Federal Student Aid:

Additional Management Improvements Would Clarify Strategic Direction and Enhance Accountability

GAO-02-255: Published: Apr 30, 2002. Publicly Released: Apr 30, 2002.

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The Department of Education's Office of Federal Student Aid (FSA) administers more than $53 billion in financial aid for more than 8.1 million students. Since 1990, GAO has included student financial aid on its high-risk list. To address these and other long-standing management weaknesses, Congress established FSA as a performance-based organization (PBO) within Education in 1998. To develop and implement a strategic direction, FSA set three strategic goals, created indicators to measure progress toward these goals, and developed a tool to link employees' day-to-day activities to these goals. The goals are to (1) increase customer satisfaction, (2) increase employee satisfaction, and (3) reduce unit cost. FSA's efforts have generally improved customer and employee satisfaction scores. FSA has begun to implement some human capital practices to better organize its services and manage its employees. But gaps exist, and FSA has not yet implemented performance management initiatives to develop and assess its employees. To better serve customers, FSA reorganized to reflect its different customers--students, schools, and financial partners. To encourage accountability, FSA is linking staff bonuses to FSA's strategic goals. Education continues to clarify FSA's level of independence and is now reviewing FSA's role and responsibilities as part of the departmentwide management planning effort.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: While FSA has continued to submit strategic and annual performance plans and reports, it has not always done so in a routine manner. Most recently, FSA submitted its FY 2005 Annual Report and its updated Five-Year Plan for 2006-2010 to Congress. While these reports in and of themselves are helpful to congressional decisionmakers, the most recent reports, and those from earlier years, continued to not meet all the specified requirements of the Higher Education Act regarding report content. For example, the most recent submission did not include specific information on the bonus amounts paid to the Chief Operating Officer and other senior officers or the basis on which the bonuses were awarded.

    Recommendation: To inform Congress about FSA's performance and to comply with statutory requirements, the Secretary of Education and FSA's COO should work collaboratively to take the steps necessary to ensure that complete and timely annual performance reports are submitted to Congress.

    Agency Affected: Department of Education

  2. Status: Closed - Implemented

    Comments: Subsequent to our report, FSA developed and incorporated into its 5-year strategic plan and its annual performance plans a specific goal to improve program integrity, including reducing the vulnerability of the federal student financial assistance programs to fraud, waste, abuse and mismanagement. As discussed in its most recent strategic plan, FSA has created an enterprise risk management function to provide greater organizational strategic risk identification and assessment capabilities, which includes default management activities. In its most recent plans and reports, FSA includes among its strategies that it will continue to provide one-on-one assistance to help schools comply with rules and regulations. As discussed in its most recent report, FSA has continued to focus on enhancing program integrity and its results are demonstrated through achievement of its fourth consecutive clean financial statement audit opinion in FY05, with no material internal control weaknesses identified for the 3rd straight year, as well as the GAO's decision to remove the student aid programs from its High Risk list. FSA's efforts at default management are also reflected in the 4.5 percent cohort default rate reported for FY03, the lowest rate in a significant number of years.

    Recommendation: To ensure accountability for enhancing the integrity of its programs, the Secretary of Education should direct FSA's COO, in collaboration with the Secretary, to develop performance strategies and measures that better demonstrate in its performance plans and subsequent performance reports its progress in enhancing the integrity of its student loan and grant programs. In particular, FSA should develop measures that better demonstrate whether its technical assistance activities result in improved compliance among schools and additional strategies for achieving its default management goals.

    Agency Affected: Department of Education

  3. Status: Closed - Implemented

    Comments: Subsequent to our report, FSA has developed a systems integration goal for its 5-year performance plans and annual performance reports. FSA recently issued its current 5-year performance plan covering the period 2006-2010 and that plan, as well as its 2005 Annual Report, includes a substantive and informative discussion of its progress in integrating its student financial aid systems as well as its plans, measures, and schedule for future systems integration efforts. Furthermore, FSA has created an "Information Framework Initiative" to provide for data exchanges among its various automated systems as well as among FSA employees, customers, and partners. These actions provide congressional decisionmakers with better information regarding FSA's efforts in meeting its legislative mandate to integrate its student financial aid systems.

    Recommendation: To ensure accountability for making continued progress toward its legislative mandate to integrate systems, the Secretary of Education should direct FSA's COO, in collaboration with the Secretary, to develop and include clear goals, strategies, and measures to better demonstrate in FSA's performance plans and subsequent performance reports its progress in implementing plans for integrating its financial aid systems.

    Agency Affected: Department of Education

  4. Status: Closed - Implemented

    Comments: Subsequent to our report, FSA modified its goals to focus on reducing aggregate administrative costs rather than reporting on reductions based on a specific unit cost measure. FSA now includes in its performance report a clarified discussion of its efforts to reduce administrative costs and presents data on the results of its cost reduction efforts. As a result of the revised performance goal and measures, the performance report provides more credible information than was previously the case. Moreover, FSA continues to work toward developing a robust and transparent unit cost measure using an activity-based costing (ABC) model. As discussed in its most recent performance report, FSA has progressed to the point where the agency has been able to calculate FY 2003 and FY 2004 costs on a unit-cost level. Further, FSA has used its model to project unit costs for FY 2005-2009 and has used the results of its work in formulating its funding requests in the President's FY 2007 budget.

    Recommendation: To ensure that congressional decision makers and the public understand the measure FSA uses to gauge its performance with respect to the costs of administering student financial aid programs, the Secretary of Education should direct FSA's chief operating officer (COO) to fully disclose in its performance plans and subsequent performance reports the bases of its unit cost calculation and to clarify what costs are included and excluded from the calculation.

    Agency Affected: Department of Education

  5. Status: Closed - Implemented

    Comments: Subsequent to our report, FSA developed a comprehensive human capital strategy. The plan incorporates, among other things, succession planning and addresses staff development. Furthermore, FSA has identified staff skills and developmental areas and is using the information to identify training needs across the organization. Additionally, based on its plans, FSA is launching additional efforts to ensure that its recruiting and hiring efforts are targeted to current and anticipated needs at the entry and junior levels and is using its excepted service appointment capacity to bring in highly qualified candidates for specific technical positions.

    Recommendation: To ensure that FSA's workforce is adequately prepared to meet future challenges and accomplish its mission, the Secretary of Education and FSA's COO should coordinate closely to develop and implement a comprehensive human capital strategy that incorporates succession planning and addresses staff development.

    Agency Affected: Department of Education

 

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