This report presents findings of an audit of the Principal Statements of the Department of Education's (ED) Federal Family Education Loan Program (FFELP) and its internal controls and compliance with laws and regulations for the fiscal years ending September 30, 1993, and September 30, 1992. The audit investigated whether the Principal Statements were reliable and whether relevant internal controls were in place and operating effectively, and tested compliance with significant provisions of selected laws and regulations. The audit found that the accuracy of the Statement of Financial Position, the Statement of Operation and Changes in Net Position, and the Statement of Budgetary Resources and Actual Expense could not be determined due to the lack of reliable student loan data. The Statement of Cash Flows was found to be fairly accurate. Material weaknesses in internal controls over determining program costs, effectively monitoring payments to guaranty agencies and lenders, and ensuring accurate financial reporting was found to have the potential for material losses of assets or misstatements in the principal statements. The Department's ability to achieve the program's mission of providing loan access to students at reasonable cost to taxpayers was seen as compromised. The pertinent financial statements, details of the audit design, additional reports, comments, and recommendations from 1992 are included. (JB)