ANNUAL REPORT FY 2019 United States Department of Education Betsy DeVos Secretary Federal Student Aid Mark A. Brown Chief Operating Officer Finance Office Alison L. Doone Chief Financial Officer November 15, 2019 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, Federal Student Aid, FY 2019 Annual Report, Washington, D.C., 20002. This report is also available on the Federal Student Aid website at StudentAid.gov/FY 2019 Annual Report. To connect to Federal Student Aid through social media, please visit the Federal Student Aid website at StudentAid.gov or on Twitter at @FAFSA. Federal Student Aid strives to improve and enhance the content quality, report layout, and public accessibility of the Annual Report. Suggestions on how this report can be made more informative and useful are welcome. The public and other stakeholders are encouraged to submit all questions and comments to [email protected]. Contents Contents About This Report .......................................................................... i Letter from the Chief Operating Officer of Federal Student Aid ... iii Letter from the Chief Operating Officer of Federal Student Aid ..................................................... v Overview of the Federal Student Aid Annual Report ...................................................................... ix Management’s Discussion and Analysis (Unaudited) .................... 1 Overview of the Management’s Discussion and Analysis ............................................................... 2 Fiscal Year 2019 Organizational Highlights ...................................................................................... 3 Looking Forward at Federal Student Aid............................................................................................................ 3 Federal Student Aid Fiscal Year 2019 by the Numbers ..................................................................................... 5 Mission and Organizational Structure ............................................................................................... 7 Federal Student Financial Aid Programs ..........................................................................................................11 Performance Management ................................................................................................................ 17 Fiscal Year 2019 Strategic Goals, Objectives, and Performance Metrics .........................................................19 Agency Priority Goals .......................................................................................................................................31 Quality of Performance Data .............................................................................................................................33 Analysis of Financial Statements ..................................................................................................... 34 Balance Sheet ..................................................................................................................................................36 Statement of Net Cost.......................................................................................................................................47 Statement of Changes in Net Position ..............................................................................................................48 Statement of Budgetary Resources ..................................................................................................................48 Financial Management Highlights .....................................................................................................................50 Analysis of Systems, Controls, and Legal Compliance ................................................................. 53 Limitations of Financial Statements ................................................................................................ 55 Annual Performance Report (Unaudited) .................................... 57 Overview of the Annual Performance Report ................................................................................. 58 Fiscal Year 2019 Organizational Performance ................................................................................ 59 Federal Student Aid Strategic Goals and Strategic Objectives .........................................................................59 Federal Student Aid Strategic Goals, Performance Metrics, and Results .........................................................60 Federal Student Aid Performance Results by Strategic Goal ...........................................................................61 Introduction to the Annual Performance Report ............................................................................ 62 Performance Results by Strategic Goal .......................................................................................... 63 Strategic Goal A: Improve quality of service for customers across the entire student aid life cycle. ................64 Strategic Goal B: Proactively manage the student aid portfolio to mitigate risk. ..............................................70 Strategic Goal C: Improve operational efficiency and flexibility. .......................................................................74 Strategic Goal D: Foster trust and collaboration among stakeholders. ............................................................76 Strategic Goal E: Invest in expanded workforce capability. .............................................................................79 Fiscal Year 2019 Accomplishments of Federal Student Aid ......................................................... 80 Legislative and Regulatory Recommendations .............................................................................. 84 Fiscal Year 2019 Annual Report | Federal Student Aid Contents Annual Bonus Awards ....................................................................................................................... 85 Report of the Federal Student Aid Ombudsman ............................................................................ 86 Financial Section ...................................................................... 109 Overview of the Financial Section .................................................................................................. 110 Financial Statements ....................................................................................................................... 111 Notes to the Financial Statements ................................................................................................. 116 Required Supplementary Stewardship Information (Unaudited) ................................................ 145 Required Supplementary Information (Unaudited) ...................................................................... 147 Independent Auditors’ Report ........................................................................................................ 154 Other Information (Unaudited) ................................................ 167 Other Information ............................................................................................................................. 169 Summary of Financial Statement Audit and Management Assurances ..........................................................169 FSA Management Challenges ........................................................................................................................169 Payment Integrity ............................................................................................................................................170 Appendices ............................................................................... 175 Appendix A: Glossary of Acronyms and Terms .......................................................................... 177 Appendix B: Availability of the Federal Student Aid Annual Report ......................................... 181 Acknowledgements .................................................................. 183 Fiscal Year 2019 Annual Report| Federal Student Aid About This Report About This Report Federal Student Aid (FSA), a principal office of the United States (U.S.) Department of Education (the Department), is required by legislation to produce an Annual Report, which details the organization’s fiscal year financial and program performance. The Federal Student Aid FY 2019 Annual Report (Annual Report) is a comprehensive document that provides an analysis of FSA’s financial and program performance results for Fiscal Year (FY) 2019 and exhibits the organization’s effectiveness in accomplishing its mission. The Annual Report enables the President of the United States, the U.S. Congress, and the public to assess the organization’s performance relative to its mission and determine whether FSA has demonstrated accountability for the resources entrusted to it. This report presents information about FSA’s performance as a Performance-Based Organization, its initiatives, accomplishments, and challenges, as required by Office of Management and Budget Circular A-11, Preparation, Submission and Execution of the Budget, Part 6, Section 260, and Circular A-136, Financial Reporting Requirements. The report also satisfies the requirements included in the