Financial Statement Audits, Fiscal Years 2012 and 2011, Federal Student Aid

Both the Department and FSA received unqualified (clean) opinions on their FY 2012 and FY 2011 financial statements. However, the audit reports noted a material weakness in internal control surrounding the Department’s Debt Management Collection System and ACS Education Servicing System—the legacy Direct Loan servicing system; found modified repeat deficiencies relating to credit reform estimation, financial reporting processes, and controls surrounding information systems; and reported that the Department’s financial management systems did not substantially comply with certain systems requirements of the Federal Financial Management Improvement Act because of the control weaknesses surrounding information systems. A number of recommendations were made to address the weaknesses identified.