabilities

Loans Receivables

(Dollars in Millions)

2023 (Unaudited)

Principal Accrued Interest Allowance for Subsidy Net

Direct Loan Program $ 1,336,158 $ 83,439 $ (388,685) $ 1,030,912 

FFEL Program 78,991 20,840 (60,517) 39,314 

Other Credit Programs for Higher Education 2,874 562 (670) 2,766 

Total Loans Receivable $ 1,418,023 $ 104,841 $ (449,872) $ 1,072,992 

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. Per OMB guidance, loan modifications were calculated using the 

President’s Budget formulation discount rates.

As the net loans receivable represents the net present value of future cash flows, it 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 for each of the loan programs. 

DIRECT LOAN PROGRAM 

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 $1,419.6 billion in gross loan receivables, as of September 30, 

2023, $76.5 billion (5.4 percent) in loan principal was in default and had been transferred 

to the Department’s defaulted loan servicer.
FY 2023 AGENCY FINANCIAL REPORT 93 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Direct Loan Program Loan Disbursements by Loan Type

(Dollars in Millions)

2023 (Unaudited)

Stafford $ 15,671 

Unsubsidized Stafford 44,878 

PLUS 23,928 

Consolidation 37,792 

Total Disbursements $ 122,269 

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 $37.8 billion during FY 2023. 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.

Direct Loan Subsidy Rates—Cohort 2023 (Unaudited)

Interest 

 Differential Defaults Fees Other* Total

Stafford 24.63% 1.99% -1.06% -11.39% 14.17%

Unsubsidized Stafford 26.89% 1.81% -1.06% -16.16% 11.48%

PLUS 12.91% 1.20% -4.23% -16.56% -6.68%

Consolidation 26.33% 0.20% 0.00% 7.01% 33.54%

Weighted Average Total 23.89% 1.21% -1.29% -8.19% 15.62%

*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.
FY 2023 AGENCY FINANCIAL REPORT 94 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Federal Family Education Loan Program

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)

2023 (Unaudited)

Outstanding Principal of Guaranteed Loans, Face Value $ 80.6 

Amount of Outstanding Principal Guaranteed $ 80.6 

As of September 30, 2023, the total principal value of guaranteed loans outstanding 

and the amount of that principal which is guaranteed is approximately $80.6 billion. 

Additionally, the FFEL Program guarantees outstanding interest balances. As of 

September 30, 2023, the interest balances outstanding for guaranteed loans held by 

lenders was approximately $3.8 billion. The Department’s total FFEL Program guarantees 

(principal and interest) are approximately $84.4 billion as of September 30, 2023. 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.

Defaulted and acquired FFEL loans are accounted for as assets as shown in the 

following table.

FFEL Program Loan Receivables 

(Dollars in Millions)

2023 (Unaudited)

Principal Accrued Interest

Allowance 

for Subsidy 

(Present Value)

Net

DEFAULTED FFEL GUARANTEED LOANS

FFEL GSL Program (Pre-1992) $ 3,208 $ 5,029 $ (8,014) $ 223 

FFEL GSL Program (Post-1991) 37,829 8,044 (34,253) 11,620 

Total Defaulted FFEL Guaranteed Loans 41,037 13,073 (42,267) 11,843 

ACQUIRED FFEL LOANS

Loan Purchase Commitment 13,083 2,490 (8,204) 7,369 

Loan Participation Purchase 23,673 4,939 (9,879) 18,733 

ABCP Conduit 1,198 338 (167) 1,369 

Total Acquired FFEL Loans 37,954 7,767 (18,250) 27,471 

FFEL Program Loan Receivables $ 78,991 $ 20,840 $ (60,517) $ 39,314 
FY 2023 AGENCY FINANCIAL REPORT 95 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Liabilities for Loan Guarantees 

(Dollars in Millions)

2023 (Unaudited)

Post-1991 FFEL Loan Guarantee Liability $ 11,084 

Pre-1992 FFEL Liquidating Account Liability for Loan Guarantees (138)

FFEL Liabilities for Loan Guarantees 10,946 

HEAL Liabilities for Loan Guarantees 251 

Total Ending Balance for Liabilities for Loan Guarantees $ 11,197 

Other Credit Programs for Higher Education

Loans Receivables, Other Credit Programs for Higher Education 

(Dollars in Millions)

2023 (Unaudited)

Principal Accrued Interest Allowance for Subsidy 

(Present Value) Net

Federal Perkins Loans $ 1,313 $ 467 $ (394) $ 1,386 

TEACH Program Loans 809 67 (322) 554 

HEAL Program Loans 368 25 (5) 388 

Facilities Loan Programs 384 3 51 438 

Total $ 2,874 $ 562 $ (670) $ 2,766 

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 $343 million in FY 2023.

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 $521 million to the Department in FY 2023 for the federal share of collected cash. 
FY 2023 AGENCY FINANCIAL REPORT 96 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Beginning with the 2023 reporting year, as part of the wind-down of the Federal Perkins 

Loan Program, the Secretary began requiring schools to assign to the Department all 

Perkins Loans that have been in default for more than two years for which there have 

been no current collections. While the mandatory assignment policy has driven more 

schools to liquidate, the majority of schools are continuing to service existing portfolios to 

recover the money they contributed to their Perkins funds and will do so for as long as it 

is feasible 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 2024-25 FISAP shows a $1.6 billion 

outstanding principal balance on Perkins loans held by schools and the Department’s 

equity interest on this portfolio is $1.4 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. 

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. The program is operated as a loan program 

under the FCRA for budget and accounting purposes since grants can be converted to 

direct loans. 

TEACH Subsidy Rates—Cohort 2023 (Unaudited)

Interest Differential Defaults Fees Other Total

Subsidy Rates 76.72% 1.56% 0.00% -32.63% 45.65%

*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.

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 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 $378 million 

in outstanding borrowing from the FFB to support loans made to HBCU institutions and 

$951 million obligated to support near term lending as of September 30, 2023.
FY 2023 AGENCY FINANCIAL REPORT 97 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

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.

NOTE 6. Liabilities Not Covered by Budgetary Resources

(Dollars in Millions)

2023 (Unaudited)

Intragovernmental

 Other than 

Intragovernmental 

Liabilities Not Covered By Budgetary Resources

Unfunded Leave $ - $ 55 

FECA Liabilities 4 14 

Total Liabilities Not Covered By Budgetary Resources 4 69 

Liabilities Not Requiring Budgetary Resources

Subsidy Due to Treasury General Fund 529 - 

Federal Perkins Loan Program 1,377 - 

Miscellaneous Receipt, Deposit Funds and Clearing 

Accounts (68) 865 

Custodial Liabilities 1 - 

Total Liabilities Not Requiring Budgetary Resources 1,839 865 

Total Liabilities Covered By Budgetary Resources 1,190,647 20,259 

Total Liabilities $ 1,192,490 $ 21,193 

NOTE 7. Debt Associated with Loans

(Dollars in Millions)

2023 (Unaudited)

Debt to the Bureau of Public Debt

Direct Loan Program $ 1,127,011 

FFEL Program 60,896 

Other Credit Programs for Higher Education 678 

Total Debt to the Bureau of Public Debt 1,188,585 

Debt to the Federal Financing Bank

Other Credit Programs for Higher Education 378 

Total Debt Associated with Loans $ 1,188,963 

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. 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. 

Approximately 94.8 percent of the Department’s debt, as of September 30, 2023, is 

attributable to the Direct Loan Program. 
FY 2023 AGENCY FINANCIAL REPORT 98 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

NOTE 8. Subsidy Due to Treasury 

(Dollars in Millions)

2023 (Unaudited)

Credit Program Downward Subsidy Re-estimates

Direct Loan Program $ 585 

FFEL Program 516 

Total Credit Program Downward Subsidy Re-estimates 1,101 

Future Liquidating Account Collections

FFEL Program 529 

Total Future Liquidating Account Collections 529 

Total Subsidy Due to Treasury General Fund $ 1,630 

NOTE 9. Other Liabilities

(Dollars in Millions)

2023 (Unaudited)

Intragovernmental

 Other than 

Intragovernmental 

Federal Perkins Loan Program $ 1,377 $ - 

Miscellaneous Receipt, Deposit Funds and Clearing Accounts (68) 865 

Liability for Advances and Prepayments 2 - 

Accrued Funded Payroll and Leave - 28 

Accrued Unfunded Annual Leave - 55 

Employer Contributions and Payroll Taxes Payable 16 2 

FECA Liabilities 4 14 

Custodial Liabilities 1 - 

Total Other Liabilities $ 1,332 $ 964 
FY 2023 AGENCY FINANCIAL REPORT 99 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

NOTE 10. 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)

2023 (Unaudited)

2024 $ 54 

2025 47 

2026 48 

2027 49 

2028 50 

After 2028 51 

Total $ 299 

The Department leases from the GSA all or a portion of 15 privately owned and 10 

publicly owned buildings in 20 cities. The table above presents the estimated future 

minimum lease payments for these privately and publicly owned buildings. The decrease 

in the estimated future minimum lease payments is due to anticipated releases of building 

and floor rentals.

Guaranty Agencies

The Department may assist guaranty agencies experiencing financial difficulties. The 

Department has not done so in FY 2023 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, 2023. The final 

disposition of claims filed and those yet to be filed from loans originated before September 

30, 2023, is not expected to have a material impact on these financial statements.
FY 2023 AGENCY FINANCIAL REPORT 100 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

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 16, 2023

The Honorable Miguel Cardona

Secretary of Education

Washington, D.C. 20202

Dear Secretary Cardona:

The enclosed Independent Auditors’ Report (report) covers the consolidated balance sheet of 

the United States Department of Education (Department) as of September 30, 2023, and the 

related notes (the consolidated financial statement), to comply with the Chief Financial Officers 

Act of 1990, as amended. The report should be read in conjunction with the Department’s 

consolidated financial statement to fully understand the context of the information contained 

therein.

We engaged the independent certified public accounting firm KPMG LLP (KPMG) to audit the 

consolidated financial statement of the Department as of September 30, 2023. 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. Following is a summary of the results reported in the

Independent Auditors’ Report.

Report on the Audit of the Consolidated Financial Statement

Disclaimer of Opinion

KPMG has not been able to obtain sufficient appropriate audit evidence to provide a 

basis for an audit opinion because of unresolved errors KPMG identified in the 

underlying data used to calculate the subsidy re-estimates for the Department’s direct 

loan and loan guaranty programs.

Report on Internal Control Over Financial Reporting

Material Weakness (Exhibit A)

Controls over the Relevance and Reliability of Underlying Data Used in Credit Reform 

Estimates Need Improvement.

Significant Deficiencies (Exhibit B)

Information Technology Controls Need Improvement, and

Entity Level Controls Need Improvement.
FY 2023 AGENCY FINANCIAL REPORT 101 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Page 2 – Independent Auditors’ Report

Report on Compliance and Other Matters 

Compliance and Other Matters (Exhibit C) 

Federal Managers’ Financial Integrity Act of 1982 (FMFIA)

Federal Financial Management Improvement Act of 1996 (FFMIA)

In connection with the contract, the Office of Inspector General reviewed KPMG’s report and 

related documentation and inquired of its representatives. Our review, as differentiated from 

an audit of the consolidated financial statement 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 consolidated financial statement 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 report dated November 16, 2023, 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

Inspector General

Enclosure
FY 2023 AGENCY FINANCIAL REPORT 102 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Independent Auditors’ Report

Inspector General 

United States Department of Education

Secretary

United States Department of Education:

Report on the Audit of the Consolidated Financial Statement

Disclaimer of Opinion

We were engaged to audit the consolidated balance sheet of the United States Department of Education 

(Department) as of September 30, 2023, and the related notes (the consolidated financial statement).

We do not express an opinion on the accompanying consolidated financial statement of the Department.

Because of the significance of the matter described in the Basis for Disclaimer of Opinion section of our report, 

we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on 

the consolidated financial statement.

Basis for Disclaimer of Opinion 

During fiscal year 2023, we identified errors in the underlying data used to develop assumptions used to 

calculate the subsidy re-estimates for the Department’s direct loan and loan guaranty programs. Management 

was unable to determine the extent of the impact of these issues on the balance sheet and related notes. As a 

result of this matter, we are unable to determine whether any adjustments to the balance sheet might have 

been necessary with respect to the fiscal year 2023 Loan Receivables, Net – Direct Loan Program; Loan 

Receivables, Net – Federal Family Education Loan (FFEL) Program; Subsidy Due to Treasury; Loan 

Guarantee Liabilities; Unexpended Appropriations; Cumulative Results of Operations; and the related notes.

Other Matter - Interactive Data

Management has elected to reference to information on websites or other forms of interactive data outside the 

fiscal year 2023 Agency Financial Report to provide additional information for the users of its consolidated 

financial statement. Such information is not a required part of the consolidated financial statement 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.

Responsibilities of Management for the Consolidated Financial Statement

Management is responsible for the preparation and fair presentation of the consolidated financial statement in 

accordance with U.S. generally accepted accounting principles, and for the design, implementation, and 

maintenance of internal control relevant to the preparation and fair presentation of the consolidated financial 

statement that is free from material misstatement, whether due to fraud or error.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statement

Our responsibility is to conduct an audit of the Department’s consolidated financial statement in accordance 

with auditing standards generally accepted in the United States of America (GAAS), Government Auditing 

Standards, issued by the Comptroller General of the United States, and Office of Management and Budget 

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 2023 AGENCY FINANCIAL REPORT 103 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

2

(OMB) Bulletin No. 24-01, Audit Requirements for Federal Financial Statements, and to issue an auditors’

report. However, because of the matter described in the Basis for Disclaimer of Opinion section of our report, 

we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on this

consolidated financial statement.

We are required to be independent of the Department and to meet our other ethical responsibilities, in 

accordance with the relevant ethical requirements relating to our audit.

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 statement. Such information is the responsibility of management and, although not a part of the basic 

consolidated financial statement, 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 statement in 

an appropriate operational, economic, or historical context. We were unable to apply certain limited procedures 

to the required supplementary information in accordance with GAAS because of the significance of the matter 

described in the Basis for Disclaimer of Opinion paragraph. We do not express an opinion or provide any 

assurance on the information.

Report on Internal Control Over Financial Reporting

In connection with our engagement to audit the Department’s consolidated financial statement as of 

September 30, 2023, we considered the Department’s internal control over financial reporting (internal control) 

as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of 

expressing an opinion on the consolidated financial statement, 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 were not identified. 

However, as described in the accompanying Exhibits, we identified 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 

internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial 

statement will not be prevented, or detected and corrected, on a timely basis. We consider the deficiencies 

described in the accompanying Exhibit A, Controls over the Relevance and Reliability of Underlying Data Used 

in Credit Reform 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 the accompanying Exhibit B, Information Technology Controls Need 

Improvement and Entity Level Controls Need Improvement, to be significant deficiencies.

Report on Compliance and Other Matters

In connection with our engagement to audit the Department’s consolidated financial statement as of

September 30, 2023, 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 statement. However, providing an opinion on compliance with those provisions was not 

an objective of our engagement, and accordingly, we do not express such an opinion. The results of our tests 
FY 2023 AGENCY FINANCIAL REPORT 104 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

3

disclosed instances of noncompliance or other matters that are required to be reported under Government 

Auditing Standards or OMB Bulletin No. 24-01, and which are described in Exhibit C.

We also performed tests of the Department’s 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 engagement, and accordingly, we do not express such an opinion. The 

results of our tests disclosed instances in which the Department’s financial management systems did not 

substantially comply with the (1) Federal financial management systems requirements and (2) applicable 

Federal accounting standards. The results of our tests disclosed no instances in which the Department’s 

financial management systems did not substantially comply with the United States Government Standard 

General Ledger at the transaction level.

Additionally, if the scope of our work had been sufficient to enable us to express an opinion on the consolidated 

financial statement, other instances of noncompliance or other matters may have been identified and reported 

herein.

Department’s Response to Findings

Government Auditing Standards requires the auditor to perform limited procedures on the Department's 

response to the findings identified in our engagement and described in Exhibit D. The Department’s response 

was not subjected to the other auditing procedures applied in the engagement to audit the consolidated 

financial statement and, accordingly, we express no opinion on the response.

Purpose of the Reporting Required by Government Auditing Standards

The purpose of the communication described in the Report on Internal Control Over Financial Reporting and 

the Report on Compliance and Other Matters sections 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 16, 2023
FY 2023 AGENCY FINANCIAL REPORT 105 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

A-1 

Exhibit A

Material Weakness

Controls over the Relevance and Reliability of Underlying Data Used in Credit Reform Estimates Need 

Improvement 

Background:

The material weakness under this section is related to the Department’s Direct and FFEL student loan 

portfolios. 

The Department is required to perform interest rate and technical re-estimates of the subsidy costs (commonly 

referred to as subsidy re-estimates) of its direct loan and loan guaranty programs as of September 30 every 

year. 

These subsidy re-estimates are calculated using an internally developed cash flow model, the Student Loan 

Model (SLM). The SLM utilizes assumptions based on internally sourced data elements from Information 

Technology (IT) systems. The future cash flow outputs generated from the SLM are 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, to produce the subsidy re-estimates. 

Condition:

Management did not design and implement sufficiently precise controls over the relevance and reliability of

certain data used in key assumptions for the SLM.

Cause/Effect:

Management’s risk assessment process was not sufficient to identify the risk related to the relevance and 

reliability of the underlying data used in significant assumptions for the subsidy re-estimates. Additionally, 

management did not sufficiently communicate errors in the underlying data internally to those responsible for 

calculating the subsidy re-estimates. Inadequate controls over the relevance and reliability of the underlying 

data used to develop the subsidy re-estimates led to errors which increases the risk that the balance sheet and 

related notes 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 6, Define Objectives and Risk Tolerances; Principle No. 10, 

Design Control Activities; Principle No. 13, Use Quality Information; Principle No. 14, Communicate 

Internally. 

• 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, Paragraph 20.

Recommendation:

We recommend that management design and implement controls that require the validation of the relevance

and reliability of underlying data used in developing the assumptions related to the subsidy re-estimates. Such 

review should be documented and maintained. 
FY 2023 AGENCY FINANCIAL REPORT 106 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

B-1 

Exhibit B

Significant Deficiencies

A. Information Technology Controls Need Improvement

The following control deficiencies in the areas of Information Technology (IT) logical access, security 

management, segregation of IT duties, application change management, and computer operations are related 

to both the Department and Federal Student Aid (FSA) systems. 

Conditions:

In prior years, we reported a significant deficiency related to the Department and FSA’s IT controls due to 

persistent unmitigated IT control deficiencies. During FY 2023, the FSA management demonstrated progress 

implementing corrective actions to remediate some prior-year deficiencies, such as change and configuration 

management controls. However, the Department management and FSA management have not fully 

remediated prior-year deficiencies related to logical access administration, separated and transferred user 

access removal, user access reviews and recertification, configuration management, and computer operations. 

New and existing IT control deficiencies related to security management, access controls, and segregation of IT 

duties for the Department’s core financial management system, three of FSA’s financial and mixed systems, 

and one identity and access management support system are as follows:

Department:

1. Deficiencies in IT security management controls: System deficiencies, including those identified during 

external audits, for the Department’s core financial management system were not documented in Plan of 

Action and Milestones (POA&M) and tracked in the security management tool, as required by Department 

policies and guidance. 

2. Deficiencies in IT logical access controls: Access controls for new and separated contractors were not 

consistently and accurately performed, including the inconsistent reporting of start and termination effective 

dates. Further, the access controls were not consistently followed for the Department’s core financial 

management system. Specifically,

a. documentation supporting the completed security awareness training for new and modified users could 

not be provided; 

b. evidence supporting complete and accurate access reviews and recertifications was not provided or 

retained;

c. password controls were not designed to meet the Department’s requirements; and 

d. the Department’s requirement for the use and monitoring of generic and shared accounts for two of 

three of the Department’s financially relevant applications was not met for all accounts.

3. Deficiencies in IT controls related to the segregation of IT duties: For one of the Department’s core financial 

management systems, users with developer access had access greater than read-only to the system’s 

production environment.

4. Deficiencies in IT application change management and patch management controls: The application 

change management and patch management policies and controls were not consistently followed for the 

Department’s core financial management system in accordance with Department policy. The Department 

did not provide sufficient evidence supporting tracking, security assessment, and approval for certain 

application changes and patches. 
FY 2023 AGENCY FINANCIAL REPORT 107 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

B-2 

5. Deficiencies in IT computer operations controls: Controls over computer operations were not properly 

designed and implemented. Specifically, 

a) changes to the job processing and scheduling tools were not centrally tracked; 

b) changes were made directly in the production environment; and

c) the use and monitoring of generic and shared accounts for the job scheduling tool did not follow the 

Department’s requirements.

FSA:

1. Deficiencies in IT security management controls: Management did not effectively operate corrective action, 

remediation, and quality review controls for IT security weaknesses. Specifically, Plan of Action and 

Milestone (POA&M) closure documentation for three FSA systems and one identity and access 

management system did not always address the root cause of the deficiencies, thereby increasing the 

potential of IT control deficiencies reoccurring in the future. 

2. Deficiencies in IT logical access controls: The access control processes were not consistently followed for 

three FSA systems and one identity and access management system. Specifically,

a. evidence supporting complete and accurate access listings and evidence supporting new, modified, or 

separated users was not provided or was provided with missing required information and/or approvals;

b. unauthorized access was provisioned and/or access was provisioned without adhering to the least 

privileged principle;

c. evidence supporting complete and accurate access reviews and recertification controls was 

unavailable or was retained; and

d. the Department’s requirement for multi-factor authentication control was not implemented for all internal 

system users.

Cause/Effect:

Management has not performed effective risk assessments and there was a lack of effective monitoring 

controls over the effectiveness of designed control activities by the Department and FSA to ensure the 

following:

1. All system deficiencies, including those identified during external audits, have a documented POA&M and 

are tracked in the required security management tool. Additionally, 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 adequately documented supporting 

evidence.

2. Systems and support processes consistently adhered to documented agency-wide policies and procedures 

for the financial and mixed systems hosted and managed by FSA and the Department.

3. The established logical access control process is followed and requests and related evidence for new, 

modified, or separated users were retained, documented completely and accurately, and approved.

4. Complete and accurate access reviews are performed to detect and mitigate the risk of unauthorized 

accounts, access that is not commensurate with job responsibilities or least privilege, and access 

permissions not being revoked timely.
FY 2023 AGENCY FINANCIAL REPORT 108 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

B-3 

5. Password controls are designed to meet the Department’s requirements.

6. The requirements for the use and monitoring of generic and shared accounts controls are followed and 

enforced. 

7. Segregation of duties and least privilege principles are followed and enforced.

8. The established change process and patch management process are followed.

9. The established process for job processing changes is followed and the requirements for the use and 

monitoring of generic/shared accounts controls for the job scheduling tool are followed and enforced. 

10. The established computer operations process detects and/or prevents unauthorized changes to the job 

processing tool and schedules within the core financial system environment. 

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 Information Technology (IT) System Access Control Standard.

• Department IT Identification and Authentication (IA) Standard.

• EDCAPS System Security Plan (SSP) control requirements.

• FMS SSP control requirements.

• EDCAPS Configuration Management Plan (CMP).

• Department Information Technology System and Information Integrity (SI) standard policy section 2.2 

control SI-2, Flaw Remediation.

• EDCAPS Patch Management Plan, section 4.7 Patch Maintenance.

• Department Baseline Cybersecurity Standard, OCIO-STND-01, dated September 23, 2021, Section 3.15. 

Acceptable Use. 

• Office of the Chief Information Officer (OCIO), Information Assurance Services (IAS) Plan of Action and 

Milestones, Standard Operating Procedures (SOP), Version 2.8 dated July 7, 2022, Section 1.4 POA&M 

Management and Section 4.7 CAP POA&M Workflow.

• Cybersecurity Policy, Departmental Directive ACSD-OCIO-004, section V. Responsibilities.

• Information Technology (IT) System Security Assessment and Authorization (CA) Standard dated 

January 31, 2023, Section 2.4 CA-5 Plan of Action and Milestones (POA&M) (P, L, M, H and Control 

Overlay).

• IT Program Management (PM) Standard dated January 31, 2023, section 2.4 PM-4 Plan of Action and 

Milestones Process (P, Deployed Organization-Wide).

• The Green Book, Principle No. 2, Exercise Oversight Responsibility, Principle No. 3 Establish Structure, 

Responsibility, and Authority, Principle No. 4, Demonstrate Commitment to Competence, Principle No. 7, 

Identify, Analyze, and Respond to Risks, Principle No. 8 Assess Fraud Risk, Principle No.10, Design 

Control Activities, Principle No. 11, Design Activities for the Information System, Principle No. 13, Use 
FY 2023 AGENCY FINANCIAL REPORT 109 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

B-4 

Quality Information, Principle No.16, Perform Monitoring Activities, Principle No.17, Evaluate Issues and 

Remediate Deficiencies. 

• Federal Information Processing Standards (FIPS) 200, Minimum Security Requirements for Federal 

Information and Information Systems.

• National Institute of Standards and Technology Special Publication 800-53, Security and Privacy Controls 

for Federal Information Systems and Organizations, Revision 5, specifically security control requirements 

CA-5 Plan of Action and Milestones, PM-4 Plan of Action and Milestone Process, AC-2 Account 

Management, AC-5 Separation of Duties, AC-6 Least Privilege, AT-3 Role-based Training, AT-4 Training 

records, IA-2 Identification and Authentication (Organizational Users); CM-3 Configuration Change Control, 

and SI-2 Flaw Remediation. 

Recommendations:

We recommend that the Department:

1. Improve the risk assessment process over IT to help ensure the Department is appropriately defining 

objectives to enable the identification of risks and associated controls to help mitigate the risks.

2. Communicate control issues and/or weaknesses through established tools and relevant reporting lines to 

the appropriate parties on a timely basis to enable prompt evaluation and resolution of the issues and/or 

weaknesses.

3. Evaluate, design, and implement controls to track and report all new and separated contractors.

4. Ensure separated contractors are off-boarded and system personnel are notified in a timely manner to 

disable or remove access to IT resources.

5. Provide training and oversight to the Department’s personnel with on/off-boarding controls to help ensure 

new/separated contractors are properly tracked.

6. Update access review procedures to require the reviewers to verify the access lists received to be used in 

the performance and operation of the access reviews is complete and accurate and not modified prior to 

commencing the access reviews.

7. Identify, design, and implement controls requiring a reviewer to validate the population generated for review 

is complete and accurate. 

8. Enforce established access authorization controls and ensure all requirements are met prior to granting 

system access. Formally perform and document the periodic reviews of all database user accounts in 

accordance with Department policy to confirm access is current, authorized, and commensurate with job 

responsibilities.

9. Ensure the application and database server access review controls include the verification of access 

privileges assigned to the user accounts are commensurate with job responsibilities and follow the concept 

of least privilege.

10. Ensure the database and server layer controls comply and operate with the disabling of inactive accounts 

and account lockout duration password setting requirements, as required by Department Policy. 

11. Adhere to the SSP control requirements and avoid the use of generic and shared accounts. If generic and 

shared accounts are required, obtain a formal risk acceptance and develop a policy and procedure to:

a. Authorize the use of these accounts by approved personnel, 
FY 2023 AGENCY FINANCIAL REPORT 110 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

B-5 

b. Control who can access the generic/shared accounts and those sensitive actions performed by the 

accounts are logged and reviewed every time the accounts are used, and

c. Require that generic/shared accounts’ passwords are changed each time approved personnel separate 

or transfer from the Department. 

We recommend that FSA:

12. Design and implement improvements for the risk assessment process over IT to help ensure the FSA is 

appropriately defining objectives to enable the identification of risks and associated controls to help mitigate 

the risks.

13. Design and implement controls to evaluate the magnitude of impact, likelihood of occurrence, and nature of 

the deficiency in order to 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.

14. 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.

15. Ensure segregation of duties and least privilege principles are adhered to when granting user access. 

16. Evaluate and update the access review controls based on risk and enforce segregation of duties. 

17. Reconcile the list of users’ roles and responsibilities from the identity and access software tools to the lists 

that reside in each system accessed by such users. 

18. Update access review policies and controls to require the reviewer to verify the access list, received to be 

used in the performance of the access reviews, is complete and accurate and not modified prior to 

commencing the access reviews.

19. Enforce the operation of established access authorization controls and ensure all requirements are met 

prior to granting access to systems.
FY 2023 AGENCY FINANCIAL REPORT 111 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

B-6 

B. Entity Level Controls Need Improvement

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, through our procedures, two entity-wide control environment conditions in 

the areas of risk assessment and monitoring activities that have a pervasive influence on the effectiveness of 

controls. 

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 financial reporting processes to enable the 

identification of risks, define risk tolerances and identify 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. Inadequate risk assessment throughout the Department and FSA prevented the proper identification and 

analysis of certain risks related to the financial reporting process at the Department and FSA, and from 

designing appropriate risk responses. 

2. Insufficient monitoring prevented the Department and FSA from implementing corrective action plans and 

remediating control deficiencies timely.

The conditions noted above contributed to the control deficiencies described earlier in Exhibits A and B.A and 

could lead to other weaknesses in internal control over financial reporting. 

Criteria: 

The following criteria were considered in the evaluation of the significant deficiency presented in this Exhibit:

• The Green Book Principle 6, Define Objectives and Risk Tolerances. 

• The Green Book Principle 17, Evaluate Issues and Remediate Deficiencies. 

Recommendations: 

We recommend that management:

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 2023 AGENCY FINANCIAL REPORT 112 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

C-1 

Exhibit C

Compliance and Other Matters

A. Federal Managers’ Financial Integrity Act of 1982 (FMFIA)

Condition:

Management performed an internal control assessment as required under FMFIA; however, management’s 

assessment did not substantially comply with FMFIA and the related OMB A-123 requirements. Specifically,

management did not consistently identify and document financial statement and process level risks and key 

controls. 

Cause/Effect:

Management did not substantially meet FMFIA requirements due to a lack of adequate risk assessments over 

key processes and data used in the consolidated financial statement. In addition, management did not 

sufficiently consider FMFIA and OMB Circular No. A-123 requirements when performing their evaluation of

internal controls.

This resulted in the lack of timely identification of errors in data that impacted subsidy re-estimates in the 

consolidated financial statement. Furthermore, management could not determine the effect of these errors on 

the consolidated financial statement. 

Criteria:

The following criteria were considered in the evaluation of the compliance matter presented in this Exhibit:

• Section 2 of FMFIA.

• OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal 

Control

Recommendation:

We recommend that management update the risk assessment regarding the evaluation of internal controls to 

ensure it includes all key processes, key data, and other material line items on the consolidated financial 

statement. 
FY 2023 AGENCY FINANCIAL REPORT 113 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

C-2 

B. Federal Financial Management Improvement Act of 1996 (FFMIA)

Condition:

Management did not establish and maintain financial management systems that substantially comply with the 

following FFMIA requirements: 

1. Federal Financial Management Systems Requirements. As discussed in Exhibit A, deficiencies in controls 

to prevent or detect errors in data used to calculate subsidy re-estimates prevented management from 

issuing reliable and accurate financial reporting. Specifically, management was unable to produce an 

auditable financial statement based on the data from the agency’s financial system.

2. Federal Accounting Standards. As discussed in Exhibit A, the control deficiencies identified during the audit 

provide an indication that the Department’s financial management systems were substantially noncompliant 

with applicable federal accounting standards. Specifically, management was unable to provide evidence 

that the cash flow projections for the subsidy re-estimates were based on sufficient relevant and reliable 

data preventing the agency’s ability to prepare an auditable financial statement.

Cause/Effect:

Management did not substantially meet FFMIA requirements due to an inadequate risk assessment over key 

processes and data used in the consolidated financial statement.

This increases the risk that transactions are incorrectly recorded to the general ledger, impacting the 

completeness, existence, and accuracy of the balances in the consolidated financial statement.

Criteria: 

The following criteria were considered in the evaluation of the compliance matter presented in this Exhibit:

• Section 803(a) of FFMIA.

• Appendix D to OMB Circular No. A-123, Compliance with the Federal Financial Management Improvement 

Act of 1996 

Recommendation:

We recommend that management implement the recommendation presented in the material weakness in 

Exhibit A. 
FY 2023 AGENCY FINANCIAL REPORT 114 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

D-1 

Exhibit D 

Att: Management’s Response
OTHER

INFORMATION

(unaudited)
Other Information (Unaudited)

About the Other Information Section

The Other Information section includes:

Consolidated Statement of Net Cost, Consolidated Statement of 

Changes in Net Position, and Combined Statement of Budgetary 

Resources (Unaudited)

The Consolidated Statement of Net Cost (Unaudited) shows, 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 Statement of Changes in Net Position (Unaudited) presents 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 Sheet.

The Combined Statement of Budgetary Resources (Unaudited) presents the budgetary 

resources available to the Department, the status of these resources, and the outlays of 

budgetary resources.

The Notes to the Consolidated Statement of Net Cost, Consolidated Statement 

of Changes in Net Position, and Combined Statement of Budgetary Resources 

(Unaudited) 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.

FY 2023 AGENCY FINANCIAL REPORT 116 U.S. DEPARTMENT OF EDUCATION
FY 2023 AGENCY FINANCIAL REPORT 117 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Note 11. Other Accounting Policies

Note 12. Property and Equipment

Note 13. Credit Program Subsidy Expense and Reconciliations of Loans Receivable, 

Allowance for Subsidy, and Liabilities for Loan Guarantees

Note 14. Roll-Forward of Debt Associated with Loans 

Note 15. Net Cost of Operations

Note 16. COVID-19 Activity

Note 17. Statement of Budgetary Resources

Note 18. Reconciliation of Net Cost to Net Outlays

Note 19. Reclassification of Statement of Net Cost and Statement of Operations 

and Changes in Net Position for Financial Report Compilation Process

Note 20. Other Matters

Required Supplementary Information (Unaudited)

This section contains the Combining Statements of Budgetary Resources for the year 

ended September 30, 2023.

Office of Inspector General’s (OIG) Management and 

Performance Challenges for Fiscal Year 2024

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 

2024. The OIG identified the following seven challenges: (1) Implementing Pandemic 

Relief Laws for Elementary and Secondary Education, (2) Implementing Pandemic 

Relief Laws for Higher Education, (3) Oversight and Monitoring of Student Financial 

Assistance Programs, (4) Oversight and Monitoring of Grantees, (5) Data Quality and 

Reporting, (6) Improper Payments, and (7) Information Technology Security. The full 

report is available at the OIG website.

Summary of Financial Statement 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.
FY 2023 AGENCY FINANCIAL REPORT 118 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Payment Integrity Information 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.

Civil Monetary Penalty Adjustment 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.

Climate Related Financial Risk

This section summarizes the Department’s FY 2021 Climate Adaptation Plan and provides 

information on the FY 2024 Climate Adaptation and Environmental Justice Plans.

The Grants Oversight and New Efficiency Act of 2016

(GONE Act) and Education’s Grant Closeout Process

This section provides a high-level summary of the Department’s expired, but not closed, 

federal grants and cooperative agreements.
FY 2023 AGENCY FINANCIAL REPORT 119 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

U.S. Department of Education

Consolidated Statement of Net Cost

For the Year Ended September 30, 2023

(Dollars in Millions)

FY 2023 (Unaudited)

PROMOTE EQUITY FOR PREKINDERGARTEN THROUGH GRADE 12 STUDENTS WITH ACCESS TO EDUCATIONAL RESOURCES, 

OPPORTUNITES, AND INCLUSIVE ENVIRONMENTS 

Gross Costs $ 100,093 

Earned Revenue (104)

Net Program Cost $ 99,989 

INCREASE POSTSECONDARY VALUE BY FOCUSING ON EQUITY STRATEGIES TO ADDRESS ACCESS TO AFFORDABILITY, COMPLETION, AND 

POST-ENROLLMENT SUCCESS 

Direct Loan Program

Gross Costs $ (78,781)

Earned Revenue (35,917)

Net Cost (Surplus) of Direct Loan Program $ (114,698)

FFEL Program

Gross Costs $ 11,848 

Earned Revenue (3,994)

Net Cost of FFEL Program $ 7,854 

Other Credit Programs for Higher Education

Gross Costs $ 84 

Earned Revenue (907)

Net Cost (Surplus) of Other Credit Programs for Higher Education $ (823)

Non-Credit Programs

Gross Costs $ 49,084 

Earned Revenue (10)

Net Cost of Non-Credit Programs $ 49,074 

Net Program Costs (Surplus) $ (58,593)

Total Program Gross Costs $ 82,328 

Total Program Earned Revenue $ (40,932)

Net Cost of Operations (Notes 15 & 18) $ 41,396 

The accompanying notes are an integral part of these statements.

The Consolidated Statement of Net Cost, Consolidated 

Statement of Changes in Net Position, and Combined 

Statement of Budgetary Resources (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 120 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

U.S. Department of Education

Consolidated Statement of Changes in Net Position

For the Year Ended September 30, 2023 

(Dollars in Millions)

FY 2023 (Unaudited)

 Unexpended 

Appropriations

Cumulative 

Results of 

Operations

Beginning Balances $ 231,216 $ (9,487)

Appropriations Received 255,795 - 

Appropriations Transferred – In/Out 4 - 

Other Adjustments (Rescissions, etc.) (1,629) - 

Appropriations Used (313,824) 313,824 

Nonexchange Revenue - 3 

Imputed Financing from Costs Absorbed by Others - 64 

Negative Subsidy Transfers, Downward Subsidy Re-estimates, and Other - (330,204)

Net Cost of Operations - (41,396)

Net Change $ (59,654) $ (57,709)

Net Position $ 171,562 $ (67,196)

The accompanying notes are an integral part of these statements.
FY 2023 AGENCY FINANCIAL REPORT 121 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

U.S. Department of Education

Combined Statement of Budgetary Resources 

For the Year Ended September 30, 2023 

(Dollars in Millions)

FY 2023 (Unaudited)

Budgetary

Non-Budgetary 

Credit Reform 

Financing Accounts

BUDGETARY RESOURCES

 Unobligated Balance from Prior Year Budget Authority (Net) (Note 17) $ 24,544 $ 27,776 

Appropriations (Discretionary and Mandatory) 247,334 7,355 

 Borrowing Authority (Discretionary and Mandatory) (Note 17) - 472,659 

 Spending Authority from Offsetting Collections (Discretionary and Mandatory) 495 70,022 

Total Budgetary Resources $ 272,373 $ 577,812 

 STATUS OF BUDGETARY RESOURCES 

New Obligations and Upward Adjustments (Total) $253,467 $523,386 

 Unobligated Balance, End of Year: 

Apportioned, Unexpired Accounts 13,459 - 

Unapportioned, Unexpired Accounts 526 54,426 

Unexpired Unobligated Balance, End of Year $ 13,985 $ 54,426 

Expired Unobligated Balance, End of Year 4,921 - 

Unobligated Balance, End of Year (Total) $ 18,906 $ 54,426 

Total Budgetary Resources $ 272,373 $ 577,812 

OUTLAYS, NET, AND DISBURSEMENTS, NET

 Outlays, Net (Discretionary and Mandatory) $ 306,504 

 Distributed Offsetting Receipts (-) (Note 17) (347,613)

Agency Outlays, Net (Discretionary and Mandatory) (Notes 17 & 18) $ (41,109)

 Disbursements, Net (Total) (Mandatory) $ 296,668 

The accompanying notes are an integral part of these statements.
FY 2023 AGENCY FINANCIAL REPORT 122 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Notes to the Consolidated Statement of Net Cost, 

Consolidated Statement of Changes in Net Position, and 

Combined Statement of Budgetary Resources 

for the Year Ended September 30, 2023 (Unaudited)

NOTE 11. Other Accounting Policies

Basis of Accounting and Presentation

These financial statements were prepared to report the 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 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. For FY 2023, the Department elected 

to present these financial statements as unaudited and include them in the Other 

Information section. 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 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.

Subsidy Cost and Budgetary Accounting for Federal 

Credit Programs 

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 costs 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) 
FY 2023 AGENCY FINANCIAL REPORT 123 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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 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. 

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 7.8 percent of the amount obligated for new loan 

awards will not be disbursed.

Budgetary Terms

The purpose of Federal budgetary accounting is to control, monitor, and report on funds 

made available to the Department by law and help ensure compliance with the law. 

Budgetary resources are amounts that are available to incur and liquidate obligations 

in a given year. 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. Obligations are legally 

binding agreements that will result in outlays, immediately or in the future. Budgetary 

resources must be available before obligations can be incurred legally. 

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 
FY 2023 AGENCY FINANCIAL REPORT 124 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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.

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.

Outlays are the liquidation of obligations that often takes the form of an electronic funds 

transfer. Outlays are reported on the SBR net of offsetting collections and distributed 

offsetting receipts.

Offsetting collections and offsetting receipts are generally amounts collected from (1) 

business-like transactions with the public or (2) intragovernmental transfers. Offsetting 

collections usually may be used by the Department once received without further 

legislation whereas offsetting receipts must be appropriated to be used. 

Offsetting receipts and offsetting collections both “offset” or reduce outlays. Offsetting 

collections reduce outlays at the expenditure account level, whereas offsetting receipts 

generally reduce outlays at the agency or Government-wide level. Offsetting receipts 

can be either “distributed” or “undistributed,” with distributed offsetting receipts shown 

on the SBR reducing agency outlays and undistributed offsetting receipts reducing 

Government-wide outlays (and not shown on the SBR). 

Budgetary transactions are included as outlays or receipts in the Budget and ultimately 

affect the budget deficit or surplus whereas non-budgetary amounts are a means of 

financing and do not affect the deficit or surplus. Non-budgetary amounts include 

the non-budgetary financing account amounts for loan and loan guarantee programs 
FY 2023 AGENCY FINANCIAL REPORT 125 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

shown on the SBR. Financing accounts reflect program cash flows as distinct from credit 

“program” accounts, which are budgetary and reflect the subsidy cost of the programs.

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 costs 

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. Administrative overhead costs are allocated to 

loan and non-credit programs based on number of applications processed, number of 

loans serviced, dollar amount of loan originations, cost of school compliance actions, and 

the cost to collect defaulted loans.

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. 

Credit Program Interest Revenue and Expense. The Department recognizes other than 

intragovernmental interest revenue 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 
FY 2023 AGENCY FINANCIAL REPORT 126 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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. 

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.

Allocation Transfers

Allocation transfers are an arrangement established by statute that allow an agency to 

delegate authority and financial operations to other Federal agencies. Treasury establishes a 

separate subsidiary account (allocation account) under the parent fund account to provide 

for the reporting of obligations and outlays incurred by the child 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 has established a child relationship with the Department of the Interior for 

transactions related to the Bureau of Indian Affairs, and receives allocation transfers, as the 

child, from the Department of Health and Human Services. 

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 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 Consolidated Statement of Net Cost and the Consolidated 

Statement of Changes in Net Position include: allocation of Department administrative 

overhead costs; and subsidy expense for direct, defaulted guaranteed, and acquired loans. 

(See Notes 13 and 15)
FY 2023 AGENCY FINANCIAL REPORT 127 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

NOTE 12. Property and Equipment

Changes in property and equipment balances were as follows:

Property and Equipment

(Dollars in Millions)

2023 (Unaudited)

Acquisition Value Accumulated 

Depreciation Net

Balance Beginning of the Year $ 168 $ (162) $ 6 

Dispositions (4) - (4)

Balance at End of Year $ 164 $ (162) $ 2 

NOTE 13. Credit Program Subsidy Expense and Reconciliations of Loans Receivable, Allowance 

for Subsidy, and Liabilities for Loan Guarantees 

The net loans receivable increased by $214.3 billion during FY 2023 (as a result of activity identified in the following table).

Reconciliation of Loans Receivable, Net

(Dollars in Millions)

2023 (Unaudited)

Direct Loan 

Program

Defaulted FFEL 

Guaranteed 

Loans

Acquired 

FFEL Loans

Other Credit 

Programs for 

Higher Education Total

Beginning Balance of Loans Receivable, Net $ 816,514 $ 9,931 $ 29,871 $ 2,332 $ 858,648 

Add Loan Disbursements:

New Loan Disbursements 84,477 - - 188 84,665 

Consolidations 37,792 - - - 37,792 

Add Defaulted Loan Claim Payments - 4,605 - - 4,605 

Less Principal, Interest, and Fee Payments Received:

Principal (42,123) (364) (766) (52) (43,305)

Interest (2,147) (18) (276) (8) (2,449)

Fees (1,656) - 1 - (1,655)

Add Interest Accruals 3,180 80 (969) 9 2,300 

Less Loans Written Off:

Principal (83,789) (1,984) (2,986) (55) (88,814)

Interest (4,990) (201) (92) (5) (5,288)

Fees - (41) - - (41)

Allowance for Subsidy 88,779 2,226 3,078 60 94,143 

Add Amortization of Net Interest:

Interest Revenue on Uninvested Funds (6,266) - (261) (12) (6,539)

Interest Revenue from the Public (3,180) - 970 (13) (2,223)

Administrative Fees 2 - (1) (4) (3)

Interest Expense on Borrowing 28,234 - 1,159 32 29,425 

Positive Subsidy Transfers (18,392) - - (37) (18,429)

Negative Subsidy Transfers 2,109 - - - 2,109 

Upward Subsidy Re-Estimate (58,932) - (5,808) (100) (64,840)

Downward Subsidy Re-Estimate (12,466) - (1,634) 50 (14,050)

Loan Modifications 204,156 - 5,181 38 209,375 

Other:

Other Adjustments to Allowance for Subsidy 851 793 252 (106) 1,790 

Other Non-Cash Reconciling Items (1,241) (3,184) (248) 449 (4,224)

Ending Balance of Loans Receivable, Net $ 1,030,912 $ 11,843 $ 27,471 $ 2,766 $ 1,072,992 
FY 2023 AGENCY FINANCIAL REPORT 128 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

When Department-held loans are written off, the unpaid principal and interest are 

removed from the gross amount of loans receivable, along with an offsetting amount 

charged to the allowance for subsidy. Prior to the write off transaction, the estimated 

uncollectible amounts are provided for in the subsidy cost allowance through the subsidy 

cost estimate, re-estimates, or loan modifications. Therefore, the write off transactions do 

not affect the net loan receivable or expenses.

Other adjustments to allowance for subsidy for defaulted FFEL guaranteed loans shown 

in the table above includes the Department’s allocation of current year subsidy reestimates and modifications to the allowance for subsidy for Department-held defaulted 

FFEL guaranteed loans. 

What follows is additional analysis for each of the loan programs. 

Direct Loan Program 

Direct Loan Program Reconciliation of Allowance for Subsidy 

(Dollars in Millions)

2023 (Unaudited)

Beginning Balance of Allowance for Subsidy $ 611,919 

Total Subsidy Expense for Direct Loans Disbursed in the Current Year 16,283 

Adjustments

Loan Modifications (204,156)

Fees Received 1,660 

Loans Written Off (88,779)

Subsidy Allowance Amortization (18,790)

Other Activities (850)

Ending Balance of Allowance for Subsidy Before Re-Estimates 317,287 

Net Upward/(Downward) Subsidy Re-Estimates 71,398 

Ending Balance of Allowance for Subsidy $ 388,685 

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 long-term 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 
FY 2023 AGENCY FINANCIAL REPORT 129 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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 or other type of discharge, including borrower 

defense discharges. 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.

Direct Loan Program Subsidy Expense 

(Dollars in Millions)

2023 (Unaudited)

Subsidy Expense for Direct Loans Disbursed in the Current Year

Interest Rate Differential $ 27,937 

Defaults, Net of Recoveries 1,196 

Fees (1,625)

Other (11,225)

Total Subsidy Expense for Direct Loans Disbursed in the Current Year 16,283 

Modifications and Re-Estimates

Loan Modifications

Modification Adjustment Transfer Gain (7,683)

Modification Adjustment Transfer Loss 6,590 

Loan Modifications (203,063)

Total Loan Modifications (204,156)

Net Upward/(Downward) Subsidy Re-Estimates

Interest Rate Re-Estimates 2,093 

Technical and Default Re-Estimates 69,305 

Total Net Upward/(Downward) Subsidy Re-Estimates 71,398 

Total Modifications and Re-Estimates (132,758)

Direct Loan Subsidy Expense $ (116,475)

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 2023 

included the following:

• Loan Deferral Extension. In FY 2023, the administration extended the student loan 

repayment deferrals through August 31, 2023. The extended relief for borrowers 

resulted in an upward modification cost of $23.2 billion. There was a net positive 

$0.1 billion modification adjustment transfer associated with this modification, 

bringing the total FY 2023 modification cost for the Direct Loan Program student 

loan repayment deferrals to $23.3 billion.
FY 2023 AGENCY FINANCIAL REPORT 130 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

• Borrower Defense to Repayment and Arbitration. The Department developed 

regulations to create a fair path for borrowers to receive a discharge if their colleges 

lied or took advantage of them. The regulations established a process for group claims 

based on common evidence, to provide for full relief of loans and refund of payments 

made, stop interest accrual within a certain period upon granting a forbearance related 

to a claim, establish timeframes for resolving a claim, and establish a reconsideration 

process for denied borrower defense claims. These changes resulted in an upward 

modification cost of $4.2 billion. There was a net negative $0.1 billion modification 

adjustment transfer associated with this modification, bringing the total modification 

cost to $4.1 billion. 

• PSLF. The PSLF Program removes the burden of student debt on public servants 

by canceling loans after 10 years of public service. The Department updated the 

PSLF application process and expanded the types of payments considered to qualify 

toward loan cancellation and described the types of qualifying employment. The 

updates included features of the limited-time PSLF waiver related to the treatment of 

specific deferments and forbearances and payments made prior to consolidation. A 

provision was included that allows individuals who work as contractors for a qualifying 

employer in a position or providing services that, under applicable state law, cannot 

be filled or provided by a direct employee of the qualifying employer, to receive 

PSLF. These changes resulted in an upward modification cost of $4.0 billion. There 

was a net positive $0.1 billion modification adjustment transfer associated with this 

modification, bringing the total modification cost to $4.1 billion. 

• Total and Permanent Disability Discharges. The Department streamlined the 

application process, eliminated the 3-year post discharge income monitoring period, 

and expanded the Social Security Administration categories that qualify for the 

discharge. These changes resulted in an upward modification cost of $4.3 billion. There 

was a net positive $0.1 billion modification adjustment transfer associated with this 

modification, bringing the total modification cost to $4.4 billion. 

• Closed School Discharge. The Department expanded the automatic discharge process 

for borrowers that attended a college that closed and clarified the treatment for 

borrowers that re-enroll in comparable programs. These changes resulted in an upward 

modification cost of $3.4 billion. There was a net positive $0.3 billion modification 

adjustment transfer associated with this modification, bringing the total modification 

cost to $3.7 billion. 

• Interest Capitalization. Interest capitalization occurs when accrued interest is added to 

the principal balance of the loan, so that future interest accrues on a higher amount. 

The Department eliminated interest capitalization wherever it is not required by 

statute. This change resulted in an upward modification cost of $3.4 billion. There 

was a net positive $0.1 billion modification adjustment transfer associated with this 

modification, bringing the total modification cost to $3.5 billion. 

• IDR Saving on a Valuation Education (SAVE) Plan. The Department published a 

Final Rule to revise the existing Revised Pay-As-You-Earn (REPAYE) repayment plan, 

which may also be referred to as the SAVE Plan. These changes resulted in an upward 

modification cost of $70.9 billion. There was a net negative $0.5 billion modification 

adjustment transfer associated with this modification, bringing the total modification 

cost to $70.4 billion. 

• Broad Based Debt Relief Reversal. A downward modification was calculated to reverse 

the inclusion of student loan debt relief from the baseline subsidy cost as a result of 
FY 2023 AGENCY FINANCIAL REPORT 131 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

the Supreme Court’s ruling on Biden v. Nebraska on June 30, 2023. These changes 

resulted in a downward modification cost of $319.4 billion. There was a net negative 

$0.5 billion modification adjustment transfer associated with this modification, 

bringing the total modification cost (savings) to $319.9 billion.

• Fresh Start/On Ramp. Fresh Start is a one-time temporary program that offers special 

benefits for borrowers with defaulted federal student loans. In addition to Fresh 

Start, the President announced that the Department is instituting a 12-month “onramp” to repayment, running from October 1, 2023, to September 30, 2024, so that 

financially vulnerable borrowers who miss monthly payments during this period are 

not considered delinquent, reported to credit bureaus, placed in default, or referred 

to debt collection agencies. These actions resulted in an upward modification cost of 

$2.9 billion. There was a net negative $0.7 billion modification adjustment transfer 

associated with this modification, bringing the total modification cost to $2.2 billion. 

Net Upward/Downward Subsidy Re-Estimates for All Prior-Year Loan Cohorts.

The Direct Loan Program subsidy re-estimate increased subsidy expense in FY 2023 by 

$71.4 billion. Re-estimated costs only include cohorts that are 90 percent disbursed (i.e., 

cohort years 1994–2022). 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, enter repayment rates, and 

Teacher Loan Forgiveness.

• Non-IDR Discharges. The Department updated the assumption to include a standard 

data update with data from NSLDS that included an update to closed school 

discharges and PSLF waiver discharges for borrowers not enrolled in IDR. The primary 

adjustment to the model this cycle was removing adjustments to the rates for total 

permanent disability and projecting those factors from the actuals in the data. The 

combined effect of these updates led to a net upward re-estimate of $29.9 billion.

• IDR Model Changes. The Department completed a standard IDR data update 

that included updates for defaults and collections, updated poverty guidelines, and 

revised inflation rates provided in OMB’s economic assumption package. This cycle 

also featured an update to the deferment and forbearance rates in the IDR model 

to account for updated projections based on servicing guidelines that suggest that 

there may be many fewer forbearances in IDR in the future as well as adjustments for 

retroactive changes implemented regarding past forbearances. The combined effect of 

these updates led to a net upward re-estimate of $26.5 billion.

• Deferment and Forbearance. The Department updated deferment and forbearance 

rates for fiscal years 2023 and prior with updated forecasted rates. Economic 

assumptions were updated for unemployment rate, and fiscal years 2020 through 

2023 were updated for actual payments made by students during the repayment 

deferral period using data from FSA. The combined effect of these changes led to a net 

downward re-estimate of $2.3 billion. 

• Collections. The Department updated FY 2023 collection rates to reflect the extension 

of the repayment deferral, along with other technical changes. The combined effect of 

these changes led to a net upward re-estimate of $16.4 billion.
FY 2023 AGENCY FINANCIAL REPORT 132 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

• Default. The default assumption was updated to include forecasted rates that spread 

future defaults more evenly across future fiscal years at the end of the Fresh Start 

period. The effect of these changes led to a net downward re-estimate of $0.6 billion.

• Repayment Plan Selection. The Department incorporated new repayment plan data 

through FY 2022 and updated the repayment plan assumption for cohorts prior to FY 

2020. This update led to a net upward re-estimate of $6.4 billion.

• 2022 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 $0.2 billion for these current-year assumption changes 

attributable to the FY 2022 cohort.

• 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 re-estimate calculated on the overall subsidy re-estimate resulted in a 

net upward re-estimate of $16.8 billion.

• Interactive Effects. The re-estimate includes a net downward re-estimate of $18.2 

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.

• Discount Rates. The rates are used to calculate the NPV of the cash flows to create 

subsidy rates. Adjustments to the 2021 and 2022 cohorts were calculated. All other 

cohorts are actual. The combined effect of these changes led to a net upward reestimate of $0.8 billion.

Direct Loan Program Interest Expense and Revenues

(Dollars in Millions)

2023 (Unaudited)

Interest Expense on Treasury Borrowing $ 28,234 

Total Interest Expense $ 28,234 

Interest Revenue from the Public 3,180 

Interest Revenue on Uninvested Funds 6,266 

Administrative Fees (2)

Amortization of Subsidy 18,790 

Total Revenues $ 28,234 
FY 2023 AGENCY FINANCIAL REPORT 133 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Federal Family Education Loan Program

Reconciliation of Liabilities for Loan Guarantees 

(Dollars in Millions)

2023 (Unaudited)

Beginning Balance of Post-1991 FFEL Loan Guarantee Liability $ 10,409 

Adjustments

Loan Modifications 1,018 

Interest Supplements Paid (1,706)

Claim Payments to Lenders (4,593)

Fees Received 601 

Interest on Accumulation on the Liability Balance (88)

Other Activities 1,160 

Net Upward Subsidy Re-Estimates 4,283 

Ending Balance of Post-1991 FFEL Loan Guarantee Liability 11,084 

Pre-1992 FFEL Liquidating Account Liability for Loan Guarantees (138)

FFEL Liabilities for Loan Guarantees 10,946 

HEAL Liabilities for Loan Guarantees 251 

Total Liabilities for Loan Guarantees $ 11,197 

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)

2023 (Unaudited)

Loan Purchase 

Commitment

Loan Participation 

Purchase ABCP Conduit Total

Beginning Balance of Allowance for Subsidy $ 7,945 $ 12,952 $ 293 $ 21,190 

Adjustments

Loan Modifications (1,808) (3,373) - (5,181)

Subsidy Allowance Amortization (317) (1,500) (50) (1,867)

Loans Written Off (485) (2,529) (64) (3,078)

Other Activities (19) (225) (12) (256)

Ending Balance of Allowance for Subsidy Before 

Re-Estimates 5,316 5,325 167 10,808 

Net Upward Subsidy Re-Estimates 2,888 4,554 - 7,442 

Ending Balance of Allowance for Subsidy $ 8,204 $ 9,879 $ 167 $ 18,250 
FY 2023 AGENCY FINANCIAL REPORT 134 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

FFEL Program Subsidy Expense 

(Dollars in Millions)

2023 (Unaudited)

Loan Modification Costs

FFEL Guaranteed Loan Program

 Net Modification Adjustment Transfer (Gain)/Loss $ 302 

 Loan Modifications 716 

 Total FFEL Guaranteed Loan Program Loan Modifications 1,018 

Loan Purchase Commitment

 Net Modification Adjustment Transfer (Gain)/Loss 39 

 Loan Modifications (1,847)

 Total Loan Purchase Commitment Loan Modifications (1,808)

Loan Participation Purchase

 Net Modification Adjustment Transfer (Gain)/Loss 61 

 Loan Modifications (3,434)

 Total Loan Participation Purchase Loan Modifications (3,373)

Total Loan Modification Costs (4,163)

Upward/(Downward) Subsidy Re-Estimates

FFEL Loan Guarantee Program 4,283 

Loan Purchase Commitment 2,888 

Loan Participation Purchase 4,554 

Total FFEL Program Subsidy Re-Estimates 11,725 

FFEL Program Subsidy Expense $ 7,562 

Loan Modifications. Loan modifications for the FFEL Loan Program for FY 2023 

included the following:

• Loan Deferral Extension. In FY 2023, the administration extended the student loan 

repayment deferrals through August 31, 2023. The extended relief for borrowers 

resulted in an upward modification cost of $2.6 billion for the FFEL Program student 

loan repayment deferrals.

• Broad Based Debt Relief Reversal. A downward modification was calculated to reverse 

the inclusion of student loan debt relief from the baseline subsidy cost as a result of 

the Supreme Court’s ruling on Biden v. Nebraska on June 30, 2023. These changes 

resulted in a downward modification cost of $13.6 billion. There was a net positive 

$0.7 billion modification adjustment transfer associated with this modification, 

bringing the total modification cost (savings) to $12.9 billion.

• Fresh Start/On Ramp. Fresh Start is a one-time temporary program that offers special 

benefits for borrowers with defaulted federal student loans. In addition to Fresh 

Start, the President announced that the Department is instituting a 12-month “onramp” to repayment, running from October 1, 2023, to September 30, 2024, so that 

financially vulnerable borrowers who miss monthly payments during this period are 

not considered delinquent, reported to credit bureaus, placed in default, or referred 

to debt collection agencies. These actions resulted in an upward modification cost of 

$3.2 billion. There was a net negative $0.2 billion modification adjustment transfer 

associated with this modification, bringing the total modification cost to $3.0 billion. 
FY 2023 AGENCY FINANCIAL REPORT 135 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

• Support for the Federal Student Loan Reserve Fund. The Department authorized the 

Guaranty Agencies to reimburse themselves from the Federal Fund for lost revenue 

that resulted from the student loan repayment deferrals during the Fresh Start period. 

The reimbursements cover the share of what the Guaranty Agencies would have 

collected during the pandemic but for the suspension. This relief for the Guaranty 

Agencies resulted in an upward modification cost of $0.7 billion.

• IDR Saving on a Valuation Education (SAVE) Plan. The Department published a 

Final Rule to revise the existing Revised Pay-As-You-Earn (REPAYE) repayment plan, 

which may also be referred to as the SAVE plan. The SAVE plan is available to student 

borrowers with a FFEL loan that has been converted into a Direct Consolidation Loan 

that is in good standing. These changes resulted in an upward modification cost of 

$2.6 billion. There was a net negative $0.2 billion modification adjustment transfer 

associated with this modification, bringing the total modification cost to $2.4 billion. 

Net Upward/Downward Subsidy Re-Estimates. The total FFEL subsidy re-estimate 

increased subsidy expense in FY 2023 by $11.7 billion. The net upward re-estimates in the 

FFEL Program were due primarily to increased non-IDR discharges in the Loan Purchase 

Commitment and Loan Participation Purchase programs.

Other Credit Programs for Higher Education

TEACH Program.

Loan Modifications. Loan modifications for the TEACH Program for FY 2023 included 

the following:

• Loan Deferral Extension. In FY 2023, the administration extended the student loan 

repayment deferrals through August 31, 2023. The extended relief for borrowers 

resulted in an upward modification cost of $9.2 million in the TEACH Program. 

There was a net positive $0.1 million modification adjustment transfer associated with 

this modification, bringing the total modification cost to $9.3 million. 

• Broad Based Debt Relief Reversal. A downward modification was calculated to reverse 

the inclusion of student loan debt relief from the baseline subsidy cost as a result of 

the Supreme Court’s ruling on Biden v. Nebraska on June 30, 2023. These changes 

resulted in a downward modification cost of $51.1 billion. There was a net positive 

$1.8 billion modification adjustment transfer associated with this modification, 

bringing the total modification cost (savings) to $49.3 billion.

• Fresh Start/On Ramp. Fresh Start is a one-time temporary program that offers special 

benefits for borrowers with defaulted federal student loans. In addition to Fresh 

Start, the President announced that the Department is instituting a 12-month “onramp” to repayment, running from October 1, 2023, to September 30, 2024, so that 

financially vulnerable borrowers who miss monthly payments during this period are 

not considered delinquent, reported to credit bureaus, placed in default, or referred 

to debt collection agencies. These actions resulted in an upward modification cost of 

$1.9 billion. There was a net negative $0.4 billion modification adjustment transfer 

associated with this modification, bringing the total modification cost to $1.5 billion. 
FY 2023 AGENCY FINANCIAL REPORT 136 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

• IDR Saving on a Valuation Education (SAVE) Plan. The Department published a 

Final Rule to revise the existing Revised Pay-As-You-Earn (REPAYE) plan, which may 

also be referred to as the SAVE plan. The SAVE plan, which is available to student 

borrowers with a Direct Loan in good standing, will replace the existing Revised PayAs-You-Earn (REPAYE) plan which is the most generous existing IDR plan for most 

borrowers. These changes resulted in an upward modification cost of $0.9 billion. 

HEAL Program.

Loan Modifications. Loan modifications for the HEAL Program for FY 2023 included 

the following:

• Loan Deferral Extension. In FY 2023, the administration extended the student loan 

repayment deferrals through August 31, 2023. The extended relief for borrowers 

resulted in an upward modification cost of $0.9 million in the HEAL Program. 

NOTE 14. Roll-Forward of Debt Associated with Loans

(Dollars in Millions)

2023 (Unaudited)

Beginning 

Balance Borrowing Repayments Accrued Interest Ending Balance

Debt to the Bureau of Public Debt

Direct Loan Program $ 837,440 $ 445,038 $ (155,467) $ - $ 1,127,011 

FFEL Program 66,995 15,438 (21,537) - 60,896 

Other Credit Programs for Higher Education 641 98 (61) - 678 

Total Debt to the Bureau of Public Debt 905,076 460,574 (177,065) - 1,188,585 

Debt to the Federal Financing Bank

Other Credit Programs for Higher Education 271 134 (33) 6 378 

Total Debt Associated with Loans $ 905,347 $ 460,708 $(177,098) $ 6 $ 1,188,963 

Most of the $445.0 billion new Direct Loan Program borrowing activity for the year was 

designated for funding downward modifications. Principal repayments during FY 2023 

for the Direct Loan Program totaled $155.5 billion.

During FY 2023, TEACH net borrowing was used for the advance of new grants and 

repayments of principal made to Treasury.
FY 2023 AGENCY FINANCIAL REPORT 137 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

NOTE 15. 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. 

Goal 5 in the Strategic Plan is considered a crosscutting goal, and therefore costs and 

revenues associated with these activities are included in the net cost programs associated 

with Goals 1 through 4. Programs associated with COVID-19 activities are administered 

by multiple program offices but are summarized separately. (See Note 16)

Program Offices Strategic Goal Net Cost Program

Net Cost Statement Program Alignment with Strategic Plan

OESE

OSERS

Other:

OCTAE

IES

OELA

OCR

Goal 1: Promote equity in student access to educational resources, opportunities, and 

inclusive environments.

Goal 2: Support a diverse and talented educator workforce and professional growth to strengthen 

student learning.

Goal 3: Meet students’ social, emotional, and academic needs.

Promote equity for 

prekindergarten 

through grade 12 

students with access 

to educational 

resources, 

opportunities, 

and inclusive 

environments

FSA

OSERS

Other:

OCTAE

IES

OPE

OCR

Goal 4: Increase postsecondary value by focusing on equity-conscious strategies to address 

access to high-quality institutions, affordability, completion, post-enrollment success, and support for 

inclusive institutions.

Increase 

postsecondary value 

by focusing on equity 

strategies to address 

access to affordability, 

completion, and postenrollment success

All Offices Goal 5: Enhance the Department’s internal capacity to optimize the delivery of its mission. Crosscutting Goal
FY 2023 AGENCY FINANCIAL REPORT 138 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Gross Costs and Earned Revenue by Program 

(Dollars in Millions)

2023 (Unaudited)

FSA OESE OSERS COVID-19 Other Total

PROMOTE EQUITY FOR PREKINDERGARTEN THROUGH GRADE 12 STUDENTS WITH ACCESS TO EDUCATIONAL RESOURCES, 

OPPORTUNITES, AND INCLUSIVE ENVIRONMENTS

Gross Cost

Grants $ - $ 26,124 $ 13,868 $ 56,576 $ 2,496 $ 99,064 

Other - 89 1 16 923 1,029 

Earned Revenue - - - - (104) (104)

Net Program Costs - 26,213 13,869 56,592 3,315 99,989 

INCREASE POSTSECONDARY VALUE BY FOCUSING ON EQUITY STRATEGIES TO ADDRESS ACCESS TO AFFORDABILITY, 

COMPLETION, AND POST-ENROLLMENT SUCCESS 

Direct Loan Program

Gross Cost

Credit Program Interest Expense 28,234 - - - - 28,234 

Subsidy Expense 179,712 - - (288,504) - (108,792)

Administrative Expenses 1,777 - - - - 1,777 

Earned Revenue

Subsidy Expense (1,739) - - (5,944) - (7,683)

Interest & Administrative Fees (9,444) - - - - (9,444)

Subsidy Amortization (18,790) - - - - (18,790)

Net Cost (Surplus) of Direct Loan Programs 179,750 

 - 

 

 - (294,448) 

 - (114,698)

FFEL Program

Gross Cost

Credit Program Interest Expense 3,261 - - - - 3,261 

Subsidy Expense 14,324 - - (6,404) - 7,920 

Subsidy Amortization (Guaranteed Loans) (88) - - - - (88)

Guaranty Agencies 580 - - - - 580 

Administrative Expenses 175 - - - - 175 

Earned Revenue

Subsidy Expense (145) - - (213) - (358)

Interest & Administrative Fees (1,306) - - - - (1,306)

Subsidy Amortization (Acquired FFEL Loans) (1,867) - - - - (1,867)

Guaranty Agencies (463) - - - - (463)

Net Cost of FFEL Program 14,471 - - (6,617) - 7,854 

Other Credit Programs for Higher Education

Gross Cost

Credit Program Interest Expense 17 - - - 15 32 

Subsidy Expense 53 - - (37) 35 51 

Administrative Expenses 1 - - - - 1 

Earned Revenue

Interest & Administrative Fees (14) - - - (15) (29)

Subsidy Amortization (3) - - - - (3)

Other (874) - - - (1) (875)

Net Cost (Surplus) of Other Credit Programs 

for Higher Education (820) - - (37) 34 (823)

Non-Credit Programs

Gross Cost

Grants 32,011 5 4,092 7,705 4,750 48,563 

Other 130 - 6 59 326 521 

Earned Revenue - - - - (10) (10)

Net Cost of Non-Credit Programs 32,141 5 4,098 7,764 5,066 49,074 

Net Program Costs (Surplus) 225,542 5 4,098 (293,338) 5,100 (58,593)

Total Program Gross Costs 260,187 26,218 17,967 (230,589) 8,545 82,328 

Total Program Earned Revenues (34,645) - - (6,157) (130) (40,932)

Net Cost $ 225,542 $ 26,218 $ 17,967 $ (236,746) $ 8,415 $ 41,396 
FY 2023 AGENCY FINANCIAL REPORT 139 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Credit Program Interest Expense and Revenues 

(Dollars in Millions)

2023 (Unaudited)

Gross Interest 

Expense

Subsidy 

Amortization

Net Interest 

Expense

Gross Interest and Administrative 

Fee Revenue

Subsidy 

Amortization

Net Revenue

Intragovernmental

Other than 

IntragovernmentalIntragovernmental

Other than 

Intragovernmental

Other than 

Intragovernmental

Direct Loan Program $ 28,234 $ - $ 28,234 $ 6,266 $ 3,178 $ 18,790 $ 28,234 

FFEL Program 3,261 (88) 3,173 2,276 (970) 1,867 3,173 

Other Credit Programs 

for Higher Education 32 - 32 12 17 3 32 

Total $ 31,527 $ (88) $ 31,439 $ 8,554 $ 2,225 $ 20,660 $ 31,439 

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 temporarily suspend nearly all required federal 

student loan payments and set borrower interest rates to zero percent until August 

31, 2023, new interest revenues were only recognized for part of FY 2023. Interest 

adjustments and reapplication activities are also included in the current year’s other than 

intragovernmental interest 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 2023 

interest revenues for the FFEL Program.
FY 2023 AGENCY FINANCIAL REPORT 140 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Grant Expenses by Appropriation

(Dollars in Millions)

2023 (Unaudited)

PROMOTE EQUITY FOR PREKINDERGARTEN THROUGH GRADE 12 STUDENTS WITH ACCESS TO 

EDUCATIONAL RESOURCES, OPPORTUNITES, AND INCLUSIVE ENVIRONMENTS

COVID-19 $ 56,576 

Education for the Disadvantaged 17,840 

Special Education – IDEA Grants 13,868 

School Improvement Programs 6,099 

Impact Aid 1,736 

Innovation and Improvement 1,036 

English Language Acquisition 829 

Career, Technical, and Adult Education 431 

Hurricane Education Recovery 30 

Institute of Education Sciences 213 

Other 406 

Subtotal 99,064 

INCREASE POSTSECONDARY VALUE BY FOCUSING ON EQUITY STRATEGIES TO ADDRESS 

ACCESS TO AFFORDABILITY, COMPLETION, AND POST-ENROLLMENT SUCCESS 

COVID-19 $ 7,705 

Student Financial Assistance

Pell Grants 29,714 

Federal Work-Study Program 1,214 

Federal Supplemental Educational Opportunity Grants 1,083 

Rehabilitation Services 3,682 

Higher Education 2,877 

Career, Technical, and Adult Education 1,572 

Special Education – IDEA Grants 123 

Hurricane Education Recovery 5 

Institute of Education Sciences 47 

Other 541 

Subtotal 48,563 

Total Grant Costs $ 147,627 

The Department has more than 100 grant programs. Descriptions of COVID-19 grant 

programs are provided in Note 16. 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. 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.
FY 2023 AGENCY FINANCIAL REPORT 141 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

• 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.

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, first-generation 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 
FY 2023 AGENCY FINANCIAL REPORT 142 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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 one-time 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 evidencebased 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 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 16. 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 145. 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

during FY 2023 for student loan borrowers by suspending nearly all federal student loan

payments through August 31, 2023, interest free. Additionally, support for student loan

borrowers was provided in previous fiscal years by the following COVID-19 relief legislation

and administrative actions.

• Authorizing Guaranty Agencies to reimburse themselves from the Federal Student Loan

Reserve Fund for lost revenue that resulted from student loan repayment deferrals.
FY 2023 AGENCY FINANCIAL REPORT 143 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

This reimbursement covers the share of what a guaranty agency might have reasonably 

collected during the pandemic, but for the suspension.

• Making temporary changes to the PSLF program through a Limited PSLF Waiver 

to allow student borrowers to get credit for payments made while working for a 

qualifying employer, regardless of loan type or repayment plan. 

• Addressing issues with IDR payment counting by allowing any borrower who made 

IDR-qualifying payments to count toward IDR, regardless of repayment plan.

Funding for each of these actions was provided through indefinite appropriations, and the 

cost impacts were recorded as loan modifications. 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 13)

In addition, 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.

The following tables provide more detail on the Department’s funded COVID-19 activity 

for FY 2023. Unobligated CARES Act balances as of the end of FY 2022 totaling $564 

million were carried forward to FY 2023 and are reported in the FY 2023 COVID-19 

schedule as Unobligated Balance from Prior Year Budget Authority (Net) together with 

$40 million of downward adjustments recorded in FY 2023 to prior years’ CARES Act 

obligations. Obligated and unobligated COVID-19 funds remaining to be disbursed as of 

the end of FY 2023 totaled $75.3 billion. (See Note 3 and 17)
FY 2023 AGENCY FINANCIAL REPORT 144 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

COVID-19 Activity

(Dollars in Millions)

2023 (Unaudited)

Unobligated Balance 

from Prior Year 

Budget Authority (Net)

Appropriations

New Obligations 

and Upward Adjustments 

of Prior Year Obligations

Unobligated Outlays

Transfers 

to General 

Fund

Net Costs 

(See Note 

15)

COVID-19 Direct Appropriations

Education Stabilization Fund

Elementary and Secondary School 

Emergency Relief Fund

Allocations to States $ 1 $ - $ - $ 1 $ 54,470 $ - $ 52,656 

Assistance for Homeless Children 

and Youth 1 - - 1 176 - 176 

Higher Education Emergency 

Relief Fund

Higher Education Funds to Students 84 - - 84 881 - 880 

Higher Education Funds to 

Institutions 19 - 4 15 4,868 - 4,830 

Proprietary Institutions Grant Funds 

for Students 238 - - 238 25 - 25 

Schools Serving Low-Income 

Students, HBCUs, and Minority 

Serving Institutions (MSIs) 

MSIs 28 - - 28 387 - 387 

HBCUs 1 - - 1 672 - 669 

Tribally Controlled Colleges and 

Universities (TCCUs) 1 - - 1 57 - 57 

Strengthening Institutions Program 55 - - 55 173 - 171 

Fund for the Improvement of 

Postsecondary Education 112 - - 112 2 - 2 

Supplemental Assistance 

and Support (113) - - (113) 215 - 217 

Governor’s Emergency Education 

Relief Fund

Emergency Education Relief Grants - - - - 780 - 780 

Emergency Assistance to Non-Public 

Schools Program - - - - 1,418 - 1,574 

Outlying Areas - - - - 322 - 322 

Bureau of Indian Education - - - - - - - 

Discretionary Grants - - - - 84 - 84 

Total Education Stabilization Fund 427 - 4 423 64,530 - 62,830 

Individuals with Disabilities Education 

Act Grants - - - - 1,359 - 1,361 

School Improvement Programs 27 - 21 6 48 - 48 

American Indian Resilience in 

Education 13 - 13 - 4 - 4 

Gallaudet University - - - - 5 - 5 

Howard University - - - - 11 - 11 

National Technical Institute for the Deaf - - - - 8 - 8 

HBCU Loan Deferment 30 - - 30 - - - 

Student Aid Administration 26 - 23 3 57 - 57 

Program Administration 9 - 5 4 7 - 7 

Inspector General 7 - 3 4 3 - 3 

Institute of Education Sciences 65 - 20 45 22 - 23 

Total COVID-19 Direct Appropriations 604 - 89 515 66,054 - 64,357 

COVID-19 Indirect Appropriations (See 

Note 5)

Loan Deferral Extension - 26,084 26,084 - 26,084 197 25,887 

Broad Based Debt Relief Reversal - 5,318 5,318 - 5,318 338,176 (332,858)

Fresh Start - 6,047 6,047 - 6,047 849 5,198 

Support for FSLRF - 670 670 - 670 - 670 

Total COVID-19 Indirect 

Appropriations - 38,119 38,119 - 38,119 339,222 (301,103)

Total COVID-19 Activity $ 604 $ 38,119 $ 38,208 $ 515 $ 104,173 $ 339,222 $ (236,746)
FY 2023 AGENCY FINANCIAL REPORT 145 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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 

1-A. States must distribute at least 90 percent of funds to local educational 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 support 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 Islander-Serving 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 
FY 2023 AGENCY FINANCIAL REPORT 146 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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 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 non-public schools), postsecondary institutions, and other 

education-related organizations.
FY 2023 AGENCY FINANCIAL REPORT 147 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

• Emergency Education Relief Grants—Provide grants to state governors for the 

purpose of providing local educational agencies (LEA), IHEs, and other educationrelated entities with emergency assistance as a result of 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 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.

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.

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 
FY 2023 AGENCY FINANCIAL REPORT 148 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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 others, and for 

carrying out the National Assessment of Educational Progress Authorization Act.

NOTE 17. Statement Of Budgetary Resources

The SBR compares budgetary resources with the status of those resources. As of 

September 30, 2023, budgetary resources were $850.2 billion, and net agency outlays 

were $41.1 billion. 

Net Adjustments to Unobligated Balances Brought Forward, October 1

(Dollars in Millions)

2023 (Unaudited)

Budgetary

Nonbudgetary 

Credit Reform 

Financing 

Accounts

Prior Year Unobligated Balance, End of Year (Total) $ 22,711 $ 65,579 

Recoveries of Prior Year Unpaid Obligations 2,362 10,174 

Borrowing Authority Withdrawn - (6,966)

Actual Repayments of Debt, Prior-Year Balances - (41,216)

Actual Capital Transfers to the Treasury General Fund (11) - 

Canceled Authority (523) - 

Downward Adjustments of Prior-Year Paid Delivered Orders 3 202 

Other Differences 2 3 

Unobligated Balance from Prior Year Budget Authority (Net) $ 24,544 $ 27,776 

During the year ended September 30, 2023, certain adjustments were made to the balance 

of unobligated budgetary resources available as of October 1, 2022. These adjustments 

included, among other things, recoveries of prior year unpaid obligations that resulted from 

downward adjustments of undelivered orders that were obligated in a prior fiscal year.

Unused Borrowing Authority 

(Dollars in Millions)

2023 (Unaudited)

Beginning Balance – Unused Borrowing Authority $ 42,109 

Current Year Borrowing Authority 472,659 

Funds Drawn from Treasury (460,708)

Borrowing Authority Withdrawn (6,966)

Ending Balance - Unused Borrowing Authority $ 47,094 
FY 2023 AGENCY FINANCIAL REPORT 149 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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)

2023 (Unaudited)

Intragovernmental With the Public

Unpaid $ 336 $ 211,050 

Paid 146 916 

Undelivered Orders $ 482 $ 211,966 

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.

Distributed Offsetting Receipts

(Dollars in Millions)

2023 (Unaudited)

Negative Subsidies and Downward Re-estimates of Subsidies:

Direct Loan Program $ 332,029 

FFEL Program 14,546 

TEACH Program 63 

Facilities Loan Programs 39 

Total Negative Subsidies and Downward Re-estimates of Subsidies 346,677 

Repayment of Perkins Loans and Capital Contributions 548 

Other 388 

Distributed Offsetting Receipts $ 347,613 

Distributed offsetting receipts are amounts that the Department collects 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, 

downward modifications, and negative subsidies.

Reconciliation of the SBR to the Budget of the U.S. Government 

(Dollars in Millions) (Unaudited)

Budgetary 

Resources

New Obligations 

and Upward 

Adjustments 

(Total)

Distributed 

Offsetting 

Receipts

Net Outlays

Combined Statements of Budgetary Resources $ 901,996 $ 813,706 $ 29,086 $ 639,369 

Expired Funds (5,638) (1,509) - - 

Distributed Offsetting Receipts - - - 29,086 

Other - (1) - (3)

Budget of the United States Government 1 $ 896,358 $ 812,196 $ 29,086 $ 668,452 

1

 Amounts obtained from the Appendix, Budget of the United States Government, FY 2024
FY 2023 AGENCY FINANCIAL REPORT 150 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

The FY 2025 President’s Budget, which presents the actual amounts for the year ending 

September 30, 2023, has not been published as of the issue date of these financial 

statements. The FY 2025 President’s Budget is scheduled for release in February 2024 and 

will be made available on OMB’s website. The table above reconciles the FY 2022 SBR to 

the FY 2024 President’s Budget (FY 2022 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.

Budgetary Status of Fund Balance with Treasury 

(Dollars in Millions)

2023 (Unaudited)

COVID-19 Funds All Other Funds Total

Unobligated Balance

 Available $ 486 $ 12,973 $ 13,459

 Unavailable 29 59,280 59,309 

Obligated Balance, Not Disbursed 74,748 145,359 220,107 

Authority Temporarily Precluded from Obligation - (2,507) (2,507)

Borrowing Authority Not Yet Converted to Fund Balance with Treasury - (47,094) (47,094)

Other - 755 755

Total Fund Balance with Treasury $ 75,263 $ 168,766 $ 244,029 

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 ($59.3 billion) differs from unapportioned and expired amounts on the SBR 

($59.9 billion) due to the Guarantee Agencies’ Federal Funds ($0.6 billion).
FY 2023 AGENCY FINANCIAL REPORT 151 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

NOTE 18. Reconciliation of Net Cost to Net Outlays

(Dollars in Millions)

2023 (Unaudited)

Intragovernmental

Other than 

IntragovernmentalTotal

Net Cost $ 23,596 $ 17,800 $ 41,396 

Components of Net Cost Not Part of Budgetary 

Outlays:

Year-End Credit Reform Subsidy 

Accrual Re-Estimates - (66,061) (66,061)

Loan Modification Adjustment Transfers - 688 688 

Property and Equipment Disposals and Revaluations - (4) (4)

Increase/(Decrease) in Assets:

Loans Receivables, Net (Non-FCRA) - 204 204 

Other Assets 60 5 65 

(Increase)/Decrease in Liabilities:

Accounts Payable - (168) (168)

Loan Guarantee Liabilities (Non-FCRA) - 137 137 

Other Liabilities (271) (398) (669)

Financing Sources:

Imputed Costs (64) - (64)

Total Components of Net Cost Not Part of 

Budgetary Outlays (275) (65,597) (65,872)

Components of Budget Outlays Not Part of Net 

Cost:

Effect of Prior-Year Credit Reform 

Subsidy Re-estimates - (16,954) (16,954)

Total Components of Budget Outlays Not Part of 

Net Cost - (16,954) (16,954)

Miscellaneous Items:

Other Loan Activities (Non-FCRA) (1) - (1)

Non-Entity Activity 325 - 325 

Non-Exchange Revenues (3) - (3)

Total Miscellaneous Items 321 - 321 

Budgetary Agency Outlays, Net $ (41,109)

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-
FY 2023 AGENCY FINANCIAL REPORT 152 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

year subsidy accrual costs) and Effect of Prior-Year Credit Reform Subsidy Re-Estimates 

(current-year budget subsidy costs).

• Current-year subsidy accrual costs are the portion of the current-year loan subsidy reestimates 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 19. 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, 2022 FR can be found on Treasury’s website, and a copy of 

the September 30, 2023 FR will be posted to this site as soon as it is released.

Reclassification of Statement of Net Cost to Line Items Used for the Government-wide 

Statement of Net Cost for the Year Ended September 30, 2023

(Dollars in Millions)

FY 2023 Department Statement of Net Cost (Unaudited) Line Items Used to Prepare FY 2023 Government-wide 

Statement of Net Cost 

Financial Statement Line Amounts Amounts Reclassified Financial Statement Line

Total Gross Cost $ 82,328 $ 50,175 Non-Federal Gross Cost

 163 Benefit Program Costs

 64 Imputed Costs

 380 Buy/Sell Cost

 31,527 Borrowing and Other Interest Expense

 19 Other Expenses (Without Reciprocals)

Total Gross Cost $ 82,328 $ 82,328 Department Total Gross Cost

Total Earned Revenue $ (40,932) $ (32,375) Non-Federal Earned Revenue

 (3) Buy/Sell Revenue (Exchange)

 (8,554) Borrowing and Other Interest Revenue (Exchange)

Total Earned Revenue (40,932) (40,932) Department Total Earned Revenue

Net Cost $ 41,396 $ 41,396 Net Cost
FY 2023 AGENCY FINANCIAL REPORT 153 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Reclassification of Statement of Changes in Net Position to Line Items Used for the Government-wide 

Statement of Operations and Changes in Net Position for the Year Ended September 30, 2023

(Dollars in Millions)

FY 2023 Department Statement of Changes in Net Position (Unaudited) Line Items Used to Prepare FY 2023 Government-wide 

Statement of Operations and Changes in Net Position 

Financial Statement Line Amounts Amounts Reclassified Financial Statement Line

Unexpended Appropriations

Beginning Balance $ 231,216 $ 231,216 Net Position, Beginning of Period

Appropriations Received 255,795 254,166 Appropriations Received as Adjusted (Rescissions and 

Other Adjustments)

Other Adjustments (Rescissions, etc.) (1,629)

Appropriations Transferred 4 4 Non-Expenditure Transfers-In of Unexpended 

Appropriations and Financing Sources

Appropriations Used (313,824) (313,824) Appropriations Used

Unexpended Appropriations, Ending Balance 171,562 171,562 

Cumulative Results of Operations

Beginning Balance (9,487) (9,487) Net Position, Beginning of Period

Appropriations Used 313,824 313,824 Appropriations Expended

Nonexchange Revenue 3 3 Collections Transferred into a TAS Other Than the 

General Fund of the U.S. Government – Nonexchange

Imputed Financing from Costs Absorbed by Others 64 64 Imputed Financing Sources

Negative Subsidy Transfers, Downward Subsidy 

Re-Estimates, and Other (330,204) (355,384) Non-Entity Collections Transferred to the General Fund of the U.S. Government

 25,178 

Accrual for Non-Entity Amounts to Be Collected and 

Transferred to the General Fund of the 

U.S. Government

 2 Other Taxes and Receipts

Net Cost (41,396) (41,396) Net Cost 

Cumulative Results of Operations, Ending Balance $ (67,196) $ (67,196)

Net Position $ 104,366 $ 104,366 Net Position, End of Period

NOTE 20. Other Matters 

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.
FY 2023 AGENCY FINANCIAL REPORT 154 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Required Supplementary Information (Unaudited)

U.S. Department of Education 

Combining Statement of Budgetary Resources 

For the Year Ended September 30, 2023

(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 17) $ 19,342 $ 27,552 $ 2,682 

Appropriations (Discretionary and Mandatory) 190,593 7,355 27,370 

Borrowing Authority (Discretionary and Mandatory) (Note 17) - 472,192 - 

Spending Authority from Offsetting Collections (Discretionary and Mandatory) 437 69,940 (1) 

Total Budgetary Resources $ 210,372 $ 577,039 $ 30,051 

STATUS OF BUDGETARY RESOURCES

New Obligations and Upward Adjustments (Total) $ 196,156 $ 522,896 $ 27,750 

Unobligated Balance, End of Year:

Apportioned, Unexpired Accounts 11,193 - 885 

Unapportioned, Unexpired Accounts 526 54,143 - 

Unexpired Unobligated Balance, End of Year $ 11,719 $ 54,143 $ 885 

Expired Unobligated Balance, End of Year 2,497 - 1,416 

Unobligated Balance, End of Year (Total) $ 14,216 $ 54,143 $ 2,301 

Total Budgetary Resources $ 210,372 $ 577,039 $ 30,051 

OUTLAYS, NET, AND DISBURSEMENTS, NET 

Outlays, Net (Discretionary and Mandatory) $ 188,368 $ 25,786 

Distributed Offsetting Receipts (-) (Note 17) (347,189) - 

Agency Outlays, Net (Discretionary and Mandatory) (Notes 17 & 18) $ (158,821) $ 25,786 

Disbursements, Net (Total) (Mandatory) $ 296,603 
FY 2023 AGENCY FINANCIAL REPORT 155 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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

$ 618 $ 422 $ 1,480 $ 224 $ 24,544 $ 27,776 $ 52,320 

19,623 (389) 10,137 - 247,334 7,355 254,689 

- - - 467 - 472,659 472,659 

- - 59 82 495 70,022 70,517 

$ 20,241 $ 33 $ 11,676 $ 773 $ 272,373 $ 577,812 $ 850,185 

$ 19,588 $ 4 $ 9,969 $ 490 $ 253,467 $ 523,386 $ 776,853 

298 - 1,083 - 13,459 - 13,459 

- - - 283 526 54,426 54,952 

$ 298 $ - $ 1,083 $ 283 $ 13,985 $ 54,426 $ 68,411 

355 29 624 - 4,921 - 4,921 

$ 653 $ 29 $ 1,707 $ 283 $ 18,906 $ 54,426 $ 73,332 

$ 20,241 $ 33 $ 11,676 $ 773 $ 272,373 $ 577,812 $ 850,185 

$ 19,228 $ 64,530 $ 8,592 $ 306,504 $ 306,504 

- - (424) (347,613) (347,613)

$ 19,228 $ 64,530 $ 8,168 $ (41,109) $ (41,109)

$ 65 $ 296,668 $ 296,668 
FY 2023 AGENCY FINANCIAL REPORT 156 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Memorandum from the Office of the Inspector General
FY 2023 AGENCY FINANCIAL REPORT 157 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 158 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Office of Inspector General’s (OIG) Management and 

Performance Challenges for Fiscal Year 2024 

New Framework for Assessing Fiscal Year 2024 Management Challenges Reporting

We developed a new framework for evaluating the Department’s activities in response 

to individual challenges as shown in Table 4 below. We also improved communication 

throughout the year regarding the activities performed by the Department to address each 

management challenge.

Table 4. Framework for Assessing Department Progress in Addressing Challenge Areas 

Description of Response to the Challenge Score

New challenge, not rated N/A

A comprehensive plan has not been developed in response to the challenge, or a plan has 

been developed but it requires significant improvement to increase the likelihood that its risk 

management practices and internal controls would provide reasonable assurance of effectively 

mitigating the challenge.

Level 1—Beginning Progress

A comprehensive plan has been developed in response to the challenge, however, some 

improvement is needed to increase the likelihood that its risk management practices and internal 

controls would provide reasonable assurance of effectively mitigating the challenge.

Level 2—Limited Progress

A comprehensive plan has been developed in response to the challenge. The plan includes 

risk management practices and internal controls that would provide reasonable assurance of 

effectively mitigating the challenge. However, the plan has not been substantially implemented 

or the plan has been substantially implemented but limited or no results have been demonstrated. 

Level 3—Established Progress

A comprehensive plan has been developed in response to the challenge. The plan includes 

risk management practices and internal controls that would provide reasonable assurance of 

effectively mitigating the challenge. The plan has been substantially implemented and partial 

results have been demonstrated.

Level 4—Significant Progress

A comprehensive plan has been developed in response to the challenge. The plan includes 

risk management practices and internal controls that would provide reasonable assurance of 

effectively mitigating the challenge. The plan has been implemented and substantial results have 

been demonstrated, but continued efforts are needed to fully mitigate the challenge.

Level 5—Demonstrated Progress
FY 2023 AGENCY FINANCIAL REPORT 159 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

In applying this framework, challenge areas that receive an assessment of “Level 

5—Demonstrated Progress” in consecutive years will be considered for removal or 

modification in subsequent management challenges reporting. 

Our implementation of the assessment framework for fiscal year FY 2024 reporting 

was limited by several factors. Most of the information provided by the Department 

on its progress occurred during August 2023, which included presentations made by 

Department leadership for each FY 2023 management challenge. These presentations 

focused on the Department’s priority corrective actions, rationale for identifying priority 

corrective actions, current implementation status, and expected implementation status by 

the end of FY 2023. 

We reviewed the information provided by the Department to gain an understanding of 

its approach to address the underlying causes associated with each management challenge. 

We assessed whether the action items identified by the Department collectively provided 

a reasonable framework to address and reduce major risks relating to each challenge. We 

also considered the identified implementation status and any related outcomes that would 

support achievement of results within each challenge. 

Our approach for FY 2024 reporting considered the initiatives and outcomes specifically 

identified by the Department and information in some readily assessable documentation 

such as strategic plans, annual reports, policies, templates, and training materials. Our 

work to validate the information presented by the Department was limited because of the 

timing of its presentations in relation to management challenge reporting requirements. 

Our validation efforts predominately focused on follow-up with the Department to 

obtain additional information supporting implementation status and the impact of 

judgmentally selected action items. 

For FY 2024, we included a brief narrative and a related progress score using the 

framework identified in Table 4 above. The outcomes of audit and investigative activity 

were factors in the identification of challenge areas and were considered as part of 

the assessment of the Department’s progress. The overall progress score considers 

the Department’s activities in response to the individual challenges. This includes 

the effectiveness of the Department’s efforts to identify root causes, develop and 

implement corrective actions, and assess the results of its efforts. Additional details on 

the Department’s activities and their responsiveness to the individual challenge areas are 

included under “Progress in Meeting the Challenge” that appears near the end of each 

management challenge section.
FY 2023 AGENCY FINANCIAL REPORT 160 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Management Challenge 1—Implementing Pandemic Relief Laws 

for Elementary and Secondary Education

The U.S. Department of Education (Department) was provided with more than $200 

billion under three major pandemic relief laws to assist states, public and nonpublic 

schools, and school districts in meeting their needs and the needs of students impacted 

by the pandemic. This included the Coronavirus Aid, Relief, and Economic Security Act

(CARES Act), enacted in March 2020; the Coronavirus Response and Relief Supplemental 

Appropriations Act, 2021 (CRRSA), enacted in December 2020; and the American Rescue 

Plan Act (ARP), enacted in March 2021. With respect to elementary and secondary 

education, these laws established new emergency relief programs that included the 

Elementary and Secondary School Emergency Relief (ESSER) program, the Governor’s 

Emergency Education Relief (GEER) program, and the Emergency Assistance to 

Nonpublic Schools (EANS) program.5

FY 2024 Assessment: Level 5—Demonstrated Progress

We found that the Department developed a 

comprehensive plan and implemented activities 

that achieved several positive outcomes. The 

Office of Elementary and Secondary Education 

(OESE) took significant actions to improve 

technical assistance, monitoring, and data 

quality that were responsive to this challenge. 

While progress has been demonstrated, the Department needs to continue its 

implementation efforts given the large amount of funding for these programs, the number 

of entities receiving funds, and the ongoing need to administer other programs in its 

elementary and secondary education grants portfolio.

Why This Is a Challenge 

The implementation of the pandemic relief laws for elementary and secondary education 

poses challenges for the Department as it must effectively oversee and monitor new grant 

programs and ensure that quality data are reported. In addition to its pandemic reliefrelated oversight responsibilities, the Department must also oversee more than 100 other 

grant programs.

Oversight and Monitoring

The pandemic relief laws provided funding for state and local agencies, nonpublic schools, 

and other education-related entities to prevent, prepare for, and respond to the impact 

of the coronavirus on our nation’s students. This included $190 billion for ESSER, $5.5 

billion for EANS, and $4.3 billion for GEER. Collectively, these programs were intended 

to support a wide range of activities that included purchasing and using technology for 

online learning, implementing summer learning and supplemental after-school programs, 

providing childcare and early childhood education, and protecting education-related jobs.

The pandemic relief programs continue to involve large outlays of Federal funds. For FY 

2022, the Department reported pandemic-related grant expenses of $78.3 billion, an 

amount several times more than its largest traditional grant programs. The Department, 

5 Our FY 2023 Management Challenges report identified “Implementing Pandemic Relief Laws” as a challenge for the 

Department. In developing our FY 2024 report, we separated this challenge into two distinct areas; this challenge 

relating to elementary and secondary education and a second challenge relating to higher education (see Management 

Challenge 2).
FY 2023 AGENCY FINANCIAL REPORT 161 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

its grant recipients and subrecipients, and other program participants must design and 

implement effective controls that collectively help ensure that pandemic relief program 

funds are used as intended and that the envisioned benefits are achieved. 

Data Quality

The pandemic relief laws included reporting provisions that were intended to provide 

transparency regarding the use of funds. The Department considered certain quarterly 

reporting requirements to be met through monthly reporting made under the 

Federal Funding Accountability and Transparency Act of 2006. The Department also 

developed and implemented data collection tools to facilitate annual reporting by 

grantees. Administering the programs 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. 

Recent Work Performed by the Office of Inspector General

Audit, Inspection, and Quick Response Activities

With respect to the Department’s implementation of pandemic relief laws for elementary 

and secondary education, the Office of Inspector General (OIG) has issued reports 

relating to ESSER, GEER, data quality and reporting, and Department operations. A 

summary of major audit, inspection, and quick response6

 activity within each area is 

shown in Table 5.

Table 5. OIG’s Recent Reports Relating to Implementing Pandemic Relief Laws for Elementary and Secondary Education

Area Summary of Major Audit, Inspection, and Quick Response Activity

ESSER We found that a grantee did not have an adequate review and approval process to ensure that subrecipients’ mandatory ESSER plans 

met all applicable requirements. We also found that the grantee could strengthen its monitoring of subrecipients to provide additional 

assurance that ESSER funds are used for allowable purposes and followed applicable regulations.

We also performed a nationwide survey of LEAs about their experiences in using ESSER funds to purchase educational technology. We 

found that LEAs generally reported using ESSER funds to purchase hardware, software, connectivity, or related products or services to 

continue instruction remotely during the coronavirus. Our report further identified challenges and benefits of ESSER-funded technology 

that were identified by LEAs.

GEER We identified concerns with multiple grantees’ subaward processes, multiple grantees’ subgrantee monitoring processes, a grantee’s 

use of funds for expenses that did not appear to be education related, and a grantee’s compliance with Federal cash management terms 

and conditions. 

Department 

Operations

We found the Department had allocated nearly 100 percent of its pandemic assistance program administration funds and that it was 

on track to obligate all its program administration funds prior to the dates the funds are set to expire. We also determined that the 

Department provided its initial spend plan within the specified timeframe to Congress, but it did not provide updates every 60 days 

as required.

6 Quick response activities are narrow in focus and generally used in areas that include communicating urgent risks, 

sharing significant information, communicating interim assessments, and summarizing lessons learned. 
FY 2023 AGENCY FINANCIAL REPORT 162 U.S. DEPARTMENT OF EDUCATION

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Investigation Activity

The OIG’s recent investigative activity within this area is shown in Table 6.

Table 6. OIG’s Recent Investigative Activity Relating to Pandemic Relief Funding for Elementary and Secondary Education

Area Related Investigative Activity

Program Participants Pursuant to an OIG investigation, a school district voluntarily returned ESSER funds that were used in a non-bid contract. 

Ongoing and Planned Work

Our ongoing work in this area includes reviews of a state educational agency’s (SEA) 

oversight and use of ESSER funds and reviews of two SEAs’ oversight of EANS funds. 

Our planned projects within this area for FY 2024 include additional reviews of SEAs’ 

oversight and local educational agencies’ (LEA) use of ESSER funds and SEAs’ oversight 

of EANS funds.

Progress in Meeting the Challenge 

We assessed the Department’s actions in response to this challenge at Level 5, or 

“Demonstrated Progress.” OESE developed a comprehensive plan and implemented 

activities that produced several positive outcomes. Plans to address this Management 

Challenge included activities to provide effective technical assistance, advance grantee 

monitoring, improve data quality, and enhance its operational ability to support grantees. 

Its implementation of related action items resulted in demonstrated progress towards 

addressing this management challenge. 

Technical Assistance

OESE’s plans for technical assistance included issuing guidance and providing interactive 

opportunities to exchange information. OESE’s related results included issuing multiple 

forms of guidance to assist recipients in their implementation of the ESSER, GEER, and 

EANS programs. This included publishing Dear Colleague Letters, Frequently Asked 

Questions, and announcements in areas such as reporting resources and expectations and 

maintenance of equity requirements. The Department also published information on 

promising practices for SEAs and LEAs to use in addressing the impact of the pandemic 

on their students. 

OESE, in partnership with the Office of Acquisition, Grants, and Risk Management’s 

Grants Management Policy Division, held a Federal Funding and Transparency Act

(FFATA) webinar that covered required reporting. In addition, OESE held a Grantee 

Learning Series, consisting of five webinars for recipients and subrecipients of its 

pandemic relief programs that covered topics such as technical assistance, grant 

administration, monitoring, performance reporting, Maintenance of Effort and 

Maintenance of Equity. According to information provided by the Department, a total 

of 470 participants attended the live webinars. The Department further noted that the 

sessions were recorded and made available on its website for asynchronous viewing. 

OESE reported that it created state mailboxes to help ensure the delivery of timely 

technical assistance and held monthly calls to address questions from grantees and provide 

additional assistance. The Department noted that the monthly ‘check in’ calls are intended 

to take place with individual grantees and be facilitated through a common agenda. We 

reviewed a sample agenda and found it included standard questions that covered areas 

such as subaward processes, monitoring activities (to include a section for monitoring 
FY 2023 AGENCY FINANCIAL REPORT 163 U.S. DEPARTMENT OF EDUCATION

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and anticipated document review processes), and whether the grantee required technical 

assistance in areas such as allowable uses of funds and reporting requirements.

The Department stated that its Grants Management Policy Division established a 

computer-based grants administration training for grantees that included a course 

dedicated to FFATA reporting requirements in support of pandemic relief programs. 

The Department further stated that this training was a vital component to support its 

technical assistance efforts.

Monitoring

OESE’s monitoring plans included the use of targeted, comprehensive, and consolidated 

monitoring.7

 OESE’s related efforts included performing focused biannual reviews of 

grantees as a form of targeted monitoring, conducting additional formal monitoring, 

publishing resources for grantees, and communicating regularly with grantees on relevant 

subject matter.

OESE stated that biannual reviews are intended to be less intensive for both the program 

office and the grantee than OESE’s formal monitoring activities. It added that the 

subject matter for biannual reviews is based on emerging issues and where a review of 

compliance is critical to assess what support, if any, a grantee may need to be successful. 

OESE stated that is currently conducting targeted reviews of ESSER grantees that are 

focused on subrecipient oversight and each grantee’s use of data, and other information, 

to continuously improve it and its subrecipients’ uses of ESSER funds spent to address 

learning loss.

OESE issues determination letters, rather than reports, at the conclusion of its biannual 

reviews that identify any areas of required corrective action. According to OESE, its FY 

2023 biannual reviews focused on the awarding of GEER funds and grantee monitoring 

of subrecipients and required seven states to complete corrective actions. We reviewed 

one of the determination letters issued in FY 2023 and found OESE required the grantee 

to provide the Department with a description of the processes used to award funds and 

review requests for funds for allowability, along with a subrecipient monitoring plan

OESE stated that grantees are identified for formal monitoring through a risk assessment 

process involving a review of fiscal data, drawdown patterns, timeliness and quality 

of performance reporting, and audit information. As of September 30, 2023, OESE’s 

formal monitoring resulted in reports to 16 States that included coverage of one or more 

pandemic relief programs. Ten of these reports included findings related to pandemic 

relief programs that required corrective action. We reviewed these reports and noted that 

the findings included areas related to grantees’ processes to identify internal risk, processes 

to evaluate internal controls, development of subrecipient monitoring plans, fiscal 

management policies, and cash management. OESE stated that it will conduct formal 

monitoring reviews of 11 additional locations in 2024. 

As part of its overall monitoring plan, OESE also published tools that included grantee 

and subrecipient self-assessment protocols for the ESSER and GEER programs and a 

grantee self-assessment for the EANS program. Additionally, as a part of its monitoring 

plan for FY 2023, OESE implemented standardized monthly calls with grantees that 

7 Targeted monitoring focuses on specific areas of compliance with Federal requirements, such as maintenance of effort. 

Comprehensive monitoring consists of a full programmatic and fiscal review focused on the grantee’s implementation 

of the pandemic relief programs. Consolidated monitoring is a cross-program review of the grantee’s implementation of 

its K–12 formula grants for both pandemic relief funding and Elementary and Secondary Education Act of 1965 formula 

grant programs administered by OESE.
FY 2023 AGENCY FINANCIAL REPORT 164 U.S. DEPARTMENT OF EDUCATION

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covered programmatic and fiscal topics. OESE stated that these engagements were 

important opportunities to provide technical assistance to grantees, as well as identify 

issues related to program compliance that may result in determining that a grantee 

requires more formal, intensive monitoring.

Data Quality

OESE and its partners in other Department offices, most notably the Office of the 

Chief Data Officer within the Office of Planning, Evaluation and Policy Development, 

developed plans to improve data quality that included targeted efforts to identify data 

abnormalities, provide support to grantees, and work collaboratively with other Federal 

stakeholders. OESE’s results included specific focus on addressing data quality issues for 

information reported to USAspending.gov and addressing grantee access issues to the 

FFATA reporting system, where data are input or uploaded. 

OESE stated that it dedicated staff resources to identify data issues and work with grantees 

to correct and address access issues. It further stated that it has also worked with Office 

of Management and Budget (OMB), the Executive Office of the President, and the 

General Services Administration (GSA) to enhance support of the FFATA site, which 

GSA manages. 

We noted that OESE started outreach to grantees regarding FFATA in 2020, when 

it published information on CARES Act quarterly reporting requirements. OESE 

has continued to provide information and assistance since that time. This included 

communicating on reporting requirements; conducting multiple webinars on FFATA 

reporting; and providing resources in conjunction with the Office of the Chief Data 

Officer that include videos, instructions, and fact sheets to assist grantees in ESSER, 

GEER, and EANS reporting. OESE stated that it also provides one-on-one technical 

assistance to grantees when needed to resolve identified issues. We reviewed OESE’s 

communications with one state regarding reporting training opportunities and data 

quality issues identified in its ESSER, GEER, and EANS reporting. These issues included 

subrecipients being included twice, negative value subawards, blank subaward amounts, 

and subaward dates occurring before the grant award date.

The Department also stated that it has reduced the number of states reporting 

overallocations as well as “0” allocations and is working to address inaccurate FFATA 

reporting findings in 18 states. 

Operational Ability to Support Grantees

The Department’s Grants Management Policy Division regularly communicates on subject 

areas and training opportunities that can help build the Department’s internal capacity to 

oversee grants. This includes, but is not limited to, the following.

• “Table Talk” sessions that are designed to allow grants professionals to share experiences 

and address questions in areas such as grants administration, effective communication 

and monitoring efforts, and technical assistance.

• “Monitoring Moments” courses that are intended to provide Department staff with 

greater insight into the strategies and tools that can support grantees in achieving their 

goals and objectives.
FY 2023 AGENCY FINANCIAL REPORT 165 U.S. DEPARTMENT OF EDUCATION

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• Other targeted subject matter such as single audits and assessing grantee risk, budget 

reviews, and costs analyses.

The Grants Management Policy Division also communicated on updates to policy, 

templates, and tools that could be used in grantee oversight, such as its Large Available 

Balances report. 

In addition to the above, the Office of Acquisition, Grants, and Risk Management’s Risk 

Management Services Division conducts “Grant Risk Management Meetings” that are 

structured to provide information on risk concentrations and other issues based on a 

review of financial risk indicators and other relevant information.

In our work relating to the Department’s use of pandemic assistance program 

administration funds, we noted that OESE had used a portion of these funds for 23 

additional full-time equivalent personnel to help perform oversight activities. These 

personnel worked on items related to GEER, ESSER, and other pandemic recoveryrelated OESE grants. At the time of our review, OESE planned to use additional funds for 

19 more full-time equivalents in subsequent years.

What the Department Needs to Do 

As noted above, the Department has demonstrated progress toward addressing this 

challenge, and should continue its efforts and tracking its outcomes. 
FY 2023 AGENCY FINANCIAL REPORT 166 U.S. DEPARTMENT OF EDUCATION

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Management Challenge 2—Implementing Pandemic Relief Laws 

for Higher Education

With respect to higher education, the pandemic relief laws established and provided more 

than $76 billion for a new emergency relief program, the Higher Education Emergency 

Relief (HEER) program, and included multiple provisions intended to provide 

postsecondary students and borrowers with emergency relief. 

FY 2024 Assessment: Level 3—Established Progress

Our assessment within this challenge area 

considered the Department’s plans to 

implement the HEER program and provisions 

intended to provide relief to students and 

borrowers. We found that the Department 

developed plans and implemented activities that 

demonstrated some results. The Department 

needs to continue its efforts given the amount of funding provided for the HEER 

program, significance of the student financial assistance program requirements, and the 

overall value of the Federal student loan portfolio.

Why This Is a Challenge 

Implementation of the pandemic relief laws for higher education poses challenges for the 

Department as it must effectively oversee and monitor the HEER program, implement 

additional student financial assistance program requirements, and ensure that quality data 

are reported. In addition to these responsibilities, the Department must oversee existing 

higher education grant programs, Federal student loan programs, and the Federal student 

loan portfolio that now surpasses $1.6 trillion. 

HEER Program and Funding 

HEER funds were awarded to institutions of higher education (IHE) to respond to the 

coronavirus and prepare for future pandemic emergencies. HEER 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. 

The pandemic relief laws provided more than $76 billion for the HEER program.

The HEER program must be effectively implemented and monitored by the Department 

to ensure that the legislation is followed, and that postsecondary institutions and students 

receive support in response to the pandemic. 

Student Financial Assistance Program Requirements and Flexibilities

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) usage. The actions taken by the Department included pausing eligible Federal 

student loan payments and setting the interest rate on those loans at 0 percent, effective 
FY 2023 AGENCY FINANCIAL REPORT 167 U.S. DEPARTMENT OF EDUCATION

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March 13, 2020. The initial pause in student loan repayments was extended through 

multiple executive actions and ended with the passage of the Fiscal Responsibility Act of 

2023, with payments restarting in October 2023.

The Department had to provide guidance to and rely on postsecondary institutions, 

contracted servicers, collection agencies, guaranty agencies, and accrediting agencies to 

effectively implement student financial assistance program requirements and flexibilities. 

While the pandemic relief laws provided more than $161 million to the Department 

for student aid administration, the Department may be challenged to provide adequate 

oversight of existing programs while it resumes collections on Federal student loans and 

implements additional plans to provide debt relief to eligible borrowers. 

Data Quality 

The pandemic relief laws included HEER reporting provisions that were intended to 

provide transparency regarding the use of funds to alleviate the impact of the pandemic. 

The Department established additional reporting requirements that included providing 

information on awards made to students and submitting annual performance reports. 

Administering higher education-related pandemic relief programs, requirements, and 

flexibilities requires the Department to collect, analyze, and report on data for many 

purposes, such as providing insight into HEER expenditures; ensuring compliance; 

evaluating performance; and informing management decisions. For this reason, the 

Department and its grant recipients must have effective systems, processes, and procedures 

in place to ensure that the reported data are accurate and complete. 

Recent Work Performed by the OIG

Audit, Inspection, and Quick Response Activities

With respect to the Department’s implementation of pandemic relief laws for higher 

education, the OIG has issued reports relating to HEER, implementation of student 

financial assistance program requirements and flexibilities, data quality and reporting, and 

Federal Student Aid (FSA) operations. A summary of major audit, inspection, and quick 

response activity within each area is shown in Table 7. 
FY 2023 AGENCY FINANCIAL REPORT 168 U.S. DEPARTMENT OF EDUCATION

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Table 7. OIG’s Recent Reports Relating to Pandemic Relief Laws for Higher Education

Area Summary of Major Audit, Inspection, and Quick Response Activity

HEER Our work relating to the Department’s implementation and oversight of the HEER program identified $73 million in duplicate 

HEER grant awards and shared observations on closed schools that received or had access to HEER funds. We also 

found that OPE did not perform or document several activities essential to effective program oversight and did not establish 

performance goals or metrics that would provide a basis to monitor individual grantee performance or report on outcomes at 

the program level.

Our work on three postsecondary schools’ use of HEER funds found that all three schools generally used the Student Aid 

portion of their HEER funds for allowable and intended purposes, but two schools did not always use the Institutional portion 

of their funds in accordance with Federal requirements. We identified other compliance issues relating to documentation 

of eligibility requirements (one school), cash management (three schools), and competitive procurement requirements 

(one school).

Flexibilities We found that FSA had adequate processes for waiving the return to Title IV (R2T4) requirements, cancelling borrowers’ 

obligation to repay William D. Ford Federal Direct Loans (Direct Loan), and excluding Pell disbursements from Pell lifetime 

usage for impacted students. We also found that FSA also designed adequate processes for schools to report the number 

and amounts of R2T4 waivers applied. 

We identified weaknesses in FSA’s implementation of CARES Act flexibilities relating to the Teacher Education Assistance for 

College and Higher Education (TEACH) Grant that may have resulted in inappropriate denials of flexibilities to some eligible 

recipients and may have provided benefits to recipients who were not entitled to them. 

Student Financial 

Assistance Program 

Requirements

We found that FSA implemented processes that generally achieved positive results in suspending and refunding most 

involuntary collections on defaulted Department-held loans. However, it did not reprocess all refunds returned to Treasury, 

did not refund all wage garnishments and Treasury offsets collected, or develop procedures to obtain and track the U.S. 

Department of Justice’s progress on suspending and refunding involuntarily collections on defaulted Department-held loans.

Data Quality and 

Reporting

Our work on three postsecondary schools’ use of HEER funds found that one school’s reporting was not always accurate and 

publicly available. The school reported $4.1 million of scholarships awarded to students in the wrong expenditure category 

and did not post all required HEER program quarterly reports on its public website.

In work relating to HEER reporting requirements, we found that 81 of the 100 recipients included in our nonstatistical sample 

complied with HEER Institutional portion reporting requirements. However, we were unable to locate Institutional portion 

reports on the websites of the 19 other recipients. 

Department Operations We found that FSA obligated nearly 100 percent of the $161.1 million in appropriations it received for pandemic assistance 

student aid administration funds from the three major coronavirus response and relief laws. The pandemic assistance student 

aid administration funds were used for personnel compensation and benefits, information technology systems and services 

contracts, and contractual services contracts.

Investigation Activity

The OIG’s recent investigative activity within this area is shown in Table 8.

Table 8. OIG’s Recent Investigative Activity Relating to Pandemic Relief Funding for Higher Education 

Area Related Investigative Activity

Institutions OIG Investigations identified institutions that drew down funds when not entitled to them, when knowingly closing, or with 

no intent to provide them to students. OIG made a referral to OPE describing observations and suggestions to improve 

OPE’s use of Department policies, procedures, and governance in pursuing administrative recoveries associated with the 

HEER program. 

OIG Investigations made an additional referral regarding an institution that used pandemic funds to pay off a pre-existing 

school loan.

Ongoing and Planned Work

Our ongoing work in this area includes reviews of FSA’s processes to transition Federal 

student loan borrowers back into repayment and the Department’s HEER audit resolution 

activities. We have no additional planned work within this area.

Progress in Meeting the Challenge 

We assessed the Department’s actions in response to this challenge at Level 3, or 

“Established Progress.” Overall, the Department developed plans and implemented 

activities that demonstrated some results. As shown in Table 7 above, our audit and 
FY 2023 AGENCY FINANCIAL REPORT 169 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

inspection work relating to selected pandemic relief-related program requirements and 

flexibilities found that FSA’s processes were adequate or achieved positive results in some 

instances. The Department developed plans to address this Management Challenge that 

included improved oversight of HEER grantees, returning borrowers to repayment, and 

implementing other program flexibilities. 

OPE Is Enhancing its Oversight of HEER Grantees

OPE developed plans to address this challenge that included developing and 

implementing internal guidance to monitor HEER grant recipients, improving its system 

of controls to ensure better and more effective oversight, and communicating HEER 

program auditing requirements to grantees. OPE has implemented some related activities 

but did not provide information that clearly identified outcomes of these activities. 

With respect to internal guidance and internal controls, OPE finalized its HEER 

monitoring plan in March 2023. We reviewed the plan and found that it included some 

positive aspects, such as the use of a structured rubric to determine the level of potential 

risk each grant recipient could face. Risk factors considered included placement on a 

Heightened Cash Monitoring payment method; the presence of HEER program findings 

in Single Audit reports, financial audit findings, or failure to implement corrective 

actions; problems with award balances, drawdowns, or unallowable expenditures; and 

late reporting or failure to submit required reports. The monitoring plan emphasizes 

using the risk assessment to inform the type and frequency of monitoring reviews and 

support provided to a grantee to help ensure successful performance. It included some 

specific tools and techniques that could be utilized based on the type of monitoring to 

be performed such as desk reviews or on-site/virtual reviews. It references additional 

guidance, OPE’s Monitoring Plan for On-Site/Virtual Review Protocol, as the 

standard operating procedures for planning and conducting a review and preparing a 

written report. 

OPE reported that it planned to conduct enhanced monitoring of HEER grantees, 

focusing on ensuring the appropriate use of funds. OPE also reported that targeted 

monitoring is an ongoing activity and that they are beginning the grant closeout process 

for grantees found to be in compliance. 

OPE has issued multiple memoranda to grantees outlining audit requirements for public, 

private, nonprofit, and proprietary institutions. The communications stressed that audits 

are a critical component of oversight and include information on what must be audited, 

due dates, and submission processes. 

The Department added that it implemented multiple strategies to provide support and 

help ensure the quality of data collected. According to the Department, this included 

providing technical assistance, using risk-based monitoring approaches, coordinating 

with the OIG, establishing processes for regular communication with grantees, and 

implementing structured data collection processes. 

FSA’s Plans for the Return to Repayment Initiative and Other Program Flexibilities 

FSA stated that it developed return to repayment plans that included multiple activities. 

FSA specifically anticipated (1) performing borrower outreach and communications; (2) 

coordinating with contractors to hire, onboard, and train staff to perform loan servicing 

activities; (3) developing and implementing policy enhancements; (4) increasing data 

analysis and reporting; and (5) heightening oversight and monitoring of vendors. These 

activities are being implemented in FY 2024 and require unprecedented effort by FSA. 
FY 2023 AGENCY FINANCIAL REPORT 170 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

During discussions related to this initiative, FSA stated that the return to repayment 

effort presented a significant challenge. It further stated that potential obstacles included 

financial and human resources, competing priorities, and borrower apathy. 

FSA also stated that as it implements return to repayment it will monitor trends in 

borrower behavior and responsiveness, begin assessing borrower repayment statuses, and 

direct interventions accordingly. FSA further said it will monitor and oversee servicers to 

ensure all borrower accounts are accurate, including loan types, interest rates, payment 

counts, repayment plans, and outstanding balances. 

The Department added that it took steps to implement pandemic relief requirements 

related to the student financial assistance programs. This included suspending payments 

and interest accrual on Federal student loans, stopping wage garnishments for borrowers 

in default, and ensuring that flexibilities were applied to eligible TEACH Grant recipients. 

What the Department Needs to Do 

The Department has developed and begun to implement a plan to improve oversight of 

the HEER program. For this year, the Department should follow through on its plan 

and track the outcomes of its efforts. FSA will begin its efforts to return borrowers to 

repayment during FY 2024. Both the OIG and the GAO plan to evaluate aspects of FSA’s 

implementation of its return to repayment initiative. 
FY 2023 AGENCY FINANCIAL REPORT 171 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Management Challenge 3—Oversight and Monitoring of Student 

Financial Assistance Programs

Within the Department, FSA administers the Federal student assistance programs 

and OPE develops Federal postsecondary education policy and regulations for the 

Federal student assistance programs. OPE 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 offer.

FSA directly manages or oversees a loan portfolio of more than $1.6 trillion, representing 

about 219.4 million student loans to more than 45 million borrowers. FSA oversees 

the disbursement of more than $27 billion in grants to more than 6 million recipients.8

FSA also oversees approximately 5,500 postsecondary institutions that participate in 

the Federal student aid programs. In FY 2022, FSA performed these functions with 

an administrative budget of about $1.9 billion and about 1,350 employees, along with 

contractors that provide outsourced business operations. From FY 2018 to FY 2022, FSA 

delivered an average of $116.7 billion in Federal student aid to an average of 10.8 million 

students. In comparing volumes from FY 2018 to 2022, the total amount of Federal 

student aid delivered declined by about 5 percent and the total number of students 

receiving aid declined by about 18 percent.9

FY 2024 Assessment: Level 3—Established Progress

The Department identified actions in response 

to this challenge for FY 2024 that focused on 

the implementation of the Unified Servicing 

and Data Solution (USDS) as a method to 

improve its oversight and monitoring of loan 

servicers. As of October 2023, USDS contracts 

had been awarded and implementation work 

was ongoing, but transitions from legacy servicers have not taken place. The Department 

described additional activities that were intended to improve oversight and monitoring 

activities relating to the student financial assistance programs in its response to our prior 

management challenge report, its FY 2022 Annual Report and its Strategic Plan, Fiscal Year 

2023–2027. Collectively these activities identified a comprehensive framework with the 

potential to mitigate this challenge. The Department provided information that identified 

outcomes relating to the activities of its Office of Enforcement but did not provide 

information on the outcomes of other activities. 

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 postsecondary institutions, 

contracted servicers, accrediting agencies, guaranty agencies, and lenders. 

8 Information relating to the amount of the loan portfolio, number of loans and borrowers, amount of grants, and number 

of recipients are from the Federal Student Aid Annual Report FY 2022.

9 Our FY 2023 Management Challenges report identified “Oversight and Monitoring” as a challenge for the Department. 

In developing our FY 2024 report, we separated this challenge into two distinct areas—this challenge relating to 

student financial assistance programs and a second relating to grants (see Management Challenge 4).
FY 2023 AGENCY FINANCIAL REPORT 172 U.S. DEPARTMENT OF EDUCATION

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Recent Work Performed by the OIG

Audit and Inspection Activities

With respect to oversight and monitoring of student financial assistance programs, the 

OIG has recently issued reports relating to areas including 90/10 revenue requirements, 

the experimental sites initiative, the Next Gen Loan Servicing Environment, and school’s 

use of professional judgement. A summary of major audit and inspection activity within 

each area is shown in Table 9. 

Table 9. OIG’s Recent Reports Relating to the Oversight and Monitoring of Student Financial Assistance Programs

Activities Reviewed Summary of Major Audit and Inspection Activity

90/10

We found that FSA had several processes for overseeing proprietary institutions’ compliance with 90/10 revenue 

requirements. However, found the Department’s reports to Congress were not always timely and complete and the 

Department did not always publish 90/10 revenue information as required to best reach the public. 

Accreditation

We determined that the Department did not comply with all regulatory requirements during a review of an accrediting 

agency’s petition for recognition renewal. We also determined that the Department implemented a process to assess 

the accrediting agency’s compliance with recognition criteria following a court remand that was permitted under 

applicable policies and regulations. We did not identify any evidence that contradicted the Department’s conclusions but 

found that its guidelines allowed for areas of reviewer subjectivity.

Experimental Sites 

Initiative We found that the Department is not complying with reporting requirements and had not published a comprehensive 

Experimental Sites Initiative report since the 2010–2011 award year report.

Next Generation Loan 

Servicing Environment We found that although FSA had processes in place for planning and managing the transition to the Next Gen loan 

servicing environment, FSA did not perform key steps within those processes or follow best practices for acquisition 

planning that could have better ensured the proper planning and managing of the transition.

Private Collection 

Agencies We found that the decision to terminate the Private Collection Agency contracts was part of an ongoing, multiyear 

Departmental strategy to overhaul student loan servicing and default collections. FSA made the decision for Business 

Process Operations vendors to handle future default collections primarily due to efficiencies and cost savings 

identified through market research, as well as the belief that doing so would improve customer service and the 

customer experience.

Professional Judgment We performed a series of audits at three schools. Overall, we found two schools did not always apply professional 

judgement in accordance with the Higher Education Act of 1965 and all three schools did not always adequately 

document the application of professional judgment.

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 a nonprofit company and the 13 for-profit postsecondary schools that it 

purchased. We also found that the Department did not follow several of its procedures relating to subsequent activities 

involving those schools. 
FY 2023 AGENCY FINANCIAL REPORT 173 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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 10.

Table 10. OIG’s Recent Investigative Activity Relating to the Student Financial Assistance Programs

Area Related Investigative Activity

Institutions OIG investigated an owner who purchased a school to obtain Title IV aid for another school he owned that was denied Title 

IV eligibility.

School Officials OIG Investigations identified improper activities of school officials that included falsifying their eligibility to obtain Federal 

student aid for personal gain.

Program Participants OIG Investigations identified schemes where students underreported income and assets to obtain Federal student aid that 

they were not eligible to receive. 

A woman submitted fraudulent school enrollment documents and FAFSAs on behalf of her deceased husband to receive 

aid in his name.

Distance Education 

Fraud Rings

Distance education 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. In two separate investigations, subjects targeted 

underserved native students or homeless populations.

Collaboration with FSA OIG and FSA established a Memorandum of Understanding to collaborate where appropriate on Title IV violations and 

institutional fraud, waste, and abuse. 

Ongoing and Planned Work

Our ongoing work in this area includes three schools’ compliance with career pathways 

and ability to benefit provisions, FSA’s oversight of contractor’s acceptability review 

process for proprietary school annual audits, FSA’s transition plans for Business Process 

Operations vendors, and FSA’s Student Aid and Borrower Eligibility Reform initiative.

Additional planned projects for FY 2024 include FSA’s oversight of Section 117 foreign 

gift and contract reporting requirements, the Department’s assessment and recoupment 

of liabilities from closed colleges, and the implementation of FSA’s Unified Servicing and 

Data Solution.

Progress in Meeting the Challenge

We assessed the Department’s actions in response to this challenge at Level 3, or 

“Established Progress.” Overall, the Department communicated plans to address this 

Management Challenge that focused on USDS implementation and an oversight and 

monitoring framework that included activities such as improving contact center and loan 

servicing operations, using available monitoring tools, utilizing enforcement capabilities, 

and expanding operational capacity. Collectively these activities have the potential to 

mitigate this challenge. However, the Department did not provide significant information 

that clearly identified outcomes of these initiatives.

USDS Implementation

FSA stated that it plans to improve its oversight and monitoring of loan servicers by 

implementing USDS. FSA described USDS as a long-term strategy to replace legacy 

servicing contracts for Direct Loans and Department-held Federal Family Education Loan 

Program loans. FSA stated that USDS will enable FSA to transition from the current loan 

servicing contracts into a more stable servicing environment that ensures borrowers can 

continue to manage repayment. 
FY 2023 AGENCY FINANCIAL REPORT 174 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

FSA stated that USDS shares the goals of prior loan servicing efforts, including providing 

all federally managed borrowers with complete account management capabilities 

on StudentAid.gov, reducing the disruption of account transfers, and increasing 

accountability for servicers via clear and measurable service-level agreements.

According to FSA, the implementation of USDS will improve customer experiences, 

provide better borrower outcomes, improve cybersecurity, hold servicers to a high level of 

performance, and enable the Department to focus on impactful objectives like reducing 

delinquency and default.

FSA stated the scope of transition requires a strategic, phased approach that greatly 

enhances the likelihood of successful implementation while mitigating the risks of failure. 

FSA further stated that the USDS contract was awarded on April 24, 2023, and it plans to 

begin transitioning from legacy loan servicers to USDS in the spring of 2024. 

Monitoring and Oversight Framework 

FSA described additional activities intended to strengthen its monitoring and oversight 

capabilities in its response to our prior management challenge report, its FY 2022 Annual 

Report, and its Strategic Plan, Fiscal Year 2023–2027. Collectively these activities identified 

a comprehensive framework with the potential to mitigate this challenge. FSA’s goals 

under this framework included improving customer service and outcomes for students 

and borrowers, strengthening engagement and accountability for educational and financial 

institutions, increasing workforce and workplace capabilities, and boosting operational 

efficiencies. A summary of selected focus areas follows.

Monitoring Tools 

FSA described monitoring activities that are performed with the intention of reducing 

program risk. This framework includes Comprehensive Compliance Reviews, Title IV 

compliance audits, Title IV program reviews, and analyses of the institutions’ financial 

capability. In July 2023, FSA published a report on the most frequently occurring findings 

resolved by FSA during FY 2022. The report summarized over 5,000 compliance audit 

deficiencies and over 700 program review deficiencies. FSA intended for the information 

to be used by IHEs to improve their awareness of compliance deficiencies so they can 

take proactive measures to self-assess and prevent similar compliance deficiencies from 

occurring. 

Outreach, Training, and Technical Assistance

FSA stated that it planned to use a data-centric approach to engage in effective outreach 

and technical assistance efforts with entities participating in the Title IV programs. This 

included identifying opportunities to provide targeted support and training though 

virtual and in-person technical assistance. FSA further stated that it provides training and 

technical assistance services through the FSA Training Center and state, regional, and 

national conferences. 

Enforcement Capabilities

FSA established an Office of Enforcement in October 2021 to strengthen its oversight of 

postsecondary schools participating in the Title IV programs. FSA stated that the Office 

of Enforcement is focused on schools that pose the most risk to students and taxpayers 

and reinforces other school oversight and compliance efforts through identifying and 

addressing serious wrongdoing. 
FY 2023 AGENCY FINANCIAL REPORT 175 U.S. DEPARTMENT OF EDUCATION

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FSA stated that it has grown the Office of Enforcement to about 90 total staff since its 

inception, including 23 new hires made during FY 2023. The team includes 19 staff 

members in its Investigations Group, which specifically evaluates indicators of potential 

misconduct or high-risk conduct by postsecondary institutions and third-party servicers, 

and investigates institutions’ compliance with federal laws, regulations, and terms of 

program participation. 

The Office of Enforcement’s efforts resulted in numerous outcomes during FY 2023, 

including the items listed below. 

• Reaching settlement agreements with five law schools after an investigation revealed 

that the schools improperly disbursed Title IV funds to students enrolled in 

unaccredited Master of Laws programs. Under the agreements, schools will stop 

disbursing Federal student aid funds to students in ineligible programs and reimburse 

the amount of improperly disbursed funds to the Department.

• Denying a school’s application to continue participation in the federal student aid 

programs following an investigation that identified violations of ability-to-benefit 

regulations, fiduciary standards of conduct, and standards of administrative capacity.

• Concluding that substantial misrepresentations were made by multiple schools that 

borrowers relied upon to their detriment. This resulted in the approval of about $239 

million in relief to about 10,900 borrowers.

• Reaching decisions on borrower defense applications subject to a settlement agreement 

entered in November 2022. As of August 2023, nearly 12,000 relief decisions were 

made and more than 2,000 revise and resubmit notices were issued.

• Instituting a secret shopper program as an additional tool to monitor schools’ Title 

IV compliance. FSA stated that secret shoppers will evaluate recruitment, enrollment, 

financial aid, and institutions’ other practices to help identify potentially deceptive or 

predatory practices used to recruit and enroll students.

• Creating a website and email address for knowledgeable sources to submit tips directly 

to the Enforcement Office about potential violations of the laws and regulations 

governing the Federal student aid programs. 

• Issuing at least five enforcement bulletins to help ensure a consistent understanding 

among participating institutions. The bulletins served to raised awareness of potential 

violations of the HEA, the Office of Enforcement’s role in reviewing allegations, 

and corrective measures that could be applied. The subject matter of the bulletins 

included allegations of misrepresentations by school personnel in the recruitment 

of military-connected students, the Office of Enforcement’s use of secret shoppers 

to evaluate school’s compliance with Title IV regulations, and how the attempted 

use of nondisclosure agreements to prevent school personnel from communicating 

with the Department on its administration of the Title IV programs violates 

cooperation requirements.

FSA stated that, from October 2022 until late August 2023, its Administrative Actions 

and Appeals Services Group completed 43 administrative actions. This included 18 fine 

actions, 7 recertification denials, 4 debarments, 3 suspension actions, and 2 program 

participation agreement revocations.

FSA also made substantial improvements to borrower defense loan discharge website 

in response to user feedback. The changes improved the overall layout and provided 
FY 2023 AGENCY FINANCIAL REPORT 176 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

critical information on the misconduct that qualifies for debt relief, what borrowers 

should include in their claims, and what happens after a borrower submits an application 

for relief.

Operational Capacity

FSA described goals relating to its workforce; data analytics and information management; 

and systems, structure, and operations. FSA also planned improve its hiring processes 

to better recruit needed talent, strategically align skills to organizational mission 

requirements, and analyze human capital systems and processes.

What the Department Needs to Do

As the Department implements USDS this year, it will be important that it ensures it 

realizes and can demonstrate improvement to customer service, borrower outcomes, 

cybersecurity, and servicer performance. It will also be important for the Department 

to continue its efforts to improve its monitoring, oversight, and technical assistance 

of participants in the Title IV programs and to track and report on the results of 

those efforts. 
FY 2023 AGENCY FINANCIAL REPORT 177 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Management Challenge 4—Oversight and Monitoring 

of 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 a wide range of eligible recipients, including LEAs, SEAs, IHEs, 

individuals, nonprofits, and other organizations and monitoring their progress in meeting 

program objectives. The Department also ensures that programs are administered fairly 

and that grants are executed in conformance with both authorizing statutes and laws 

prohibiting discrimination in federally funded activities, collects data and conducts 

research on education, and helps 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.

FY 2024 Assessment: Level 3—Established Progress

For FY 2024 we assessed the Department’s 

actions in response to this challenge at Level 3, 

or “Established Progress.” Overall, the 

Department developed plans to address this 

Management Challenge that included 

improving its training and technical assistance, 

supporting equitable access, broadening 

consolidated monitoring efforts, and incorporating lessons learned into planning 

programmatic monitoring activities for FY 2024. Collectively these activities have the 

potential to mitigate this challenge. However, the Department did not provide significant 

information that clearly identified outcomes of these initiatives.

Why This Is a Challenge

The Department administers more than 100 grant programs that annually serve about 55 

million elementary and secondary students attending 98,000 public schools and 30,000 

private schools, as well as about 9 million postsecondary students attending 5,500 colleges 

and universities. Many of these programs also serve other types of students, extending 

from early learning through adult education. 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 that the Department administers is Title I, Part A, which 

provides supplemental education funding, especially in communities of concentrated 

poverty, for local programs that provide educational opportunities and additional 

academic support to help students in schools with high rates of poverty meet challenging 

state academic standards. In FY 2023, this program provided about $18.3 billion to 

serve an estimated 25 million students in nearly 90 percent of school districts and nearly 

60 percent of all public schools. Another key program is Individuals with Disabilities 

Education Act, Part B Grants to states, which provided more than $14.2 billion in 

FY 2023 to help states and school districts meet the special educational needs of an 

estimated 7.5 million students with disabilities.

Effective monitoring and oversight are essential to ensure that grantees meet grant 

requirements and achieve program goals and objectives. Our recent audits related to 
FY 2023 AGENCY FINANCIAL REPORT 178 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

several grant programs identified weaknesses in grantee oversight and monitoring that 

included concerns with SEA and LEA controls and Department oversight processes.

Audit, Inspection and Quick Response Activities

Our recent reports related to 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. A summary of major audit, inspection, and 

quick response activity within each area is shown in Table 11. 

Table 11. OIG’s Recent Reports Relating to the Department’s Oversight and Monitoring of Federal Education 

Grant Programs

Activities Reviewed Summary of Major Audit, Inspection, and Quick Response Activity

Charter Schools We completed a series of work on charter school programs. We found that the Department designed processes to 

provide reasonable assurance that grantees reported reliable information and spent grant funds only on allowable 

activities and in accordance with program requirements, but the Charter School Program office did not always implement 

those processes as designed. We also found that the Department did not track and report on whether charter schools 

opened by grant recipients and expanded with Federal funds remained open after the grant performance period ended. 

Finally, we found that grant recipients did not always open or expand the number of charter schools committed to in their 

approved grant applications.

Disaster Recovery We found that the Department designed policies and procedures that should have provided reasonable assurance 

that it awarded and monitored disaster recovery 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 has provided inadequate oversight of grantee performance and funds awarded under 

the Student Support and Academic Enrichment program. Specifically, we found that the Department has conducted only 

limited formal monitoring activities; has not ensured that SEAs are meeting all reporting requirements; and did not always 

develop, finalize, and implement monitoring plans to monitor grantees’ performance and use of funds. 

Our work on state plans required under the Every Student Succeeds Act 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. 

Individuals with Disabilities 

Education Act

We found that the Office of Special Education Programs provided general guidance and technical assistance for 

SEAs, to assist them in implementing significant disproportionality regulatory requirements. It also performed ongoing 

monitoring of SEAs’ compliance with Individuals with Disabilities Education Act requirements and program results. 

However, it had not performed a risk assessment to determine if the change in the regulation affects the control activities 

that it has established for monitoring significant disproportionality, particularly regarding data reliability.

Our recent reports relating to grantee implementation of Federal education grant 

programs identified weaknesses that 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 12. 
FY 2023 AGENCY FINANCIAL REPORT 179 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Table 12. OIG’s Recent Reports Relating to Grantee Implementation of Federal Education Grant Programs

Activities Reviewed Summary of Major Audit, Inspection, and Quick Response Activity

Charter Schools We issued two audit reports that found both nonprofit charter management organizations reviewed 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 issued 11 reports relating to disaster recovery funding authorized under the Bipartisan Budget Act of 2018. 

Our work at SEAs relating to internal controls over the Immediate Aid to Restart School Operations (Restart) program 

identified weaknesses in programmatic monitoring processes, processes to assess fraud risks, internal controls over 

procurement, and segregation of duties. Our work relating to SEAs relating to Restart allocations and uses of funds 

also identified instances of noncompliance that included charging unallowable personnel expenditures to the program. 

We also identified opportunities to improve recordkeeping and processes for ensuring that LEAs use program funds for 

allowable and intended purposes.

Our work at SEAs relating to the Temporary Emergency Impact Aid for Displaced Students (EIA) program found that all 

four SEAs reviewed 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 three SEAs did not ensure that LEAs used EIA 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 program funds. We found that the SEA may have 

charged up to $1.3 million in payroll costs to the EIA program for employees who were not employed by the SEA during 

the accrual periods applicable to the payments.

We also found that a postsecondary school used approximately $1.8 million in Emergency Assistance to Institutions of 

Higher Education program funds for lost tuition revenue and to purchase certain equipment that was not allowable in 

accordance with Federal requirements. 

Individuals with Disabilities 

Education Act

We 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 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.

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 13.

Table 13. OIG’s Recent Investigative Activity Relating to Federal Education Grant Programs

Area Related Investigative Activity

LEA Officials OIG investigated a former school district bookkeeper who misapplied school income to the benefit of herself 

and relatives. 

Grantees OIG Investigations identified a nonprofit executive who diverted funds intended for youth scholarships by using program 

credit and bank cards to make personal purchases for himself and relatives. 

Another OIG investigation identified a Chief Executive Officer of a nonprofit organization that provides educational and 

anti-poverty programs paid for unauthorized expenses and misapplied funds towards a relative’s tutoring expenses.

Charter School Officials An OIG investigation identified a charter school owner who personally enriched herself by making payments from a 

school account to an educational company she owned to fund personal purchases. 

Ongoing and Planned Work

Ongoing work in this area includes reviews of a SEA’s use of Restart program funds; 

selected SEAs’ implementation of their statewide accountability systems; selected SEAs’ 

oversight of Prevention and Intervention Programs for Children and Youth who are 

Neglected, Delinquent, or At-Risk; the Rehabilitation Services Administration’s oversight 

of the State Vocational Rehabilitation Services program; and the Department’s approval of 

alternate assessment waivers and extensions. 
FY 2023 AGENCY FINANCIAL REPORT 180 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Planned projects for FY 2024 include the Department’s oversight of the School-Based 

Mental Health Services program, the Department’s oversight of the Stronger Connections 

Grant program, the Department’s Risk Assessment and Monitoring of the Student Service 

Programs, and Department’s oversight of statewide accountability systems. 

Progress in Meeting the Challenge

We assessed the Department’s actions in response to this challenge at Level 3, or “Established 

Progress.” Overall, the Department developed plans to address this Management Challenge 

that included improving its training and technical assistance, supporting equitable access, 

broadening consolidated monitoring efforts, and incorporating lessons learned into planning 

programmatic monitoring activities for FY 2024. Collectively, these activities have the 

potential to mitigate this challenge. However, the Department did not provide significant 

information that clearly identified outcomes of these initiatives.

Training and Technical Assistance

As noted in Management Challenge 1, the Department’s Grants Management Policy 

Division regularly communicates on subject areas and training opportunities that can 

help build the Department’s internal capacity to oversee grants. This included “Table 

Talk” sessions, “Monitoring Moments” courses, “Grant Risk Management Meetings,” 

and other targeted training subject matter. In its response to this challenge for FY 2023, 

the Department stressed plans to provide data driven training and technical assistance for 

Department staff and grantees. The Department stated that its overall expectations were 

to continue to build capacity and knowledge sharing on monitoring within the grants 

administration community internally and externally. 

Supporting Equitable Access 

The Department noted that it updated the General Education Provisions Act, Section 427 

form for state plans and applications, which is used by grant applicants to describe the steps 

that they propose to take to ensure equitable access to and participation in their Federal grant 

project. The Department stated that the updated form would improve its ability to identify 

and address barriers to equitable access. It specifically expected to improve state-administered 

grantees’ oversight of subgrantees’ compliance with applicable requirements, reduce barriers to 

participation by beneficiaries, and learn how subgrantees are addressing barriers. 

Consolidated Monitoring

OESE stated that it has broadened its consolidated monitoring efforts for formula grants, 

expanded the number of states to be monitored from two to four, and begun transitioning 

from virtual to on-site reviews. 

Incorporating Lessons Learned

The Department stated that given operational constraints, it is important to learn from 

grantees and identify both what is working and what is not working with respect to 

the Department’s programs. It further stated that it has begun to identify key topics for 

discussion with program offices and expects to support those offices in an effort to include 

relevant topics in programmatic monitoring for FY 2024.

What the Department Needs to Do

It will be important for the Department to develop measures to track the outcomes of its 

various efforts to improve monitoring and oversight. 
FY 2023 AGENCY FINANCIAL REPORT 181 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Management Challenge 5—Data Quality and Reporting 

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 13,000 public 

school districts and 99,000 public schools; about 5,700 postsecondary institutions, 

including colleges, universities, and institutions offering technical and vocational 

education at or beyond the high school level; and surveys of private schools, public 

elementary and secondary schools, students, teachers, and principals. 

FY 2024 Assessment: Level 4—Significant Progress

For FY 2024 we assessed the Department’s 

actions in response to this challenge at Level 4, 

or “Significant Progress.” Overall, the 

Department identified root causes of the 

challenge and developed responsive activities 

through the design and implementation of data 

quality-related policies, training, and strategies. 

We found that this represented a comprehensive plan and that the planned activities have 

the potential to mitigate this challenge. The Department has partially implemented 

aspects of the plan and demonstrated some results that showed a positive effect on 

improving the quality of key data.

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. 

Audits, Inspections, and Quick Response Activities 

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 14.
FY 2023 AGENCY FINANCIAL REPORT 182 U.S. DEPARTMENT OF EDUCATION

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Table 14. OIG’s Recent Data Quality-Related Reports

Area Reviewed Summary of Major Audit, Inspection, and Quick Response Activity

90/10 We found that FSA had several processes for overseeing proprietary institutions’ compliance with 90/10 revenue 

requirements. However, we found the Department’s reports to Congress were not always timely and complete and the 

Department did not always publish 90/10 revenue information as required to best reach the public. 

Charter Schools We found that the Charter School Program office’s processes did not result in grant recipients reporting clear, 

reliable, and timely information. Their processes also did not result in the Charter School Program office receiving all 

the information needed to assess grant recipients’ performance or evaluate the overall effectiveness of the Charter 

School Program.

We found that two grant recipients did not include complete and accurate information for all performance measures on 

which they were required to report in their annual performance reports. We also found that both grant recipients did not 

always retain records that supported the performance measures that they reported to the Department. 

Clery Act We found that two postsecondary institutions did not have effective controls to ensure they reported complete and 

accurate Clery Act crime statistics. We concluded that both schools’ 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.

Digital Accountability 

and Transparency Act

(DATA Act) 

An independent public accountant, with OIG oversight, determined that the Department submitted data of excellent 

quality based on guidance provided by the Council of Inspectors General on Integrity and Efficiency. It also determined 

that the Department implemented and used the governmentwide financial data standards established under the DATA 

Act. However, it found that Department did not submit certain data completely, accurately, or timely, and identified 

internal control deficiencies over the Department’s DATA Act submissions.

Disaster Recovery We found that four 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 when students who did not change schools 

or did not transfer from a disaster area were included in displaced student counts, students withdrew from the 

school prior to the disaster or enrolled after the reporting date, and displaced student counts were not supported by 

adequate documentation.

Experimental Sites Initiative We found that the Department is not complying with reporting requirements and had not published a comprehensive 

Experimental Sites Initiative report since the 2010–2011 award year report. This created a situation where the success 

or failure of the experiments conducted under the ESI has not been reported to those in Congress and the Department 

who could use the information to enhance higher education policy to better serve students.

Pandemic Relief We found that grantees and subgrantees were not consistently reporting expenditures in the Federal Audit 

Clearinghouse. This included instances where grantees and subgrantees did not identify subprograms that their 

expenditures were awarded under. We also identified widespread variations of information used by other grantees and 

subgrantees to identify subprograms that their expenditures were awarded under. 

In our work relating to HEER reporting requirements, we were unable to locate Institutional portion reports on the 

websites for 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 selected SEAs’ implementation of their statewide 

accountability systems, selected SEAs’ oversight of EANS funds, and SEAs’ oversight 

of spending and educational outcomes of the Prevention and Intervention Program for 

Children and Youth Who Are Neglected, Delinquent, or At Risk. 

Our planned work for FY 2024 includes FSA’s oversight of section 117 foreign gift and 

contract reporting requirements and the Department’s oversight of Stronger Connections 

Grant reporting. Additional work will be performed based on the results of ongoing 

reviews and programmatic and grantee related risk assessments.

Progress in Meeting the Challenge

We assessed the Department’s actions in response to this challenge at Level 4, or 

“Significant Progress.” Overall, the Department identified root causes of the challenge and 
FY 2023 AGENCY FINANCIAL REPORT 183 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

identified responsive activities through the design and implementation of data qualityrelated policies, training, and strategies. We found that this represented a comprehensive 

plan and that the planned activities have the potential to mitigate this challenge. The 

Department has partially implemented aspects of the plan and demonstrated some results 

that showed a positive effect on improving the quality of key data. 

Data Quality Policies

The Department’s priority corrective actions included updating and reissuing its 

Information Quality Guidelines in FY 2023. We reviewed the Information Quality 

Guidelines and found it requires significant activities in advance of data collection, 

including preparation of a data quality plan. The Information Quality Guidelines further 

require that plans address major aspects of data quality, such as utility, objectivity, and 

integrity. The data quality plans are required to identify primary uses and requirements 

for data collection, specify key data quality measures and targets, and address security 

and privacy controls. The Department has published a Data Quality Plan Template to 

help ensure that the quality of a data asset is planned for, documented, and addressed 

throughout the data management lifecycle. We reviewed the template and found it 

included fields that required respondents to identify aspects including the purpose of 

the data; data quality dimensions, measures, and targets; how related data standards are 

documented; and data quality assessments and timelines.

The Department prepared additional guidance to assist its offices in data quality efforts. 

This included a Data Quality Playbook which outlines strategies to consider in planning 

data collections associated with grant programs’ processes. We reviewed the document and 

found that it included specific elements relating to understanding limitations, identifying 

standards, providing technical assistance, and addressing data quality errors. We also 

noted the Department issued a Data Quality Planning and Implementation Checklist. We 

reviewed that document and found it included reflection questions on areas such as data 

collection, data quality, and internal data control and governance. 

The Department stated that it has applied this framework to data quality in its 2023 data 

collection for the Education Stabilization Fund (ESF) and plans to apply this to new data 

collections starting in 2024 when it implements its Data Quality Policy. The Department 

also reported outcomes that showed its ESF data collection improved. According to the 

Department, the number of ESSER-related business rules (which identify systematic 

errors and warnings to prevent incorrect or incomplete data reporting by grantees) was 

increased by 25 percent. Also, the Department stated that a total of 283 data quality issues 

were flagged across all states, compared to 183 data quality issues in the prior year.

Data Quality Training, Technical Assistance, and Shared Resources 

The Department has also developed training on data quality and has plans to train grants 

personnel and eventually all staff on data quality practices. The Department specifically 

created training for its grant staff that is accessible through an online portal with subject 

matter that includes the Data Quality Playbook, Data Quality Projects, Data Quality 

Management, and the Data Quality Template. The Department’s plans also included 

developing basic-level training for all Department staff that would provide information 

on data quality concepts, principles, tools, techniques, and best practices. Collectively, the 

training would serve to enhance operational capabilities and increase knowledge in this 

critical area.

The Department stated that it initiated activities in FY 2023 to provide data quality 

technical assistance that included consultations on the development of data quality plans 
FY 2023 AGENCY FINANCIAL REPORT 184 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

and other support as needed. The Department also planned to develop rubrics that could 

be applied to assess data quality plans, provide a feedback mechanism on opportunities 

for improvement, and identify best practices that could be shared as a resource across the 

Department. Finally, the Department planned to develop and maintain additional data 

quality responses that will be accessible through a shared location. 

Data Quality Strategies

The Department described additional data quality strategies that included updating 

collection forms; developing reporting templates, data dictionaries, and business rule 

guides; dedicating time for grantee contact to address data quality questions; and 

operating a help desk with contractor support. Successful implementation of these items 

would provide an additional opportunity to improve the quality of collected data. 

Measurement and Desired Outcomes

In developing and implementing the plan, the Department demonstrated application 

of risk management principles and designed internal controls that should ensure the 

sustainability of its actions. The Department has plans to continue to implement its 

changes in FY 2024. The Department stated that outcomes would be assessed, in part, 

against goals relating to the Department’s Fiscal Years 2022–2026 Strategic Plan. It also 

identified additional desired outcomes that included reduction in the number and scope 

of data quality-related audit findings, more efficient use of resources in supporting data 

collection, and increased confidence in and use of data to inform decision making. 

What the Department Needs to Do

It will be important for the Department to fully implement its enterprise-wide initiatives 

and to demonstrate results of these efforts. 
FY 2023 AGENCY FINANCIAL REPORT 185 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Management Challenge 6—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) repealed and replaced several 

improper payments statutes and consolidated those laws’ requirements. PIIA requires 

Federal agencies to reduce improper payments and to report annually on their efforts. 

PIIA also requires each agency’s Inspector General to determine the agency’s compliance 

with the statute for each fiscal year. 

FY 2024 Assessment: Level 3—Established Progress

For FY 2024, we assessed the Department’s 

actions in response to this challenge at Level 3, 

or “Established Progress.” Overall, the 

Department has developed a plan with the 

potential to mitigate major elements of this 

challenge. The plan included activities intended 

to help develop reliable estimates and reduce its 

estimates to less than 10 percent for each program where a rate is published and issuance 

of guidance intended to improve its payment integrity efforts. However, the Department 

did not provide significant information that clearly identified outcomes of its initiatives.

Why This Is a Challenge

The Department must ensure that the billions of dollars entrusted to it reach the 

intended recipients. In FY 2022, the Department identified the Federal Pell grant, Direct 

Loan, Title I, ESF, and Special Education Grants to States for Education of Children 

with Disabilities (Special Education) programs as being susceptible to significant 

improper payments.

We found that the Department published unreliable improper payment estimates for 

the Title I, Special Education, ESF, Pell, and Direct Loan programs for FY 2022. It is 

important for the Department to develop reliable estimates so that it can identify the root 

causes and take actions to prevent and reduce improper payments.

Audit Activity

The OIG’s review of the Department’s compliance with improper payment reporting 

requirements for FY 2022 found that the Department did not comply with PIIA because 

it did not meet one of the six compliance requirements. Specifically, the Department 

reported improper payment estimates for the Title I, Special Education, and ESF 

programs that exceeded 10 percent. As shown in Table 15, our recent improper payment 

audits identified opportunities for improvement in multiple areas.
FY 2023 AGENCY FINANCIAL REPORT 186 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Table 15. Results of Recent OIG Statutorily Required Improper Payment Audits

FY of 

Department’s 

Reporting

Complied with 

Reporting 

Requirements

Identified Concerns

2022 No The Department did not comply with the PIIA because it did not meet one of its six compliance requirements. 

Specifically, the Department reported improper payment and unknown payment estimates for the Title I, Special 

Education, and ESF programs that exceeded 10 percent. The Department also published unreliable improper 

payment and unknown payment estimates for the Title I, Special Education, ESF, Pell, and Direct Loan programs. 

Specifically, for the Title I and Special Education programs, the improper payment and unknown payment 

estimates were based on inaccurate sampling populations. Further, for the Title I, Special Education, and 

ESF programs, the Department’s testing results were inaccurate. Finally, the improper payment sampling and 

estimation plan for the Pell and Direct Loan programs included nonrandom student-level sampling.

2021 No The Department did not comply with the PIIA because it did not meet one of its six compliance requirements. 

Specifically, the Department reported improper payment and unknown payment estimates for the Title I program 

that exceeded 10 percent. The Department also published unreliable improper payment estimates for the Title 

I, Pell, and Direct Loan programs. We found that the Department’s improper payment sampling and estimation 

plan for the Title I program was not adequate for SEAs that use certain advance payment processes. We also 

found that the Department’s sampling and estimation plans for the Pell and Direct Loan programs were unreliable 

because they included nonrandom student-level sampling. 

2020 No The Department did not comply with the 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 and reported improper payment rates that exceed 10 percent for the EIA and Restart programs. The 

Department also published unreliable improper payment estimates for the Pell, Direct Loan, EIA, Restart, and 

Emergency Assistance to Institutions of Higher Education programs. 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 needed 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. 

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. 

Progress in Meeting the Challenge

We assessed the Department’s actions in response to this challenge at Level 3, or 

“Established Progress.” Overall, the Department has developed a plan with the potential 

to mitigate major elements of this challenge. The plan included activities intended to help 

develop reliable estimates and reduce its estimates to less than 10 percent for each program 

where a rate is published and the issuance of guidance intended to improve its payment 

integrity efforts. However, the Department did not provide significant information that 

clearly identified outcomes of its initiatives.

Direct Loan and Pell Programs

The Department’s plans included strategies to help produce appropriate estimates in 

accordance with PIIA requirements. This specifically focused on activities that would 

resolve differences between the OIG and FSA regarding the methodology used to develop 

improper payment estimates for the Direct Loan and Pell programs. Specifically, the 

Department noted that differences continue to exist between the OIG’s conclusion that 

random sampling is required for a statistically valid sample for use in improper payment 

estimates and FSA statisticians’ conclusion that sampling of Single Audit Act compliance 

audits of public and private, nonprofit institutions nationwide, which do not always use 

random sampling, provide quality data for statistically valid results. 
FY 2023 AGENCY FINANCIAL REPORT 187 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

In response, the Department noted that PIIA provides OMB the authority to approve 

agencies’ improper payment estimation methodologies as appropriate given program 

characteristics and resources. The Department stated that it is seeking OMB approval to 

have its methodology approved as statistically valid. 

The Department also stated that it continues to seek approval for changes to Single 

Audit Act guidance that would ensure that statistically valid data are provided by nonFederal auditors to support the Department’s estimates. Either approach, if approved and 

effectively implemented, could address the reliability issues with the Direct Loan and Pell 

program improper payment estimates that our recent reports have identified. 

Title I, Special Education, and ESF Programs 

The Department’s plans also included strategies to help ensure it can develop reliable 

estimates for its Title I, Special Education, and ESF programs. The Department stated 

that it initiated efforts to address weaknesses identified in previous audits. This would 

help ensure timely reporting of information provided by grantees that the Department 

uses in the development of improper payment estimates. The Department specifically 

stated that it categorized a large number and volume of payment samples as unknown 

payments because of difficulties in obtaining appropriate documentation from grantees. 

The Department further noted that this was a significant reason why it reported improper 

payment estimates exceeding 10 percent for each of these three programs and for the 

Department’s overall noncompliance with PIIA. The Department stated that it is revising 

processes to provide more time for all grantees to respond to documentation requests, 

considering different approaches to test payments for a large grantee because of its 

advanced payment processes, providing technical assistance, and consulting with OMB on 

categorizing certain sampled payments. Collectively, these activities have the potential to 

mitigate this challenge. 

Successful implementation of the actions identified for each of these programs, along 

with the effective execution of its sampling and estimation plans, could address this 

management challenge. We will audit the Department’s compliance with PIIA in FY 

2024, to include an assessment of the effectiveness and outcomes of its corrective actions. 

We note that the Department is repeating its previously unsuccessful attempts to address 

sampling issues with its Direct Loan and Pell grant programs. Should these efforts not 

succeed, we encourage the Department to consider other alternatives to addressing our 

findings as laid out in the 2022 PIIA report.

Payment Integrity Policy 

The Department issued a new directive on payment integrity during FY 2023. We 

reviewed the directive and found it provides a framework that can help improve payment 

integrity in the Department’s programs and administrative payment activities if effectively 

implemented. The directive specifically identified pre-payment controls that can help 

prevent improper payments from occurring. This included activities to help ensure that 

potential grantees understand critical payment integrity elements such as allowable use 

of funds, internal controls, payment documentation requirements, financial and cash 

management, cost principles, and traceability. Other identified pre-payment controls 

focused on Department staff using available Federal information systems to verify 

eligibility of a vendor, grantee, loan recipient, or beneficiary to receive Federal payments. 

The directive also identified potentially beneficial during-payment and post-payment 

control activities. This included monitoring payments against approved budgets, applying 

special terms and conditions, and reviewing grant management system reports relating to 
FY 2023 AGENCY FINANCIAL REPORT 188 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

large available balances and excessive drawdowns. The directive also required Department 

offices to establish and maintain effective internal controls over payments. Finally, it 

required development of a structured and systematic approach to recognize areas where 

the potential for improper payments may arise and to subsequently address the risk, 

as appropriate.

What the Department Needs to Do 

Successful implementation of the Department’s planned actions should address this 

management challenge. The Department stated that because of its efforts the improper 

payment rate estimates for the Title I, Special Education, and ESF programs will 

significantly improve for FY23 reporting. We will audit the Department’s Improper 

Payment initiatives, as required, again in 2024.
FY 2023 AGENCY FINANCIAL REPORT 189 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Management Challenge 7—Information Technology Security

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. 

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. 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.

FY 2024 Assessment: Level 4—Significant Progress

We assessed the Department’s actions in 

response to this challenge at Level 4, or 

“Significant Progress.” The Department’s 

actions and plans included activities intended to 

improve IT security and expand related 

operational capabilities. This framework 

establishes a comprehensive plan that may 

effectively mitigate key elements of the challenge. Implementation is ongoing and partial 

results have been demonstrated as shown in the results of our FISMA work.

Why This Is a Challenge

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). According to information 

on ITDashboard.gov, the Department requested more than $1 billion for FY 2024 

information technology (IT) related spending. 

Considering increased occurrences of high-profile data breaches (public and private 

sector), the importance 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 and 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. 
FY 2023 AGENCY FINANCIAL REPORT 190 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Audits and Inspections Involving IT Security

Recent FISMA work has been performed under changing requirements. Specifically, the 

FY 2023 review required an assessment of 20 core and 20 supplemental reporting metrics, 

the FY 2022 review required an assessment of 20 core metrics, and the FY 2021 review 

required an assessment of 66 metrics. 

As shown in Table 16, our recent reports, performed by a contractor with OIG oversight 

or by the OIG with contractor assistance, noted that the Department and FSA have made 

progress in strengthening their information security programs. Our FY 2021 FISMA 

review concluded that the Department and FSA were not effective10 in any of the nine 

FISMA metric domains. However, in FY 2022, based on the revised metric scoring, 

the Department and FSA were found to be effective in five of the nine FISMA metric 

domains. In FY 2023, again based on the revised metric scoring, the Department and FSA 

were found to be effective in eight of the nine FISMA metric domains.

Table 16. Results of FISMA Audits and Inspections—FY 2021–2023 Metric Domain Maturity Levels

Security Function and Metric Domain FY 2021 Maturity Level FY 2022 Maturity Level FY 2023 Maturity Level

Identify: Risk Management Level 3 

Consistently Implemented

Level 3 

Consistently Implemented

Level 4 

Managed and Measurable

Identify: Supply Chain Risk Management Level 2 

Defined

Level 3 

Consistently Implemented

Level 4 

Managed and Measurable

Protect: Configuration Management Level 3 

Consistently Implemented

Level 4 

Managed and Measurable

Level 4 

Managed and Measurable

Protect: Identity and Access Management Level 2 

Defined

Level 3 

Consistently Implemented

Level 3 

Consistently Implemented

Protect: Data Protection and Privacy Level 2 

Defined

Level 3 

Consistently Implemented

Level 4 

Managed and Measurable

Protect: Security Training Level 3 

Consistently Implemented

Level 4 

Managed and Measurable

Level 4 

Managed and Measurable

Detect: Information Security 

Continuous Monitoring

Level 3 

Consistently Implemented

Level 4 

Managed and Measurable

Level 4 

Managed and Measurable

Respond: Incident Response Level 3 

Consistently Implemented

Level 4 

Managed and Measurable

Level 4 

Managed and Measurable

Recover: Contingency Planning Level 3 

Consistently Implemented

Level 4 

Managed and Measurable

Level 4 

Managed and Measurable

10 FISMA maturity ratings are defined as Level 1: Ad-Hoc, Level 2: Defined, Level 3: Consistently Implemented, Level 4: 

Managed and Measurable, and Level 5: Optimized. A maturity rating of level 3 or below is considered not effective.
FY 2023 AGENCY FINANCIAL REPORT 191 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

However, as shown in Table 17, our recent FISMA audits and inspection included a 

range of findings across the cybersecurity framework security functions and their related 

metric domains.

Table 17. Results of OIG FISMA Audits and Inspections—Cybersecurity Framework Security Functions and Metric Domains 

with New Findings

Security Function and Metric Domain FY 2021 FY 2022 FY 2023

Identify: Risk Management Audit Finding - Audit Finding

Identify: Supply Chain Risk Management Audit Finding - -

Protect: Configuration Management Audit Finding Inspection Finding Audit Finding

Protect: Identity and Access Management Audit Finding Inspection Finding Audit Finding

Protect: Data Protection and Privacy Audit Finding Inspection Finding Audit Finding

Protect: Security Training Audit Finding - -

Detect: Information Security Continuous Monitoring Audit Finding - Audit Finding

Respond: Incident Response Audit Finding Inspection Finding Audit Finding

Recover: Contingency Planning Audit Finding - -

The Department’s overall IT security program and practices were assessed to be effective 

in FY 2022 and FY 2023 based on review of the required FISMA metrics. However, 

recommendations were made in several areas where the Department and FSA could 

strengthen their controls. 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. In addition, we note that the Department’s 

technology environment is constantly evolving, bringing new threats and cybersecurity 

requirements. As technology environments evolve, it is important that the Department 

continues to ensure that it implements the respective security controls to protect its 

information and resources. 

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 2022 report, the independent public accountant noted 

that FSA management demonstrated progress in 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. 

The independent public accountant concluded that 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. 

Ongoing and Planned Work

Planned projects in this area will continue to 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. Planned projects for FY 2024 include the 
FY 2023 AGENCY FINANCIAL REPORT 192 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Department’s oversight and monitoring of IT inventory and the Department’s oversight 

and management of its websites.

Progress in Meeting the Challenge

We assessed the Department’s actions in response to this challenge at Level 4, or 

“Significant Progress.” The Department’s actions and plans included activities intended to 

improve IT security and expand related operational capabilities. Overall, the framework 

establishes a comprehensive plan that may effectively mitigate key elements of the 

challenge. Implementation is ongoing and partial results have been demonstrated as 

shown in the results of our FISMA work.

Improving IT Security

The Department’s Fiscal Years 2022–2026 Strategic Plan includes an IT-related objective 

and identifies implementation strategies that include strengthening its management of 

value-added technologies and evolving its cybersecurity capabilities. The Department 

also developed an Information Resources Management Strategic Plan FY 2022–2026 that 

established how the Department will use information management resources to support 

its mission. This includes goals of strengthening the Department’s ability to protect and 

safeguard data housed within its systems, optimizing its risk posture, and maturing its 

ability to identify, protect, detect, respond, and recover from cybersecurity threats. This 

plan includes objectives relating to enhancing capacity to manage cybersecurity risk, 

implementing enterprise controls to reduce risk, and maturing the Department’s Security 

Operations Centers.

The Department identified implementation of a full Zero-Trust Architecture as a priority 

corrective action in response to this challenge. The Department stated it will adopt 

modern security best practices through this objective, including improving multi-factor 

authentication and encryption for data at rest and in transit. The Department further 

stated that this program will improve its security infrastructure, increase visibility across 

the security environment, and enhance data protection. The Department reported 

progress that included onboarding a Zero-Trust Architecture program manager and 

developing a project schedule for full implementation by the end of FY 2024.

The Department continues to make progress in fully implementing its enterprise 

identity, credential, and access management program (ICAM). For instance, it instituted 

multifactor authentication deployment across the Department by integrating personal 

identity verification validation for its personnel that resulted in improved deployment 

compliance. The Department also continues to modernize and enhance its Enterprise 

ICAM solution to align with OMB Memorandum M-22-09, Moving the U.S. Government 

Toward Zero Trust Cybersecurity Principles, by integrating with the ED Cyber Data 

Lake to develop a centralized identity dashboard to improve transparency into identity 

related metrics. In addition, Enterprise ICAM has integrated Login.gov authentication 

services for external users (i.e., public) to leverage a single secure sign-on authenticator to 

Department applications.

The Department reported additional plans to establish an IT Asset Management program, 

begin a transition to a new IT system hosting contract with increased security capabilities, 

and expand the Department’s Continuous Diagnostics and Mitigation capabilities. 

The Department also reported that it completed multiple initiatives in response to recent 

FISMA work. This included amending the vulnerability and patch management process 

to facilitate more timely resolution; establishing additional controls to update, remove, or 
FY 2023 AGENCY FINANCIAL REPORT 193 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

replace obsolete or unsupported solutions and encryption protocols for operating systems; 

implementing a review process to improve management of the active directory user 

accounts and access termination; and enhancing oversight of privileged accounts. 

Expanding Operational Capacity 

The Department identified establishing and protecting dedicated lines of funding and 

personnel for the enterprise cyber and IT program as a second priority corrective action 

in response to this challenge. The Department stated that this effort would address the 

inadequate funding for IT and cybersecurity along with the staffing cuts, lack of adequate 

recruitment and retention, and lack of incentive pay flexibilities that hamper its efforts 

to compete with the Federal enterprise and private sector for cyber workforce. The Office 

of the Chief Information Officer stated that it was coordinating with the Department’s 

budget services on this effort. 

What the Department Needs to Do

As the Department continues its efforts to develop and implement an effective system 

of IT security controls, it will be important that it continues to focus on the timely and 

successful implementation of corrective actions in response to our audit work. It will 

also be important for the Department to continue its efforts to advance its Zero Trust 

Architecture capabilities, as well as fully implement its identity, credential, and access 

management strategy.
FY 2023 AGENCY FINANCIAL REPORT 194 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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. 
FY 2023 AGENCY FINANCIAL REPORT 195 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

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 100 and the Department’s management assurances on 

page 41.

Summary of Financial Statement Audit

Audit Opinion: Disclaimer of Opinion

Restatement: No

Material Weaknesses Beginning 

Balance New Resolved Consolidated Ending Balance

Total Material Weaknesses 1 1 0 1 1

Summary of Management Assurances

Effectiveness of Internal Control Over Financial Reporting—Federal Managers’ Financial Integrity Act 

(FMFIA) 2

Statement of Assurance: Modified

Material Weaknesses Beginning 

Balance New Resolved Consolidated Reassessed Ending Balance

Total Material 

Weaknesses 0 1 0 0 0 1

The Department had 1 material weakness in the design and 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: Modified

Nonconformances Beginning 

Balance New Resolved Consolidated Reassessed Ending Balance

Total Nonconformances 0 2 0 0 0 2

Compliance with Federal Financial Management Improvement Act of 1996 (FFMIA)

Agency Auditor

1. System Requirements Lack of compliance noted Lack of compliance noted

2. Federal Accounting Standards Lack of compliance noted Lack of compliance noted

3. U.S. Standard General Ledger at Transaction Level No lack of compliance noted No lack of compliance noted
FY 2023 AGENCY FINANCIAL REPORT 196 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Payment Integrity Information 

Act Reporting

All program outlays can be categorized as 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 payments to 

ensure that the billions of dollars in federal funds it disburses annually are considered 

proper payments. 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. Low amounts 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 received 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 rely on 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 refine 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 sound financial stewardship to the American taxpayer.
FY 2023 AGENCY FINANCIAL REPORT 197 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Description of Risk-Susceptible and High-Priority Programs 

In FY 2023, the Federal Pell Grant, William D. Ford Federal Direct Loan, Title I, Part 

A, Education Stabilization Fund (ESF), Special Education Grants to States, and the 

Individuals with Disabilities Education Act (IDEA) programs continued to be designated 

as programs that are “susceptible to significant improper payments” (referred to as Phase 2 

per OMB Circular A-123, Appendix C guidance). The Federal Pell Grant program 

remains an OMB-designated high-priority program. The William D. Ford Federal Direct 

Loan program was considered a high-priority program during the year based on FY 2022 

reporting, but based on FY 2023 improper payment and unknown payment results 

described in this Payment Integrity reporting section, the Direct Loan program no longer 

meets the threshold and is not considered a high-priority program for FY 2023. 

The Department continues to place additional emphasis on ensuring payment integrity 

and minimizing 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.

Federal Pell Grant 

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. Grant 

funds can be disbursed directly to the school to be applied towards a student’s costs, 

directly to the student, or a combination of both. A student is eligible to receive a Pell 

Grant if the student meets the requirements of an eligible student under 34 Code of 

Federal Regulations (CFR) Part 668. Students may use their grants at any participating 

postsecondary institution as established by 34 CFR Part 690 and further updated by 

the Higher Education Reconciliation Act of 2005 (HERA) and the Higher Education 

Opportunity Act of 2008 (Public Law 110-315) (HEOA).

William D. Ford Federal Direct Loan 

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. A student is eligible to receive a 

Direct Loan if the student enrolls in a school that provides Direct Loans, and the student 

meets the requirements of an eligible student under 34 CFR Part 668. Eligible students 

may receive a Direct Loan in accordance with the annual and aggregate loan limits as 

established by 34 CFR Part 685.203 and further updated by HERA and HEOA.

Special Education Grants to States

The Special Education Grants to States, Individuals with Disabilities Education Act (IDEA) 

program provides formula grants to assist the 50 states, the District of Columbia, Puerto 

Rico, the Department of the Interior, Outlying Areas, and the Freely Associated States 

in meeting the excess costs of providing special education and related services to children 

with disabilities. To be eligible for funding, states must serve all children with disabilities 

between the ages of 3 through 21, except that they are not required to serve children aged 

3 through 5 or 18 through 21 years if services are inconsistent with state law or practice or 
FY 2023 AGENCY FINANCIAL REPORT 198 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

the order of any court. A state that does not provide a Free Appropriate Public Education 

(FAPE) to children with disabilities aged 3 through 5 cannot receive base payment funds 

attributable to this age group or any funds under the Preschool Grants program. Funds 

are allocated among states in accordance with a variety of factors, as outlined in the 

funding formula under section 611(d) of the IDEA.

Education Stabilization Fund

The Education Stabilization Fund (ESF) was established by the Coronavirus Aid, Relief, 

and Economic Security Act (CARES Act) in March 2020, with subsequent allocations to 

the Fund codified through the Coronavirus Response and Relief Supplemental Appropriations 

Act (CRRSA Act), and the American Rescue Plan Act (ARP Act). The ESF is an investment 

of more than $263 billion and is composed of relief funds that support state and 

institutional efforts to prevent, prepare for, and respond to the coronavirus impacts on 

our nation’s students. Programs created under the ESF investment include: Education 

Stabilization Fund Discretionary Grants, Governor’s Emergency Education Relief Fund, 

Elementary and Secondary School Emergency Relief Fund, Homeless Children and 

Youth, Emergency Assistance to Non-Public School, Outlying Areas, Bureau of Indian 

Education, and Higher Education Emergency Relief Fund.

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 2023, the Department used statistically valid sampling and estimation 

methodologies to estimate the improper payment rates for the Pell Grant, Direct Loan, 

IDEA, ESF, 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, IDEA, ESF and Title I improper 

payment estimates in FY 2023 and prior years, please visit https://paymentaccuracy.gov.

Risk Assessments

As required by OMB Circular A-123, Appendix C, the Department assesses the risk of 

improper payments at least once every three years for each program and activity with 

annual outlays of more than $10 million that is not reporting an improper payment 

estimate. In FY 2023, the Department assessed improper payment risk for ten grant 

programs and two administrative activities. These risk assessments did not identify any 

additional Education programs or activities as being susceptible to significant improper 

payments. Additionally, the Department also conducted risk assessments of all FSAmanaged programs. There were no additional programs identified as susceptible to 

significant improper payments.
FY 2023 AGENCY FINANCIAL REPORT 199 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Identified and Recaptured Improper Payments

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 has determined that payment recapture audits would not be 

cost effective for any of its loan and grant programs or for contracts. A comprehensive 

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 payments. For detailed information on identified and recovered improper 

payments in FY 2023, readers can visit https://paymentaccuracy.gov.

High Priority Programs—Sampling and Estimation Methodology 

Plan (S&EMP)

For FY 2023 AFR reporting, the Department used a statistically valid S&EMP 

to estimate improper and unknown payments for the Pell Grant and Direct Loan 

programs. The Department submitted the statistically valid S&EMP to OMB on 

June 29, 2023. This statistical methodology uses a random sample of annual compliance 

audits, with associated final audit determination (FAD) letters, if applicable, that cover 

approximately 5,400 eligible schools. A small population of schools may apply for and 

receive a waiver or exemption from the compliance audit requirements. FSA accounts 

for these disbursements through a statistically valid sampling process. In addition to 

the compliance audits and related data, the methodology also uses the Free Application 

for Federal Student Aid (FAFSA) Internal Revenue Service (IRS) Data Statistical 

Study (“Study”) and the results of tests of Federal Family Education Loan to Direct 

Loan consolidations and Direct Loan refunds. A plain language description of the 

methodology used and the results obtained for each of these programs is available on the 

Department’s improper payments website.
FY 2023 AGENCY FINANCIAL REPORT 200 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

High-Priority Programs—Improper and Unknown Payment 

Payment Estimates 

Readers can obtain more detailed information on reporting improper payment and 

unknown payment estimates in FY 2023 and prior years at https://paymentaccuracy.gov.

The FY 2023 Pell Grant estimates include results from the Study which estimates Pell 

Grant improper payment rates based on a comparison between information reported 

by recipients of Pell Grant funds on the FAFSA and income details reported to the 

IRS. Rates from the Study are included in the Pell Grant improper payment estimate 

and categorized as a misreported income root cause. The misreported income root 

cause accounts for approximately 75 percent of the estimated FY 2023 Pell Grant 

improper payments. 

Figure 16 summarizes the estimated amount of improper payments and unknown 

payments made directly by the Department and the amount of improper payments made 

by recipients of federal money. For additional details, please refer to the High Priority 

Programs—Root Cause Categories section.

Figure 14. FY 2023 Pell Grant Estimates

(Dollars in Millions)

Figure 15. FY 2023 Direct Loan Estimates

(Dollars in Millions)

Note: The source of the FY 2023 Pell Grant and Direct Loan outlay amounts is FSA’s Financial Management System (FMS).
FY 2023 AGENCY FINANCIAL REPORT 201 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Figure 16. FY 2023 Sources of Improper Payments & Unknown Payments 

(Dollars in Millions)

High Priority Programs—Insufficient or Lack of Documentation 

Of the $812.29 million and $586.66 million in estimated improper payments and 

unknown payments for the Pell Grant and Direct Loan programs, respectively, 

approximately 0.01 percent and 0.00 percent are categorized as unknown due to inability 

to discern whether the payment was proper or improper as a result of insufficient or lack 

of documentation.

High Priority Programs—Monetary Loss and Non-Monetary 

Loss 

This section presents the portion of the improper payment estimates that are attributed to 

monetary loss and non-monetary loss. Monetary loss and non-monetary loss are defined 

by OMB.

• Monetary loss to the Federal Government: An amount that should not have been 

paid and in theory should/could be recovered.

• Non-monetary loss to the Federal Government: Either an underpayment or a 

payment to the correct recipient for the correct amount where the payment process 

fails to follow applicable regulation and/or statute.
FY 2023 AGENCY FINANCIAL REPORT 202 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

The monetary loss and non-monetary loss amounts reported in Table 18 are estimates; not 

all monetary loss is recoverable.

Table 18: FY 2023 Monetary and Non-Monetary Loss for High-Priority Programs*

Program Reporting Category

Amount 

(Dollars in 

Millions)

Percentage of 

Improper Payment 

and Unknown 

Payment 

Estimate 

Pell 

Grant

Estimated Monetary Loss to the Government $403.92 49.72%

Estimated Non-Monetary Loss to the Government $405.23 49.89%

Estimated Unknown Improper Payments $3.15 0.39%

Total $812.29 100.00%

Direct 

Loan

Estimated Monetary Loss to the Government $67.82 11.56%

Estimated Non-Monetary Loss to the Government $518.84 88.44%

Estimated Unknown Improper Payments $0.00 0.00%

Total $586.66 100.00%

*Numbers may not add up due to rounding.

Of the estimated monetary loss for the Pell Grant and Direct Loan programs, the majority 

is outside of the agency’s control. As explained previously, 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 the funds they receive from the Department to subordinate organizations and 

individuals. These “third-party” controls are outside of the Department’s operational 

control. Examples of root causes outside of the Department’s operational control are 

defined further in the following section. The amounts of monetary loss within and 

outside of the agency’s control are reported in Table 19.

Table 19: FY 2023 Monetary Loss Within and Outside Agency Control for HighPriority Programs

Program Reporting Category

Amount 

(Dollars in 

Millions)

Percentage of 

Monetary Loss

Pell 

Grant

Estimated Monetary Loss Within Agency Control $381.57 94.47%

Estimated Monetary Loss Outside Agency Control $22.35 5.53%

Total $403.92 100.00%

Direct 

Loan

Estimated Monetary Loss Within Agency Control $0.00 0.00%

Estimated Monetary Loss Outside Agency Control $67.82 100.00%

Total $67.82 100.00%
FY 2023 AGENCY FINANCIAL REPORT 203 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

High Priority Programs—Root Cause Categories

FY 2023 root cause categories of error, as defined in OMB Circular A-123, Appendix 

C (OMB Memorandum M-21-19), were “Statutory Requirements of Program Were 

Not Met,” “Failure to Access Data/Information,” and “Unable to Determine Whether 

Proper or Improper.” Specific root causes associated with the “Statutory Requirements 

of Program Were Not Met” category include, but are not limited to, a school’s failure 

to perform or properly complete verification, a school’s failure to provide disbursement 

notifications to the student in a timely manner, untimely credit balance return to the 

Department, and inadequate documentation for meeting Satisfactory Academic Progress 

(SAP) standards. Specific root causes associated with the “Failure to Access Data/

Information” category include, but are not limited to, misreported income, incorrect 

academic level or enrollment status used, a school’s failure to observe annual eligibility 

limits, a school’s failure to properly complete verification, incorrect financial aid 

determination, and incorrect decision to complete return of Title IV funds calculation. 

Specific root causes associated with the “Unable to Determine Whether Proper or 

Improper” category may include, but are not limited to, inaccurate and/or inadequate 

tracking of attendance, lack of supporting eligibility documentation retained by schools, 

and lack of evidence to support a school completed required verification of information 

reported by an applicant on their FAFSA. 

 

 

Figure 17. FY 2023 Root Causes of Improper Payments* 

(Dollars in Millions)

* Numbers may not add up due to rounding.
FY 2023 AGENCY FINANCIAL REPORT 204 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

High Priority Programs—Corrective Actions

The Department has established an integrated system of complementary oversight 

functions to help prevent, detect, and recover improper payments, and ensure compliance 

by all participating parties. FSA’s Office of Partner Participation and Oversight (PPO) 

annually initiates more than 100 program reviews of the approximately 5,400 eligible 

schools to assess institutions’ compliance with Title IV regulations. PPO evaluates 

a school’s compliance with federal requirements, assesses liabilities for errors in 

performance, and identifies actions the school must take to make the Title IV, HEA 

programs, or the recipients, whole for any funds that were improperly managed and 

to prevent the same problems from recurring. A school with serious violations may 

be placed on heightened cash monitoring (HCM) for disbursements, lose funding 

for specific programs, or be terminated from participation in all Title IV programs 

for noncompliance.

PPO monitors annual compliance audits of schools. A school that participates in any 

Title IV program must at least annually have a compliance audit of its administration 

of that program unless an allowable waiver or exemption has been granted or, for Single 

Audit filers, the Title IV programs (major program) have been determined low-risk. 

Independent auditors perform the compliance audits to monitor schools’ administration 

of FSA programs. If any deficiencies are identified, the school must develop a corrective 

action plan that addresses the audit report findings. Auditors are required to evaluate 

whether the school has taken appropriate corrective action to address findings and 

recommendations from prior audits. PPO also performs audit resolution. This includes 

reviewing and evaluating the effectiveness of a school’s corrective action and mitigation 

efforts for noted exceptions in audit reports.

FSA continues to work with Treasury to implement the authorities provided in the 

FUTURE Act. Implementation of the authorities provided in the FUTURE Act will 

significantly improve data authentication by enabling FSA to automatically receive 

certain federal tax information (FTI) from the IRS through a direct-data exchange with 

applicant approval and enabling customers to automatically report their income for 

the total and permanent disability (TPD) discharge post-monitoring, income-driven 

repayment (IDR), and FAFSA processes. Implementation of the authorities provided in 

the FAFSA Simplification Act will improve reporting through, for example, modifying 

and simplifying the questions that students and their families have to answer on the 

FAFSA form.

The corrective actions listed below are specific to the root causes of improper payments 

identified from the FY 2023 improper payment fieldwork, and are tailored to reflect 

the unique processes, procedures, and risks involved with the Pell Grant and Direct 

Loan programs.
FY 2023 AGENCY FINANCIAL REPORT 205 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Table 20. Pell Grant and Direct Loan Improper Payment Corrective Actions

Corrective Action Description of Actions Taken in FY 2023 and Planned for FY 2024 OMB Root Cause 

Category

Implement the authorities provided 

in the FUTURE Act to improve 

verification of applicants’ and 

borrowers’ income data.

In FY 2023, the Department continued to work diligently and collaboratively with the IRS 

to implement and operationalize changes to its programs as a result of the FUTURE Act 

and amendments to section 6103 of the Internal Revenue Code (IRC). FSA and the IRS 

implemented the FUTURE Act IDR Solution on July 30, 2023. 

In FY 2024, through the Student Aid and Borrower Eligibility (SABER) Initiative, FSA will 

continue to implement the authorities and provisions provided in the FUTURE Act and FAFSA 

Simplification Act which ultimately will streamline and strengthen the collection of data used 

to determine eligibility for student financial assistance. Implementation of the authorities 

provided in the FUTURE Act will significantly improve data authentication by enabling FSA to 

automatically receive certain FTI from the IRS through a direct-data exchange with applicant 

approval and enabling customers to automatically report their income for the TPD discharge 

post-monitoring, IDR, and FAFSA processes. Implementation of the authorities provided 

in the FAFSA Simplification Act will improve reporting through, for example, modifying the 

questions that students and their families have to answer on the FAFSA form and requiring ED 

to conduct early awareness and outreach of student aid eligibility. Full implementation of the 

FUTURE Act is planned for FY 2025. FSA expects that full implementation of the authorities 

provided in the FUTURE Act will significantly reduce, or eliminate, improper payments due to 

applicants misreporting income on the FAFSA.

Failure to Access 

Data/Information

Continue to utilize and promote 

the IRS Data Retrieval Tool (DRT). 

Enhance verification procedures.

In FY 2023, FSA monitored the IRS DRT usage on a weekly basis and continued to work 

diligently and collaboratively to implement the Federal Tax Information Module (FTI-M). The 

FTI-M was successfully implemented and recorded an initial usage rate of 91%. FSA is 

encouraged by the high usage rate of the FTI-M.

In FY 2024, FSA will continue to promote the IRS DRT until full implementation of the authorities 

provided in the FUTURE Act is completed. Full implementation of the authorities provided in the 

FUTURE Act is scheduled for FY 2025, which FSA expects will significantly reduce, or eliminate, 

improper payments due to applicants misreporting income on the FAFSA. See the status of 

the corrective action titled “Implement the authorities provided in the FUTURE Act to improve 

verification of applicants’ and borrowers’ income data” for additional information.

Publish and deliver guidance, 

training, and other resources for 

institutions processing financial 

aid that address (1) verification 

errors; (2) administrative 

and process errors; and (3) 

documentation errors frequently 

made by schools.

In FY 2023, FSA published and delivered various free trainings, guidance, and resources 

for school financial aid administrators to target the root causes of improper payments and 

other frequently identified compliance issues. For example, in FY 2023 Q1, FSA published 

the 2022-2023 FSA Handbook and FSA Assessments, which provide guidance on FAFSA 

and verification requirements. FSA also published updates to questions and answers about 

verification requirements to help clarify verification requirements and reduce the risk of 

verification deficiencies. In FY 2023 Q1, FSA held the FSA Training Conference for Financial 

Aid Professionals, which received positive feedback from financial aid administrators. 

In FY 2024, FSA will continue to publish and deliver various free trainings, guidance, and 

resources for school financial aid administrators to target the root causes of improper 

payments and unknown payments and other frequently identified compliance issues. 

For example, FSA will continue to publish the FSA Handbook, FSA Assessments, and 

updates to questions and answers about verification requirements to help clarify verification 

requirements and reduce the risk of verification deficiencies. FSA is coordinating internally to 

ensure relevant offices within FSA participate in the planning for the FY 2024 FSA Training 

Conference to ensure key objectives and milestones are met. FSA will host the FY 2024 FSA 

Training Conference in FY 2024 Q1.

(1) Failure to Access 

Data/Information

(2) Statutory 

Requirements of 

Program Were 

Not Met

(3) Unable to 

Determine 

Whether Proper 

or Improper

Evaluate schools’ compliance with 

federal student aid requirements, 

assess liabilities for errors in 

performance, and identify actions 

schools must take to make the 

Title IV, HEA programs (Pell Grant 

and Direct Loan program), or the 

recipients, whole for any funds 

that were improperly managed 

as part of the program review, 

Single Audit, and/or audit process 

conducted in accordance with the 

Guide For Audits of Proprietary 

Schools and For Compliance 

Attestation Engagements of ThirdParty Servicers Administering Title 

IV Programs.

In FY 2023, FSA evaluated schools’ compliance with federal student aid requirements through 

oversight activities, such as program reviews and compliance audits, and assessed liabilities 

for errors in performance. For improper payments identified through oversight activities, such 

as compliance audits and program reviews, FSA established accounts receivable and pursued 

collection for those deemed collectible, including applicable overpayments. For additional 

information on actions taken to recover overpayments, please see paymentaccuracy.gov. 

In FY 2024, FSA will continue to evaluate schools’ compliance with federal student aid 

requirements through oversight activities, such as program reviews and compliance audits, 

and will assess liabilities for errors in performance. For future improper payments identified 

through oversight activities, such as compliance audits and program reviews, FSA will 

continue to establish accounts receivable and pursue collection for those deemed collectible, 

including applicable overpayments.
FY 2023 AGENCY FINANCIAL REPORT 206 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Civil Monetary Penalty Adjustment 

for Inflation

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/2023/01/30/2023-01596/adjustment-ofcivil-monetary-penalties-for-inflation

Table 21

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) 04-20-22 01-30-23 $ 45,429

Failure to provide information regarding teacherpreparation programs20 USC 

1022d(a)(3) 04-20-22 01-30-23 37,839

Violation of Title IV of the HEA 20 USC 1082(g) 04-20-22 01-30-23 67,544

Violation of Title IV of the HEA 20 USC 

1094(c)(3)(B) 04-20-22 01-30-23 67,544

Failure to disclose information to minor children and parents 20 USC 

1228c(c)(2)(E) 04-20-22 01-30-23 1,993

Improper lobbying for government grants and contracts

31 USC 

1352(c)(1) and 

c(2)(A)

04-20-22 01-30-23 23,727 to 237,268

False claims and statements 31 USC 3802(a)(1) 

and (a)(2) 04-20-22 01-30-23 13,508
FY 2023 AGENCY FINANCIAL REPORT 207 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

Climate Related Financial Risk

In September 2021, the Department released a new FY 2021 Climate Adaptation Plan. 

With this new plan, the Department acknowledges that climate change is affecting the 

Department’s mission and the need for comprehensive and urgent action to promote 

adaptation and resilience through the Department’s programs and operations. This plan 

builds on the lessons learned from the Department’s past sustainability action plans, 

climate change adaptation plans, and environmental justice plans to offer new actions 

that the Department can undertake to better adapt to climate change and develop agency 

resilience and resilience across the nation’s schools.

The White House currently requires that federal agencies publish various plans and 

reports regarding climate, sustainability, and environmental justice. The Department is 

developing its next Climate Adaptation and Environmental Justice plans, using White 

House guidance. Both are expected to be released in 2024. The most up to date plans and 

reports are posted on the ED Infrastructure and Sustainability page, under Reporting.
FY 2023 AGENCY FINANCIAL REPORT 208 U.S. DEPARTMENT OF EDUCATION

Other Information (Unaudited)

The Grants Oversight and New Efficiency 

Act of 2016 (GONE Act) and Education’s 

Grant Closeout Process 

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 and Budget 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 22 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 October 1, 2023, the Department had 3,560 grants 

and cooperative agreements totaling approximately $97.9 million in various statuses of 

the closeout process. 

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 S19U0002 - Risk 

Assessment of the Department’s Grant Closeout Process 

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 August 2023, the Handbook for the 

Discretionary Grants Process (Handbook) includes policy requirements that align with 

the OIG recommendations. (6.16.1) (A) (3)

Each year, the Office of Acquisition, Grants, and Risk Management (OAGRM) offers 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. 

Table 22

Category 2–3 Years 3–5 Years > 5 Years

Number of Grants/Cooperative Agreements with Zero Dollar Balances 3,197 6 -

Number of Grants/Cooperative Agreements with Undisbursed Dollar Balances 342 15 -

Total Amount of Undisbursed Balances $77,621,010 $20,279,108 -

Source: G5, grants management system linked to the Department’s general ledger system. Data is based on the performance end date of September 30, 2021.
APPE NDIC E S

(unaudited)
Appendices (Unaudited)

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

FY 2023 AGENCY FINANCIAL REPORT 210 U.S. DEPARTMENT OF EDUCATION
FY 2023 AGENCY FINANCIAL REPORT 211 U.S. DEPARTMENT OF EDUCATION

Appendices (Unaudited)

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.gov

These additional resources within the checklist assist students in finding scholarships 

and grants:

https://studentaid.gov/resources/prepare-for-college/checklists

https://studentaid.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/

Condition of Education and Digest 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/

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/

Education Resources 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. 
FY 2023 AGENCY FINANCIAL REPORT 212 U.S. DEPARTMENT OF EDUCATION

Appendices (Unaudited)

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 of 2014

(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/

Government Accountability Office 

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

National Assessment of Educational Progress 

The National Assessment of Educational Progress (NAEP) assesses samples of students in 

grades 4, 8, and 12 and at ages 9, 13, and 17 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/
FY 2023 AGENCY FINANCIAL REPORT 213 U.S. DEPARTMENT OF EDUCATION

Appendices (Unaudited)

Office of Inspector General 

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. https://oig.ed.gov/

For a list of recent reports, go to https://oig.ed.gov/reports/list

One-Stop Shopping for Student Loans

The Department provides a site where students can manage their loans.

http://studentaid.gov/

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

Projections of Education Statistics to 2028 

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

Regional Educational 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 “highleverage” 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 “high-leverage” problems. https://ies.ed.gov/rels

Resources for Adult, Career, and Technical Education 

The Department continues to support state and local efforts to implement highquality 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 
FY 2023 AGENCY FINANCIAL REPORT 214 U.S. DEPARTMENT OF EDUCATION

Appendices (Unaudited)

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 the 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/

What Works Clearinghouse Practice 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 2023 AGENCY FINANCIAL REPORT 215 U.S. DEPARTMENT OF EDUCATION

Appendices (Unaudited)

Appendix B: Glossary of Acronyms and 

Abbreviations

ABCP Asset-Backed Commercial Paper

AFR Agency Financial Report

AGA Association of Government Accountants 

AP Acquisition Plan

APGs Agency Priority Goals

APR Annual Performance Report

ARP American Rescue Plan Act of 2021

ARP ESSER American Rescue Plan Elementary and Secondary School 

Emergency Relief 

BIE Bureau of Indian Education

BOD Binding Operational Directive

BPO Business Process Operations

CARES Coronavirus Aid, Relief, and Economic Security Act of 2020

CISA Cybersecurity and Infrastructure Security Agency

COVID-19 Coronavirus Disease 2019

CPSS Contracts and Purchasing Support System

CRRSAA Coronavirus Response and Relief Supplemental Appropriations 

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

EANS Emergency Assistance to 
FY 2023 AGENCY FINANCIAL REPORT 216 U.S. DEPARTMENT OF EDUCATION

Appendices (Unaudited)

Non-Public Schools 

ECASLA Ensuring Continued Access to Student Loans Act of 2008

EDARM Division of Enterprise Data Analytics and Risk Management 

EDCAPS Education Central Automated Processing System

EGP Education Grants Platform 

EIA Emergency Impact Aid

ELG Evidence Leadership Group 

Emergency Temporary Emergency Impact Aid for

Impact Aid Displaced Students

EO Executive Order

ERIC Education Resources Information Center

ERM Enterprise Risk Management 

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

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
FY 2023 AGENCY FINANCIAL REPORT 217 U.S. DEPARTMENT OF EDUCATION

Appendices (Unaudited)

GPRA Government Performance and Results Act of 1993

GSA General Services Administration

HBCUs Historically Black Colleges and Universities

HEA Higher Education Act of 1965

HEAL Health Education Assistance Loan

HEERF Higher Education Emergency Relief Fund

HHS U.S. Department of Health and Human Services

HTTPS Hypertext Transfer Protocol Secure

IDEA Individuals with Disabilities Education Act 

IDR Income-Driven Repayment

IEP Individualized Education Program 

IES Institute of Education Sciences

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

IQA Information Quality Act 

IRS Internal Revenue Service

IT Information Technology

LEAs Local Educational Agencies

LINCS Literacy Information and Communication System

MSIs Minority Serving Institutions

NAEP National Assessment of Educational Progress

NCES National Center for Education Statistics 

Next Gen FSA Next Generation Federal Student Aid

NIST National Institute of Standards and Technology

NSLDS® National Student Loan Data System

OAGRM Office of Acquisition, Grants, and Risk Management

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

ODP Open Data Platform

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 Counsel
FY 2023 AGENCY FINANCIAL REPORT 218 U.S. DEPARTMENT OF EDUCATION

Appendices (Unaudited)

OHR Office of Human Resources

OIG Office of Inspector General

OMB Office of Management and Budget

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 

Pell Federal Pell Grant

PEPS Postsecondary Education Participants System 

PIIA Payment Integrity Information Act of 2019

PIMA Payment Integrity Monitoring Application

PIV Personal Identity Verification

PLUS Parent Loan for Undergraduate Students 

POC Principal Office Component

POA&M Plan of Actions & Milestones 

President’s Budget of the United States

Budget Government

PSLF Public Service Loan Forgiveness

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

SEAs State Educational Agencies

SSA Social Security Administration

STEM Science, Technology, Engineering, and Mathematics

TCUs Tribal Colleges and Universities 

TCCUs 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

Title IV Title IV of the Higher Education Act of 1965 

TOP Treasury Offset Program

TPD Total and Permanent Disability 

Treasury U.S. Department of Treasury

USDS Unified Servicing and Data Solution 
FY 2023 AGENCY FINANCIAL REPORT 219 U.S. DEPARTMENT OF EDUCATION

Appendices (Unaudited)

VDP Vulnerability Disclosure Policy

VM Vulnerability Management

WIOA Workforce Innovation and Opportunity Act
FY 2023 AGENCY FINANCIAL REPORT 220 U.S. DEPARTMENT OF EDUCATION

Appendices (Unaudited)

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.

The Office of Budget Service has lead responsibility for 

multiple functions, including developing and implementing 

the Department’s Budget. The Office of Acquisition, 

Grants, and Risk Management (OAGRM) is responsible for 

developing, managing, and providing policy guidance and 

oversight of the Department’s acquisition, grant, and risk 

management activities and operations.

The Contracts and Acquisitions Management Division, 

within OAGRM, 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

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 2023 Agency Financial Report:

For General Layout and Web Design

Fathom Creative

For Accounting Services

Cotton & Company Assurance and Advisory LLC

FMR Consulting Inc.

OptumServe Technology Services Inc.

The FY 2023 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 2023
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Our Mission is to promote student achievement and 

preparation for global competitiveness by fostering 

 educational excellence and ensuring equal access.

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