This report from the Office of Inspector General (OIG) identifies systemic weaknesses in the operations and programs of the U.S. Department of Education (ED). The office provides accurate financial information to make informed decisions, manage for results, and ensure operation integrity. Vigorous fraud investigations are continuing. Audits reveal continuing problems with network security, student financial assistance information system contracts, control of purchase cards, and third party drafts. The OIG found noncompliance with the Gun-Free Schools Act of 1994 in two states and poor information management. The Office is issuing audits, identifying fraud, and reaching several civil settlements regarding aid programs. In addition to assisting members of Congress, OIG performed 60 quality reviews of independent audits, participated in ongoing efficiency initiatives, reviewed ED contributions to the security of the nation's critical infrastructure, and issued reports to the President. Tables in 10 appendices contain audit information. (TEJ)