ANNUAL REPORT FY 2020 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 16, 2020 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 2020 Annual Report, Washington, D.C., 20002. This report is also available under Performance Reports on the Federal Student Aid website at StudentAid.gov. 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]. ii Fiscal Year 2020 Annual Report | Federal Student Aid Contents F Contents About This Report ............................................................. iii About This Report .......................................................................... v Overview of the Federal Student Aid Annual Report .................... vii Management’s Discussion and Analysis (Unaudited) ......... 1 Overview of Management’s Discussion and Analysis ..................... 3 Fiscal Year 2020 Organizational Highlights ................................... 4 Looking Forward at Federal Student Aid .............................................................. 4 Federal Student Aid Fiscal Year 2020 by the Numbers ........................................... 7 Mission and Organizational Structure ............................................ 9 Mission, Vision, and Core Values ...................................................................... 10 FSA Organizational Structure ........................................................................... 11 Significant Legislation that Directs the Federal Student Aid Mission....................... 13 Federal Student Aid Stakeholders ..................................................................... 14 Federal Student Financial Aid Programs............................................................. 16 Performance Management ........................................................... 21 Agency Priority Goals ...................................................................................... 28 Quality of Performance Data ............................................................................ 31 Analysis of Financial Statements ................................................. 32 Introduction .................................................................................................. 32 Balance Sheet ................................................................................................ 34 Financial Management Highlights ..................................................................... 49 Analysis of Systems, Controls, and Legal Compliance .................. 50 Annual Performance Report (Unaudited) ......................... 53 Overview of the Annual Performance Report ............................... 55 Introduction to the Annual Performance Report .......................... 56 Federal Student Aid Strategic Goals, Performance Metrics, and Results ................. 58 Performance Results by Strategic Goal ........................................ 63 Strategic Goal 1: Empower a High-Performing Organization................................ 64 Strategic Goal 2: Provide World-Class Customer Experience to the Students, Parents, and Borrowers We Serve .................................................................... 71 Strategic Goal 3: Increase Partner Engagement and Oversight Effectiveness ........ 89 Strategic Goal 4: Strengthen Data Protection and Cybersecurity Safeguards ......... 99 Strategic Goal 5: Enhance the Management and Transparency of the Portfolio .... 106 Fiscal Year 2020 Accomplishments of Federal Student Aid ........ 131 Legislative and Regulatory Recommendations .......................... 136 Annual Bonus Awards ................................................................ 137 Fiscal Year 2020 Annual Report | Federal Student Aid i Contents Report of the Federal Student Aid Ombudsman ......................... 138 Financial Section ............................................................ 159 Overview of the Financial Section ............................................. 161 Financial Statements ................................................................. 162 Consolidated Balance Sheet ........................................................................... 163 Consolidated Statements of Net Cost .............................................................. 164 Consolidated Statements of Changes in Net Position ......................................... 165 Combined Statements of Budgetary Resources ................................................ 166 Notes to the Financial Statements ............................................. 167 Required Supplementary Information (Unaudited) ................... 201 Independent Auditors’ Report ................................................... 208 Office of Inspector General Audit Transmittal ................................................... 208 Independent Auditors’ Report ........................................................................ 210 Other Information (Unaudited) ...................................... 225 Other Information ..................................................................... 227 Summary of Financial Statement Audit and Management Assurances ................. 227 FSA Management Challenges ......................................................................... 227 Payment Integrity ........................................................................................ 228 Appendices .................................................................... 229 Appendix A: Discontinued Strategic Goals and Performance Metrics ...................................................................................... 231 Appendix B: Glossary of Acronyms and Terms ........................... 233 Appendix C: Availability of the Federal Student Aid Annual Report ....................................................................................... 238 ii Fiscal Year 2020 Annual Report | Federal Student Aid About This Report F About This Report Fiscal Year 2020 Annual Report | Federal Student Aid iii About This Report This page is intentionally left blank iv Fiscal Year 2020 Annual Report | Federal Student Aid About This Report F 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 2020 Annual Report (Annual Report) is a comprehensive document that provides an analysis of FSA’s financial and program performance results for Fiscal Year (FY) 2020 and exhibits the organization’s effectiveness in accomplishing its mission. The Annual Report enables the President of the United States, the U.S. Congress (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 (PBO), its initiatives, accomplishments, and challenges, as required by the U.S. Office of Management and Budget (OMB) 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 following federal statutes: • Higher Education Act of 1965, as amended • Federal Managers’ Financial Integrity Act of 1982 • Chief Financial Officers Act of 1990 • Government Performance and Results Act of 1993 • Government Management Reform Act of 1994 • Federal Financial Management Improvement Act of 1996 • Reports Consolidation Act of 2000 • Improper Payments Information Act of 2002, amended • Government Performance and Results Modernization Act of 2010 • Improper Payments Elimination and Recovery Act of 2010 • Improper Payments Elimination and Recovery Improvement Act of 2012 The Department produces the U.S. Department of Education FY 2020 Agency Financial Report (AFR). That report provides a comprehensive view of the Department’s stewardship over its resources and includes a summary of the information contained in the Annual Report. The Annual Report is available at StudentAid.gov/Annual Report. Fiscal Year 2020 Annual Report | Federal Student Aid v About This Report This page is intentionally left blank vi Fiscal Year 2020 Annual Report | Federal Student Aid Overview of the Federal Student Aid Annual Report Overview of the Federal Student Aid Annual Report The Annual Report is organized into the following five sections: Management’s Discussion and Analysis Management’s Discussion and Analysis provides an overview of the Annual Report. It includes a discussion of the FSA mission, its organizational structure, and the fiscal year financial and performance highlights. The section concludes with a discussion