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Capital Would Help Sustain Management Progress' which was released on 
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Report to Congressional Committees:

United States Government Accountability Office:

GAO:

October 2004:

Office of Federal Student Aid:

Better Strategic and Human Capital Planning Would Help Sustain 
Management Progress:

GAO-05-31:

GAO Highlights:

Highlights of GAO-05-31, a report to congressional committees:

Why GAO Did This Study:

In 2003, the Department of Education’s Office of Federal Student Aid 
(FSA) managed about $60 billion in new financial aid. In 1998, the 
Congress designated FSA as a performance-based organization. In so 
doing, it specified purposes for the agency, such as to reduce program 
costs and increase accountability of its officials, and provided 
flexibilities such as allowing FSA to pay bonuses. Also FSA is 
required to annually prepare a performance plan and report and have 
performance agreements for its senior officials. Past reviews revealed 
serious problems and concerns about FSA’s management. In January 2003, 
GAO reported that FSA had made progress but had not sufficiently 
addressed some key management issues. Also, GAO noted that FSA, like 
other agencies needed to address human capital issues. GAO assessed 
FSA’s progress in (1) addressing key management issues and meeting 
requirements for planning and reporting, and (2) developing a human 
capital strategy and increasing the accountability of its officials.

What GAO Found:

FSA has made progress addressing its key management issues; however, 
its plans and reports do not contain all the required information 
needed by the Congress and the public to assess FSA’s progress in 
achieving its goals and purposes. FSA’s significant improvements in 
its financial management and internal control are reflected in its 
receiving an unqualified or “clean” opinion on its financial statements 
for fiscal years 2002 and 2003. In addition, FSA’s fiscal year 2003 
financial audit did not identify any material internal control 
weaknesses. FSA has also made progress in other areas, but to a lesser 
extent. FSA completed several critical systems integration tasks, but 
full systems integration is several years away. In addition, FSA has 
addressed many program integrity issues—factors that could affect the 
vulnerability of student aid programs to fraud, waste, and abuse—but 
has not developed guidance to ensure that its comprehensive compliance 
reviews are being performed as expected. Furthermore, FSA has developed 
a cost model that has the potential to identify the full cost of its 
activities and changes in costs over time, but as of July 2004, the 
model was not fully operational. As a result, FSA has not been able to 
demonstrate that it has reduced the cost of administering its programs. 
Also, FSA issued a 5-year performance plan and annual performance 
reports, but neither included specific measures needed to determine 
whether FSA has made progress toward meeting its longer-term strategic 
objectives. 

FSA has developed a comprehensive human capital strategy and has taken 
steps to increase the accountability of most of its officials, but some 
of the human capital strategy’s components and the accountability 
system have weaknesses. FSA’s human capital plan describes the agency’s 
human capital strategy and the strategy’s components. For example, FSA 
has a draft succession plan to prepare for the retirement of key staff.
However, this plan has weaknesses. The draft succession plan shows that 
the agency will redistribute the duties of most retiring staff but does 
not discuss how the agency will develop the skills of remaining staff 
to take over new responsibilities. To increase the accountability of 
its officials, FSA changed from a pass-fail to multilevel performance 
appraisal systems for its senior officials and included job-specific 
goals in their performance agreements based on their areas of 
responsibility. FSA also changed the way it awards performance bonuses, 
but the criteria were not clear. 

What GAO Recommends:

GAO recommends that FSA (1) issue guidance for performing comprehensive 
compliance reviews, (2) include measures and goals in its performance 
plans and reports, (3) revise its succession plan, (4) evaluate human 
capital initiatives, and (5) clarify the criteria for awarding bonuses.
FSA generally agreed with our recommendations.

www.gao.gov/cgi-bin/getrpt?GAO-05-31. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Conelia Ashby at (202) 
512-8403 or ashbyc@gao.gov.

[End of section]

Contents:

Letter:

Results in Brief:

Background:

FSA Has Made Progress Addressing Key Issues, but Has Not Completely 
Fulfilled Its Planning and Reporting Responsibilities:

FSA Has Developed a Human Capital Strategy and Taken Steps to Increase 
the Accountability of Officials, but Both Efforts Have Weaknesses:

FSA Has Taken Steps to Increase the Accountability of Officials, but 
Its Criteria for Awarding Bonuses Are Not Clear:

Conclusions:

Recommendations to the Secretary of Education:

Agency Comments and Our Evaluation:

Appendix I: Scope and Methodology:

Overall Approach:

Objective I: Key Management Issues:

Objective II: Human Capital:

Appendix II: GAO Recommendations to Education Related to Student 
Financial Aid and Status of Their Implementation:

Appendix III: Definitions of Systems Supporting FSA's Student Aid 
Programs:

Appendix IV: Comments from the U.S. Department of Education:

Appendix V: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

Staff Acknowledgments:

Related GAO Products:

Table:

Table 1: Components of FSA's Human Capital Strategy:

Figures:

Figure 1: Organizational Structure of Federal Student Aid:

Figure 2: FSA's Approach for Integrating Its Information Systems:

Figure 3. FSA's Activity-Based Cost Model:

Figure 4: Illustration of a Segment of FSA's Annual Plan:

Figure 5: Selections from FSA's Skills Catalog: FSA's Office of the 
Chief Financial Officer:

Figure 6: Change in FSA's Performance Agreements from Organizational 
Goals in Fiscal Year 2002 to Individual Goals in Fiscal Year 2003:

Abbreviations:

ABC: activity-based cost:

ASEDS: Application, School Eligibility, and Delivery Unit:

CFO: Chief Financial Officer:

COD: Common Origination and Disbursement:

COO: Chief Operating Officer:

FAFSA: Free Application for Federal Student Aid:

FFEL: Federal Family Education Loan:

FFMIA: Federal Financial Management Improvement Act:

FMFIA: Federal Managers' Financial Integrity Act:

FSA: Office of Federal Student Aid:

GPRA: Government Performance and Results Act:

HEA: Higher Education Act:

IRS: Internal Revenue Service:

MIT: Management Improvement Team:

OIG: Office of Inspector General:

OMB: Office of Management and Budget:

OPM: Office of Personnel Management:

PBO: performance-based organization:

SES: Senior Executive Service:

SFFAS: Statements of Federal Financial Accounting Standards:

United States Government Accountability Office:

Washington, DC 20548:

October 6, 2004:

The Honorable Judd Gregg: 
Chairman: 
The Honorable Edward M. Kennedy: 
Ranking Minority Member:
Committee on Health, Education, Labor, and Pensions: 
United States Senate:

The Honorable John A. Boehner: 
Chairman: 
The Honorable George Miller: 
Ranking Minority Member: 
Committee on Education and the Workforce: 
House of Representatives:

The Department of Education's (Education) Office of Federal Student Aid 
(FSA) administered over $60 billion in new federal student aid to 
approximately 9 million students in 2003. FSA describes its mission as 
helping to put America through school by providing access to higher 
education through effective and efficient delivery of student aid. 
However, past audits and reviews revealed that the agency has 
encountered some problems accomplishing this mission. Consequently, we 
designated student financial aid programs as high-risk in 1990 because 
of concerns about fraud, waste, abuse, and mismanagement of the 
billions of dollars in student financial aid.[Footnote 1]

In 1998, when the Congress amended the Higher Education Act (HEA), it 
designated FSA as a performance-based organization (PBO) and authorized 
the agency to operate without the constraints of certain rules and 
regulations for the purpose of achieving specific measurable goals and 
objectives. This flexibility was intended to allow FSA to better 
address long-standing management weaknesses and enhance its delivery of 
student financial aid. The Congress designated several purposes for 
FSA, including reducing costs of administering the program and 
increasing accountability of officials. In addition, the Congress 
required that FSA annually issue (1) a 5-year performance plan that 
establishes measurable goals and objectives for the organization and 
(2) performance reports showing progress toward achieving its 
measurable goals and objectives in accordance with applicable 
requirements under the Chief Financial Officer (CFO) Act and the 
Government Performance and Results Act (GPRA)[Footnote 2]. While FSA 
had developed new management strategies and had made some progress 
improving its operations, Education's Office of Inspector General (OIG) 
and we found that FSA had not sufficiently addressed management 
weaknesses, identified reductions in cost, prepared 5-year performance 
plans, or submitted useful and timely reports. Specifically, we 
reported in January 2003 that FSA needed to take further actions in 
several key management areas, and we identified human capital 
management as one of the key challenges facing FSA and agencies 
governmentwide.[Footnote 3]

Since we completed the work for our January 2003 report, FSA has 
further attempted to address our concerns. We have undertaken this 
effort to examine the extent to which FSA has made progress (1) 
addressing key management issues related to financial management and 
internal control, systems integration, program integrity,[Footnote 4] 
the costs of administering its programs, and fulfilling its planning 
and reporting responsibilities, and (2) establishing a comprehensive 
human capital strategy and increasing the accountability of its 
officials.

To assess FSA's progress in these areas, we reviewed and analyzed 
several documents such as auditors' reports on FSA's financial 
statements and internal control for fiscal years 2002 and 2003, annual 
performance plans and reports, and its 5-year performance plan. We also 
analyzed FSA's systems plans and related documentation, as well as the 
performance agreements and evaluations of its senior managers. We 
interviewed officials from FSA, Education's OIG, and Education's 
Management Improvement Team (MIT),[Footnote 5] as well as union 
officials. We conducted our work between November 2003 and August 2004 
in accordance with generally accepted government auditing standards. 
For more details about our scope and methodology, see appendix I.

Results in Brief:

FSA has made progress addressing key issues in the areas of financial 
management and internal control, systems integration, program 
integrity, and determining the cost of administering its programs, but 
FSA's 5-year performance plan and its annual performance reports do not 
meet all HEA and GPRA requirements. The extent of FSA's progress in 
addressing key management issues varied among the issues. FSA made 
significant progress in addressing its financial management and 
internal control weaknesses as reflected in its receipt of an 
unqualified, or "clean," opinion on its financial statements for fiscal 
years 2002 and 2003. In addition, FSA's auditors did not identify any 
material internal control weaknesses in FSA's fiscal year 2003 audit. 
FSA also made progress in improving program integrity and in 
implementing an activity-based cost model to assist it in identifying 
the full cost of its activities. Although FSA completed several 
critical systems integration tasks, it remains several years from 
operating in a fully integrated information systems environment. FSA 
also made progress toward fulfilling its planning and reporting 
responsibilities by issuing its first 5-year performance plan in June 
2004. However, this plan did not include performance measures needed to 
assess progress over time, and its 2003 performance report did not 
clearly indicate progress toward meeting its long-term strategic 
objectives.

FSA has developed a comprehensive human capital strategy and taken 
steps to increase the accountability of most officials, but some of the 
human capital strategy's components and the accountability system have 
weaknesses. According to FSA officials, the agency has collaborated 
with an organization that specializes in government workforce issues to 
complete its human capital plan that summarizes the agency's human 
capital strategy and its components. Based on our review of its plan, 
FSA's human capital strategy includes many of the practices of leading 
organizations. For example, the document identifies challenges that FSA 
will likely face in coming years such as addressing the skills of its 
staff. However, there are also weaknesses in some of the strategy's 
components. For example, FSA's succession plan shows that staff in 
nearly 250 key positions are likely to retire and the agency will 
redistribute the duties to existing staff for 140 of these positions, 
but it does not address how the agency will develop the skills of 
remaining staff to take over these new duties. Further, FSA has not 
fully evaluated the usefulness of its learning coupon--a $500 benefit 
staff can use to pay for external training courses. To increase the 
accountability of its senior officials, FSA changed from a pass-fail to 
multilevel performance appraisal systems and emphasized achievement of 
individual goals in their performance agreements. FSA also changed the 
criteria for awarding bonuses to its senior officials. However, none of 
those we asked could explain the new criteria.

We are making several recommendations to the Secretary of Education and 
FSA's Chief Operating Officer that would allow the agency to better 
determine and communicate its progress in achieving its strategic 
objectives, strengthen efforts to improve program integrity, and 
improve the components of its human capital strategy.

FSA's Chief Operating Officer provided written comments on a draft of 
this report. In commenting on the draft, FSA generally agreed with our 
findings and recommendations. Copies of the written comments are in 
appendix IV.

Background:

FSA manages and administers student financial aid programs authorized 
under Title IV of the HEA, as amended. These programs include the 
William D. Ford Federal Direct Loan Program (Direct Loans), the Federal 
Family Education Loan Program (FFEL), the Federal Pell Grant Program 
(Pell Grants), and campus-based programs.[Footnote 6] The student aid 
environment is complex and involves a large number of parties. In 2003, 
about 6,600 schools, 3,700 lenders, and 36 guaranty agencies 
participated in the Title IV student aid programs.[Footnote 7] 
Additionally, there are numerous information systems, federal financial 
requirements, programmatic regulations, and human capital issues that 
also affect the delivery of student financial aid.

For many years, the Department of Education designed technology systems 
and processes to accommodate each financial aid program as it was 
developed. As the demand for the programs grew, so did the number of 
systems needed to support institutional participation, student 
eligibility determination, aid disbursement, operational accounting, 
and financial record keeping for the many disparate programs involved. 
After 30 years of such practices, the department was left with stand-
alone information systems and separate delivery processes that were not 
integrated with one another. Consequently, student aid delivery became 
replete with redundant data, rising costs, complex rules, and 
inefficiency for everyone involved. The process to gain access to 
student financial aid programs required users, such as an educational 
institution's financial aid or accounting staff, to continually log in 
and out of different systems for related aid information on students 
for each program. Accessing the student information for each FSA 
program often required the use of different school identifiers and 
passwords, and users often did not have the ability to retrieve 
necessary information when they did gain access. We previously reported 
that the problem of not having access to current, accurate information 
sometimes led to loans and grants being improperly awarded.[Footnote 8] 
In 1999 FSA began implementing a strategy to integrate its many 
disparate systems.

In response to the growing complexity, increasing demand, and the 
likelihood for fraud, waste, and abuse associated with the student aid 
programs, the Congress established FSA as the government's first PBO in 
October 1998.[Footnote 9] As defined in the legislation, the specific 
purposes of the PBO are to:

* improve service in the student financial assistance programs;

* reduce costs of administering the programs;

* increase accountability of officials;

* provide greater flexibility in management;

* integrate information systems;

* implement an open, common, integrated delivery system; and:

* develop and maintain a financial aid system containing complete, 
accurate, and timely data to ensure program integrity.

FSA's enabling legislation also established several requirements and 
provided certain flexibilities. These requirements included the 
appointment of a chief operating officer (COO), the establishment of a 
fair and equitable system for measuring staff performance, and the 
development of annual performance agreements for the COO and other 
senior managers. In exchange for increased accountability, the 
legislation allows for the payment of performance bonuses to the COO 
and senior managers hired under the excepted service hiring authority, 
and the law allows FSA to hire an unlimited number of Senior Executive 
Service (SES) personnel and a limited number of excepted service 
technical/professional staff.

Additionally, the law established several annual reporting requirements 
to inform the Congress and the public of the progress that FSA was 
making toward achieving its intended purposes and goals. Specifically, 
among other things, FSA must (1) develop and publicly release each year 
a 5-year performance plan that includes measurable goals and objectives 
as well as the action steps necessary to achieve a modernized student 
financial assistance delivery system and (2) provide an annual report 
to the Congress that describes the results achieved relative to its 
goals and objectives. The annual performance report must include (1) a 
copy of the current year's independent financial audit report; (2) a 
discussion of financial and performance requirements applicable to the 
PBO under the CFO Act and GPRA, (3) results achieved in the previous 
year; (4) evaluation ratings of the COO and senior managers, including 
the amounts of bonus compensation awarded to these individuals; (5) 
recommendations for legislative and regulatory changes; and (6) other 
such information required by the Director of the Office of Management 
and Budget (OMB). The planning and reporting requirements are 
consistent with federal reform laws, such as the CFO Act, GPRA, Federal 
Managers' Financial Integrity Act (FMFIA), Federal Financial Management 
Improvement Act (FFMIA), and others intended to reshape the way 
government conducts its business.

FSA's budget supports its staff, contractors, and day-to-day 
operations. In fiscal year 2004, FSA's operating budget was $621 
million.[Footnote 10] FSA worked with about 3,800 contractors and 
employed about 1,100 staff. As of June 2004, FSA had 10 organizational 
units at its headquarters in Washington, D.C., and some of these units 
also have regional offices in 10 states nationwide. Figure 1 
illustrates the organizational structure of its headquarters office.

Figure 1: Organizational Structure of Federal Student Aid:

[See PDF for image]

[A] The FSA Ombudsman informally resolves complaints from student loan 
borrowers and makes recommendations for improving service within FSA.

[B] Responsibilities of Financial Partners Services include providing 
business services, support, and oversight to lenders and guaranty 
agencies.

[C] Workforce Support Services is referred to hereafter as human 
capital.

[End of figure]

Federal agencies, including FSA, face human capital challenges. 
Recognizing this, in 2001 GAO designated strategic human capital 
management as a governmentwide high-risk area. With respect to FSA, we 
reported in 2002 that almost 40 percent of the agency's workforce was 
eligible for retirement.[Footnote 11] We also reported that the agency 
had experienced difficulty in reaching agreement with its union on a 
past human capital initiative.[Footnote 12] Additionally, we noted that 
particular attention was needed to address human capital planning, 
leadership continuity, and succession planning, as well as recruitment 
and development to meet organizational needs.

FSA Has Made Progress Addressing Key Issues, but Has Not Completely 
Fulfilled Its Planning and Reporting Responsibilities:

FSA has made progress in addressing key issues in the areas of 
financial management and internal control, systems integration, program 
integrity, and determining the cost of administering its programs, but 
FSA has not completely fulfilled its responsibility with respect to 
developing performance plans and reports. Many of the changes made by 
FSA have been based on GAO recommendations. Of the 22 recommendations 
that GAO has made related to student financial aid since 2001, we 
determined that FSA has fully implemented 12, partially implemented 5, 
and is in the process of implementing 5 others. A listing of past GAO 
recommendations related to FSA and student financial aid and their 
status is contained in appendix II.

FSA's Progress Varied by Key Area:

FSA's progress varied by key area. FSA made significant progress in 
financial management and addressed several internal control weaknesses 
reported by us and outside auditors. FSA has completed several critical 
systems integration tasks but is not yet operating in a fully 
integrated environment. Also, FSA has taken some actions to improve 
program integrity and developed a model to calculate the cost of 
administering its programs.

Financial Management and Internal Control:

For several years, independent auditors reported serious financial 
management problems at FSA, but in fiscal years 2002 and 2003, the 
agency received an unqualified--or "clean"--opinion on its financial 
statements. In addition, although the auditors identified two 
reportable conditions,[Footnote 13] they did not identify any material 
internal control weaknesses[Footnote 14] in FSA's fiscal year 2003 
audit. The two reportable conditions the auditors identified concern 
management controls surrounding the calculation and reporting of the 
loan liability activity and subsidy estimates and information systems 
controls. FSA has developed a corrective action plan to address these 
findings and is working to implement it. Also, FSA prepared its 
financial statements earlier than required in 2003.[Footnote 15]

We determined that FSA has established processes to address several 
internal control weaknesses. Since we previously reported that internal 
control weaknesses made FSA vulnerable to improper payments in its 
grant and loan programs,[Footnote 16] FSA has taken steps to better 
ensure that Pell Grants are not issued to ineligible students. In 
fiscal year 2002, FSA implemented a process for verifying an 
applicant's age when the information indicated that the applicant was 
75 or older and another process for identifying and investigating 
schools with high percentages of students with certain characteristics, 
such as older, noncitizen Pell Grant recipients. These reviews are used 
to identify problems such as eligibility-related violations or 
indications of possible fraudulent activities, which are referred to 
the OIG. In addition, since our finding that FSA did not correct Social 
Security numbers and dates of birth in all records, FSA has implemented 
its new loan origination and disbursement system, which automatically 
makes such changes to records in all systems.

Independent auditors also reported in 2003 that Education's systems did 
not substantially comply with the Federal Financial Management 
Improvement Act's requirements.[Footnote 17] Because FSA's financial 
reporting relies on the department's systems, computer security 
weaknesses identified at Education also affect FSA. The auditors found 
that while the department had made progress in strengthening controls 
over information technology processes, computer security weaknesses 
still existed. However, the auditors also reported that these 
weaknesses were not material.

Systems Integration:

FSA is continuing to take actions toward better integrating systems 
supporting its student financial aid programs. FSA's integration 
strategy focuses on achieving a seamless information exchange 
environment in which users--students, educational institutions, and 
lenders--would benefit from simplified access to the agency's financial 
aid processes and more consistent and accurate data across its 
programs. The strategy involves consolidating FSA's existing legacy 
systems, in which the functionality of certain systems would be 
incorporated into new or modernized systems and, in the long term, 
integrating systems and using electronic interfaces to facilitate data 
exchanges across systems.[Footnote 18]

Consistent with OMB guidelines,[Footnote 19] FSA has made progress 
toward establishing an enterprise architecture needed to guide its 
systems integration. An enterprise architecture provides a framework 
for developing and maintaining integrated information systems and 
establishes the rules and standards required for interrelated systems 
to work together efficiently and effectively. FSA has completed many of 
the required elements of its architecture, including the baseline and 
target architectures that, respectively, describe the agency's current 
and future information systems environments. In addition, FSA has named 
a permanent chief architect, with responsibility for overseeing its 
systems integration efforts.

FSA has also begun consolidating certain information systems, thus 
reducing the overall number of systems that it must rely on to 
administer its student financial aid programs. Over the past several 
years, the agency has retired 6 of 18 systems and incorporated their 
functionality into certain other systems. (Definitions for these 
systems are in app. III.) From 2002 to 2004, FSA retired 3 systems and 
incorporated their functionality into the Common Origination and 
Disbursement (COD) System.[Footnote 20] COD supports a single process 
for delivering Direct Loan and Pell Grant aid to students and relies on 
middleware as a solution for exchanging data between incompatible 
systems while the agency works toward full integration.[Footnote 21] 
According to FSA, the consolidation of the three systems' functions 
into COD has improved the delivery of student aid by simplifying the 
process by which schools request, report, and reconcile federal Pell 
Grant and Direct Loan funds and by facilitating schools' submissions of 
student aid data through the use of a common student record. FSA also 
retired 3 systems that supported its financial activities, such as 
collecting on defaulted student loans, and incorporated these functions 
into its Financial Management System--creating a repository for the 
agency's financial information.[Footnote 22] FSA reported that these 
actions have helped improve financial decision-making and the ability 
to create financial reports for FSA, lenders, and guaranty agencies.

Nonetheless, FSA remains several years from operating in a fully 
integrated information systems environment. While it has reduced the 
number of systems supporting its programs, FSA plans further actions to 
reengineer the agency's information processing environment. In this 
regard, FSA has begun three major systems integration initiatives, 
which it plans to complete by 2008:

* Front-End Business Integration is planned to simplify and improve the 
front-end processes (for example, grant and loan originations) 
associated with FSA's student aid delivery services by integrating the 
information, processes, and supporting systems that applicants, their 
parents, and others rely on in seeking financial aid.

* Integrated Partner Management is planned to improve FSA's ability to 
reduce fraud and errors in its student aid programs by incorporating 
improved controls, such as common identifiers, system access 
information, and a single point of enrollment. The initiative is 
expected to reengineer or replace FSA's current database of entities, 
such as schools and lenders that participate in the student aid 
programs.

* Common Services for Borrowers is planned to improve and simplify 
back-end services related to the management of student aid obligations 
(for example, loan repayments) by combining the borrower-related 
functions of existing loan servicing systems into an integrated 
process.[Footnote 23]

FSA officials explained that, overall, the three integration 
initiatives are expected to streamline systems and operations through 
further consolidating common processing functions and interfacing 
systems that receive and process loan applications, monitor program 
participation, and track loan obligations. As an essential first step 
for sharing common financial aid data in the integrated environment, 
FSA is in the process of completing data standardization across its 
systems. In addition, the agency has begun hiring contractors to 
support the three integration initiatives. However, the agency has not 
yet fully defined the technological solutions for the initiatives--a 
step that is necessary to know what specific technology will be used to 
integrate the systems. FSA officials stated that the agency would rely 
on the supporting contractors to perform this crucial task.

The agency also plans to define integration strategies that would 
enable existing financial management and other systems to share data 
with its integrated components.[Footnote 24] However, the technological 
solutions for accomplishing this have not been defined. FSA's approach 
for integrating its systems is depicted in figure 2.

Figure 2: FSA's Approach for Integrating Its Information Systems:

[See PDF for image]

[A] FSA anticipates completing the Common Services for Borrowers 
initiative in 2006.

[End of figure]

Until FSA achieves a fully integrated environment, it lacks assurance 
that it will realize greater efficiencies in sharing student financial 
aid information across its programs. Further, the agency cannot be 
assured that it will be able to provide sustained higher-quality 
information and enhanced services to students, parents, schools, and 
others.

Program Integrity:

In response to issues raised in past reports, FSA has taken several 
steps to improve program integrity, but FSA has no assurance that 
comprehensive compliance reviews are being performed properly or that 
the results are reliable.[Footnote 25] To improve the oversight of and 
assistance to foreign schools, FSA (1) added controls to verify the 
existence of foreign schools and their students, (2) hired a consultant 
to help determine how best to ensure accountability of foreign schools, 
and (3) started developing an online training program to help foreign 
school officials properly administer the program.[Footnote 26] Also, 
FSA has taken steps to help address concerns raised about students who 
have underreported family income on their student aid 
applications.[Footnote 27] FSA conducted studies with the Internal 
Revenue Service (IRS) to compare student and parent income on student 
aid applications with reported income on tax forms to determine the 
extent of over-and under-reporting of income in student applications. 
FSA also worked with OMB and the Department of the Treasury to draft 
legislation that would permit the IRS to disclose taxpayer information 
to Education.[Footnote 28] Such legislation, if passed, would enable 
FSA to compare the income data on the financial aid applications with 
tax records to better ensure that only eligible students receive 
financial aid. According to agency officials, FSA has developed several 
approaches for implementing the comparison process in anticipation of 
passage of the legislation.

Moreover, FSA has taken steps to enhance its student loan default 
management efforts. In 2003, FSA created a work group that identified 
over 60 default prevention and management initiatives and a new 
organizational unit, Portfolio Risk Management, that focuses on 
mitigating and reducing the risk of loss to the taxpayer from student 
aid obligations. FSA also added information to its exit-counseling 
guide to help increase borrowers' awareness of the benefits of repaying 
their loans through electronic debiting accounts and prepayment 
options.[Footnote 29]

In its 2003 annual performance report, FSA stated that it had completed 
several reviews to enhance the integrity of its programs. Among other 
things, FSA reported that the agency had monitored 40 percent of all 
participating schools through comprehensive compliance reviews. 
According to FSA headquarters officials, a comprehensive compliance 
review is triggered by specific events, such as compliance deficiencies 
identified during independent audits, financial statements that do not 
conform to accepted accounting standards, schools applying for initial 
eligibility or renewing their eligibility, or schools changing 
ownership or merging. FSA officials stated that these reviews could 
result in a decision to perform a more in-depth on-site review. FSA 
officials explained that during comprehensive compliance reviews, 
regional teams are to review all available data about that school in 
addition to addressing the triggering event. However, FSA officials 
could not provide us written documents defining a comprehensive 
compliance review or guidance on how teams are to perform these 
reviews. Without such documentation and guidance, FSA has no assurance 
that regional teams are properly performing these reviews, the results 
are reliable, or the related decisions are appropriate.

Cost of Administering FSA's Programs:

As part of its effort to demonstrate that it has reduced the cost of 
administering its programs--one of the purposes established in the HEA-
-FSA is implementing an activity-based cost (ABC) model. FSA's proposed 
ABC model is intended to produce information on the full cost of 
administering federal student aid programs to help manage costs and 
measure performance. The model as designed will enable FSA to comply 
with federal managerial cost-accounting standards.[Footnote 30] When 
fully implemented, the proposed ABC model should facilitate progress 
toward meeting FSA's goal of identifying the full cost of its separate 
activities and determining the change in such costs over time. For 
example, using this model, FSA would be able to compare the changes in 
costs for using Free Application for Federal Student Aid (FAFSA) on the 
Web to the use of paper financial aid applications. Figure 3 summarizes 
FSA's model.

Figure 3: FSA's Activity-Based Cost Model:

[See PDF for image]

[A] FSA interviewed and surveyed staff to obtain information on 
activities and their costs.

[B] Other systems include those related to student financial aid 
programs such as the Debt Management and Collections System.

[End of figure]

However, FSA's proposed ABC model was not fully operational as of July 
2004. FSA has completed the initial design of the ABC model and has 
partially tested it using financial and nonfinancial workload data for 
fiscal years 2002 and 2003. During the test of the model using fiscal 
year 2002 data, FSA identified costs of more than $24.8 million that 
could not be assigned to a specific activity because insufficient 
information was known about these costs. Further, FSA had not fully 
reconciled the fiscal year 2002 costs used to test the model to total 
cost amounts reported in its audited financial statements. In March 
2004 FSA staff advised us that they plan to address both of these 
issues. In July 2004 FSA officials updated us on the status of their 
implementation efforts. FSA staff advised us that they had further 
tested the model using fiscal year 2003 data, including fully 
reconciling the fiscal year 2003 costs in the model to amounts reported 
in its audited financial statements. Further, FSA officials advised us 
that all fiscal year 2003 costs could be assigned to activities, and 
that they plan to use the knowledge gained from this effort to revisit 
and resolve the issues outstanding from the tests using fiscal year 
2002 data. FSA officials told us that FSA plans to complete testing its 
model and have it fully operational by spring 2005. When its cost model 
is fully operational, FSA plans to use the results to drive changes in 
how it does business, such as identifying targets for business process 
improvements and comparing resource allocations with results. FSA also 
expects to be able to measure changes in the cost of its program 
activities over time. Once FSA's cost model is fully tested and 
operational, FSA should be able to identify the full cost to administer 
its financial aid programs and reliably determine the changes in such 
costs over time.

FSA Has Not Completely Fulfilled Its Planning and Reporting 
Responsibilities:

The HEA requires FSA to develop a 5-year performance plan annually, and 
FSA issued its first one in June 2004. This plan covers fiscal years 
2004-2008 and contains five strategic goals referred to by FSA as 
strategic objectives: (1) integrating FSA systems and providing new 
technology solutions, (2) improving program integrity, (3) reducing 
program administration costs, (4) improving human capital management, 
and (5) improving products and services to provide better customer 
service. While FSA's 5-year performance plan provides a general 
discussion of each objective, it lacks measures for later determining 
the extent to which the objectives have been met. Furthermore, FSA's 
plan identifies a number of action steps, referred to as tactical goals 
by FSA. These steps, however, are not directly linked to a specific 
strategic objective, and some do not contain specific performance 
measures that can be used to assess progress over time. For example, 
FSA's 5-year performance plan describes the establishment of an office 
to serve as the central point of contact for all FSA projects and 
provides a general discussion of the office's purpose and activities. 
However, this action step is not linked to a particular strategic 
objective and does not include any measures or targets for assessing 
future progress.

FSA's 2004 annual plan does not fully complement its 5-year performance 
plan. FSA's annual plan lists annual goals, referred to as action items 
and success measures, but the success measures do not provide a means 
for assessing performance toward achieving longer-term strategic 
objectives. As shown in figure 4, an X in one or more related columns 
in the annual plan indicates which strategic objective or objectives 
the annual goal supports, but it does not indicate how achievement of 
the annual goal will result in progress toward the strategic objective 
or objectives. In addition, in reviewing the 2004 plan, we found that 
the annual plan contained six strategic objectives, while the 5-year 
performance plan for fiscal years 2004-2008 contained five.[Footnote 
31] According to FSA officials, the sixth goal was identified while the 
5-year performance plan was going through the review process. FSA did 
not add the sixth goal to this plan before it was finalized because it 
did not want to delay the plan's issuance. However, FSA officials said 
that they would add it to the 2005-2009 performance plan.

Figure 4: Illustration of a Segment of FSA's Annual Plan:

[See PDF for image]

[End of figure]

FSA's annual performance report for fiscal year 2003 does not conform 
to the requirements of HEA or GPRA.[Footnote 32] FSA is to issue an 
annual performance report that includes an evaluation of the extent to 
which the agency met the strategic objectives established in its prior 
year's 5-year performance plan. Although FSA had not previously 
prepared a performance plan, it had strategic objectives and annual 
goals, and its 2003 performance report clearly discusses FSA's 
achievement of its annual goals. The report also provides a general 
discussion of its accomplishments under each strategic objective.

However, the performance report does not include measures or trend data 
by which the Congress could clearly see the extent of FSA's progress, 
because, as previously noted, the annual plans did not provide a means 
for assessing performance toward achieving strategic objectives. For 
example, under its objective to improve program integrity, FSA 
describes the Late Stage Delinquency Assistance Program as an 
initiative to mitigate potential defaults in the Direct Loan Program by 
eliciting assistance from schools in locating and contacting borrowers 
prior to default. The report states that initial results are promising 
but does not provide a measure of the extent to which this effort 
contributes to the overall program integrity objective or the extent of 
the agency's progress in meeting this strategic objective. Further, the 
report does not include all required information regarding the COO and 
senior officials. The report summarizes the bonus amounts paid but does 
not include performance-rating information for the COO and senior 
officials, as required.

FSA Has Developed a Human Capital Strategy and Taken Steps to Increase 
the Accountability of Officials, but Both Efforts Have Weaknesses:

FSA has laid the foundation for a comprehensive human capital strategy 
and has taken steps to further its efforts to address the 
accountability of senior officials, but some of the human capital 
strategy's components and the accountability system have weaknesses. 
For example, FSA's draft succession plan identifies the staff that are 
eligible to retire in the next few years, but the plan relies heavily 
on redistributing workloads to other employees, and none of the 
strategy's other components described how these individuals would be 
trained to fulfill these duties. FSA has taken added steps to increase 
accountability for senior officials, such as holding them responsible 
for achieving individual goals specified in annual agreements and 
changing the way bonuses are awarded. However, we found that the new 
criteria for awarding bonuses for senior officials was unclear and 
could undermine other efforts to increase accountability, such as 
making greater distinctions in performance by using a new performance 
management system.

FSA Has Developed a Human Capital Strategy, but Some of its Components 
Have Weaknesses:

FSA has undertaken steps to develop a comprehensive human capital 
strategy in part because of issues raised in our previous reports; 
however, we found weaknesses with some of the strategy's 
components.[Footnote 33] FSA officials told us that they worked in 
collaboration with an organization that specializes in government 
workforce issues to develop a document that summarizes the various 
components of its human capital strategy.[Footnote 34] Agency officials 
provided us with a copy of its final human capital plan at the end of 
July 2004. Our work and guidance in this area indicates that in 
developing a human capital strategy, leading agencies identify talent 
at all levels of the organization, emphasize developmental projects for 
staff, address human capital challenges specific to the organization, 
and facilitate broader transformation efforts, such as training, to 
address organizational needs that position the organization to meet its 
future challenges.[Footnote 35] FSA's human capital plan indicates that 
the agency has strategies that include many of these practices. For 
example, the plan outlines challenges the agency will likely face in 
coming years and discusses recognized weaknesses and challenges, such 
as the need to develop the skills of staff and maintain the focus of 
the agency's leadership on human capital issues.

However, we found weaknesses in some of the strategy's components. 
FSA's succession plan identifies likely retirements but relies on a 
short-term solution--shifting duties to other staff. As for one of its 
components used to develop staff skills, the learning coupon staff can 
use for external training, FSA has not established a method to fully 
evaluate its usefulness. Also, FSA's realignment plan may be delayed 
because the agency has not reached agreement on its implementation with 
union officials. Table 1 lists and briefly describes the five key 
components of FSA's human capital strategy.

Table 1: Components of FSA's Human Capital Strategy:

Component name: Succession plan; 
Description of component: An approach for identifying, training, and 
transitioning future leaders into roles without impairing business 
objectives.

Component name: Staff realignment project; 
Description of component: A proposal to reorganize the workforce that 
includes targeted voluntary early retirements and separation incentive 
payments.

Component name: Skills Catalog; 
Description of component: An inventory of required skills for FSA 
positions.

Component name: Online learning tools and training resources; 
Description of component: Learning tracks; 
* Web-based curriculum that supports a set of competencies needed to 
perform a specific job; 
Description of component: Career Zone; 
* An office that manages internal training courses and provides 
counseling to staff to help them match individual skills and career 
planning with organizational priorities; 
Description of component: Learning coupon; 
* $500 benefit for external training courses.

Component name: Recruitment plan; 
Description of component: Methods for recruiting, hiring, and 
retaining staff.

Source: GAO analysis of 2004 FSA draft human capital plan and other FSA 
materials.

[End of table]

Furthermore, FSA does not maintain an information system to track staff 
development--a critical piece in strategic workforce planning. 
According to agency officials, FSA staff members have access to a 
number of stand-alone human capital information systems, including one 
housed at the department that contains data on training courses taken 
by staff. However, an official described this system as outdated and 
said that it did not allow staff to create individual development plans 
or provide data that managers needed for other agency planning efforts, 
such as its succession plan. Our previous studies indicate that 
information systems play a critical role in workforce planning. Valid 
and reliable data on knowledge and skills of staff are critical to 
assessing an agency's current and future workforce gaps. With such 
data, agencies can minimize these gaps and better manage risk by 
allowing managers to spotlight areas for attention and take appropriate 
actions before crises develop. A senior official agreed that the agency 
does not have systems that allow the agency to track staff development 
but also said that an independent system was not a good investment 
because of the ongoing efforts by Education to procure a departmentwide 
human capital management system.

Succession Plan:

FSA prepared a draft succession plan that addresses, in part, the 
concerns we raised in 2002 about the pending retirement of senior 
employees in key positions across the agency.[Footnote 36] This draft 
plan identified almost 250 employees from across the agency that are 
likely to retire between 2003 and 2006, about 22 percent of the 
agency's workforce. Also, the plan designated 167 of the positions as 
critical positions that help FSA achieve its organizational goals and 
identified 31 positions as "hard to fill" because specific skills and 
program knowledge are required to perform the duties related to these 
positions. When these hard-to-fill positions become vacant, FSA plans 
to fill one-third of the positions through internal hiring; one vacancy 
will be filled through a mentoring opportunity.

However, the succession plan did not include information about all 
positions and relied on short-term solutions. The plan did not include 
any information for 12 positions, 10 of which are in regional offices 
and include responsibility for oversight of lenders, banks, and 
guaranty agencies. Moreover, according to the plan, FSA will 
redistribute the workload to existing staff for 140 of the 247 
positions but the strategy's components do not discuss how the agency 
will use developmental projects or training to prepare these staff to 
assume these duties. We previously reported that training and 
developing new and current staff to fill new roles and work in 
different ways would be a crucial part of the federal government's 
endeavors to meet future challenges.[Footnote 37] Agency officials 
acknowledge that this is a short-term approach but stated that it will 
allow them time to consider the full range of options to best position 
its resources while getting the job done. Our work and guidance in this 
area indicates that leading organizations develop succession plans that 
strategically focus on both the organization's current and future 
capacity. Leading organizations are shifting from a short-term 
replacement approach that identifies individuals for a specific vacancy 
to a strategic approach that identifies and develops high-potential 
individuals. Using certain approaches, such as shifting duties from 
retired staff to those who remain--even in the short term--may put the 
agency at risk because staff may not be prepared to adequately fulfill 
new duties. As a result, essential functions of the agency may suffer.

Staff Realignment and Early Out Proposals:

FSA's human capital strategy includes proposals to realign its 
workforce and offer early out packages to staff, but as of August 2004, 
the union had not agreed to either proposal. The realignment proposal 
would affect the Application, School Eligibility, and Delivery Unit 
(ASEDS), which has more than 530 employees--nearly half of the agency. 
This proposal states, among other things, that FSA would eliminate the 
office responsible for providing specific, program-related training for 
schools participating in the Direct Loan program because it has decided 
to adopt an approach that supports all schools and all student aid 
programs. As a result of the realignment, some staff from this office 
will be reassigned to other units, as needed. For other staff, the 
proposal states that because they have skills that no longer align with 
the agency's needs, it would be more cost-effective for the 
organization to offer "early out packages" than to engage in an 
extensive retraining effort. FSA's second proposal, which is related to 
but not dependent on the implementation of the realignment proposal, 
would allow some employees to retire early or receive voluntary 
separation payments.[Footnote 38] The early out packages are intended 
to provide the agency with greater flexibility in managing its 
workforce and recruiting workers with needed skills. This proposal 
states that using this approach, vacancies will be created that will 
allow FSA to hire individuals that possess the requisite skills.

However, FSA and union officials had not reached agreement on the 
realignment proposal and had yet to begin discussions on its early out 
proposal. According to an agency official, the realignment proposal was 
developed over a 6-month period. At the end of May 2004, after the 
Secretary of Education gave his approval, FSA submitted the realignment 
proposal to the union. The collective bargaining agreement between FSA 
and its union states that the union should have the opportunity to 
review actions affecting any aspect of employee working conditions, 
including those related to training, development, and appraisals. This 
agreement requires FSA to share proposals with the union after 
receiving approval by the department--which it did. An agency official 
told us that FSA had not received input from labor union officials on 
the agency's proposed realignment and that union officials had 
requested additional information before agreeing to meet with FSA 
officials to discuss the proposal. As of August 2004, FSA had informed 
the union that it had met its collective bargaining obligations and 
would proceed with the implementation of the realignment proposal 
during September 2004. As for the early out proposal, FSA officials 
told us that it received approval from the Secretary in early June, and 
by the month's close he requested authority from Office of Personnel 
Management (OPM) to offer early out packages (i.e., early retirement 
options and voluntary separation buyouts). FSA has informed the union 
of this proposal and indicated that it would wait until OPM granted 
approval before entering into collective bargaining with the union. As 
of August 2004, FSA had not received approval from OPM for the early 
out packages.

Skills Catalog:

In an effort to identify the skills and competencies required to 
perform at all levels of the agency, FSA revised its Skills Catalog, 
which should enable staff to independently plan their professional 
development. The catalog was originally created in 2000 and was revised 
based on a series of interviews with senior managers and subject matter 
experts throughout the agency. Its purposes are to (1) provide a common 
tool for management and staff to set expectations, (2) help employees 
identify opportunities for development through courses offered 
externally or by FSA, and (3) assist managers in future workforce 
planning efforts. FSA's 5-year plan indicates that one potential use of 
the Skills Catalog would be to identify gaps in critical competencies 
and provide employees with information on when and where additional 
training and development are needed. We previously reported that 
effective training and development programs are an integral part of a 
learning environment that can enhance the federal government's ability 
to attract and retain employees with the skills and competencies needed 
to achieve results.[Footnote 39] FSA encouraged its employees to think 
of the catalog as a restaurant menu through which they would place an 
order to address their individual development needs and contribute to 
the agency's objectives. In addition to listing a set of core 
competencies that every FSA employee is expected to 
demonstrate,[Footnote 40] the catalog defines three competency areas 
for each organizational unit consisting of functions, skills, and 
knowledge. FSA has developed draft competencies for all units. For 
example, selected competencies listed in the Skills Catalog for staff 
in the office of the Chief Financial Officer are summarized in Figure 
5.

Figure 5: Selections from FSA's Skills Catalog: FSA's Office of the 
Chief Financial Officer:

[See PDF for image]

FSA-wide core competencies: 
Business ethics; 
Continuous learning and improvement; 
Customer service; 
FSA business knowledge; 
Time and task management; 
Results orientation; 
Interpersonal skills; 
Oral and written communication; 
Technology literacy. 

Chief Financial Officer: Functions: 
Contract management; 
Reconciliation of FSA data; 
Federal financial management; 
Budget presentation and justification; 

Chief Financial Officer: Skills: 
Budget formulation; 
Research and analysis; 
Presentation; 
Customer service and support;

Chief Financial Officer: Knowledge: 
Budget concepts and practices; 
Chief Financial Officer Act; 
Credit Reform Act; 
Generally Accepted Accounting Principles. 

[End of table]

Source: FSA Skills Catalog, Summer 2004 (draft).

[End of figure]

Online Learning Tools and Training Resources:

FSA introduced online learning tools as an added resource for some 
staff who are responsible for providing oversight and determining 
eligibility of schools. FSA developed unit-specific online tools, 
called learning tracks, designed to improve the skills needed to 
perform everyday tasks. FSA created five online tools in fiscal year 
2003, and agency officials told us that they plan to introduce more 
online tools by fiscal year 2005 that further address organizational 
needs, such as tools to enhance communication and supervisory skills. 
An FSA official said that the development of these online tools would 
be a key part in the agency's efforts to strengthen program integrity. 
According to a draft document on the tools, the development of learning 
tracks would shift the agency away from developing an entire agencywide 
curriculum based on particular position descriptions and toward 
developing resources for specific on-the-job skills. Officials told us 
that learning tracks have been introduced to divisions in ASEDS that 
perform case management and oversight and determine school eligibility. 
These learning tracks target the development of skills, such as data 
analysis and comprehension, leadership, and critical thinking.

Also, FSA continued to support internal and external training 
opportunities. FSA offered a wide variety of courses internally through 
its Career Zone. In 2003 FSA expanded this office, and contracted 
services from two full-time career counselors who began providing 
individualized career counseling sessions and career development 
courses. FSA also continued to offer its staff a $500 learning coupon, 
to pay for technical and work-related external training courses. 
Officials told us that the coupon was part of an effort to enable 
employees to take a proactive approach to planning their professional 
development. Around 40 percent of FSA's staff used the learning coupon 
during fiscal years 2003 and 2004, although the agency had allocated 
sufficient funds to provide this benefit for up to 50 percent of the 
staff. While the agency has surveyed staff that used the learning 
coupon, officials told us that they were not certain why more staff did 
not use it.[Footnote 41] Our work in this area shows that evaluation is 
an integral part of planning that allows agencies to build upon lessons 
learned and improve performance. Because the agency has surveyed only 
coupon users, officials cannot be assured that the learning coupon is 
an effective tool for helping staff develop their skills or that these 
funds are being budgeted for likely needs. Officials indicated that 
they had plans to broaden their efforts to survey all staff to better 
understand perceptions about the coupon.

Recruitment:

To fill vacancies, FSA plans to use a variety of techniques and to 
recruit nationwide, governmentwide, and internally. FSA also plans to 
recruit interns and subsequently offer, to those who perform well, 
permanent positions. In addition, FSA will continue to use the 
flexibilities allowed in the HEA for hiring senior executives and 
technical staff. According to the plan, FSA will use these 
flexibilities to address critical agency needs such as in the 
information technology area.

FSA Has Taken Steps to Increase the Accountability of Officials, but 
Its Criteria for Awarding Bonuses Are Not Clear:

FSA has taken steps to increase the accountability of its senior 
officials--one of its purposes as a PBO.[Footnote 42] FSA modified its 
performance measurement system, emphasized individual achievement of 
goals, and provided bonuses based on individual performance. However, 
we found that the criteria for awarding bonuses to senior officials 
were not clear.

Beginning in 2001, as a result of a departmentwide initiative, FSA 
adopted new performance appraisal systems for all of its employees, 
including its SES members and senior managers, to provide the agency 
with the ability to make greater distinctions in performance.[Footnote 
43] Before the new systems were adopted, all department employees were 
evaluated on a pass-fail basis. The new system for SES uses three 
performance levels, while the new system for senior managers and others 
uses five performance levels.[Footnote 44] Our body of work in this 
area suggests that effective performance management systems allow 
organizations to make meaningful distinctions in performance.[Footnote 
45] By utilizing multiple performance categories, FSA has improved its 
ability to make distinctions in performance among its senior officials 
and increase accountability.

The 2003 performance agreements we reviewed for both types of senior 
officials--SES and senior managers--emphasized individual achievement 
of goals. Prior to 2003, performance agreements specified (1) how a 
senior official's performance would be evaluated; (2) individual 
projects and activities to be performed by the official; and (3) six 
organizational, or "cross-cutting," goals to which all senior officials 
were expected to contribute.[Footnote 46] For the 2003 performance 
period, SES agreements for senior officials included three performance 
element groups: (1) leadership, management, and coaching; (2) work 
quality, productivity, and customer service; and (3) organizational 
priorities/job specifics. For each senior official at FSA, the 
organizational priorities/job specifics performance element primarily 
consisted of unique individual goals for which the official has 
responsibility and for which he or she is held accountable. However, 
FSA's emphasis on individual goals still included the use of 
organizational, or cross-cutting, goals--only to a lesser extent. But 
we also found that the use of such goals has become more strategic. 
FSA's fiscal year 2003 annual plan contained at least four such cross-
cutting goals, including goals to implement a data strategy and enhance 
program monitoring and oversight. Having performance agreements that 
consist of both job-specific individual and cross-cutting 
organizational goals reinforces accountability for both individual and 
organizational success. We view the use of collaborative efforts as a 
key practice in achieving results. Figure 6 illustrates the change from 
organizational goals used in the fiscal year 2002 performance 
agreements to individual goals in FSA's 2003 performance agreements.

Figure 6: Change in FSA's Performance Agreements from Organizational 
Goals in Fiscal Year 2002 to Individual Goals in Fiscal Year 2003:

[See PDF for image]

[End of figure]

The HEA specifies that performance agreements should reflect the 
organization's measurable performance goals. However, not all 
individual goals in the performance agreements we reviewed were aligned 
with FSA's annual plan.[Footnote 47] We were provided the 2003 
performance agreements for 11 senior officials and found that 6 of them 
had goals that were not included in FSA's 2003 annual plan.[Footnote 
48] According to FSA officials, some of these individuals were serving 
in acting capacities and would not have performance agreements that 
directly conformed to the organization's annual plan until they assumed 
the jobs permanently. Additionally, FSA officials stated that many of 
the goals for these 6 senior officials were not included in the fiscal 
year 2003 annual plan because the plan did not include daily 
operational activities. For instance, the duties of the Ombudsman were 
not included in the fiscal year 2003 annual plan. The Ombudsman's 
agreement required that official to identify regulatory limitations 
that may serve as the basis for borrower complaints and to meet 
statutory mandates for distributing public information, among other 
things. Other senior officials had daily operational activities 
included in their performance agreements, such as (1) ensure that all 
FSA contracts support the core operation and support functions required 
to implement the agency's organizational strategy, and (2) acquire 
knowledge of all collection group activities, including information 
systems and staff duties. According to agency officials, FSA has 
changed its approach for constructing its annual plan and included 
daily operational activities as well as the top organizational 
priorities in its fiscal year 2004 plan.

FSA also changed the way bonuses are awarded to senior officials to 
emphasize individual performance, but the criteria used to make these 
decisions are not readily apparent. In previous years, bonuses were 
awarded to senior officials based in equal parts on a manager's overall 
contributions to the organization and achievement of the organizational 
goals. Beginning in fiscal year 2003, FSA's COO took steps to modify 
this practice by basing performance awards on the achievement of goals 
related to each official's area of responsibility. According to the 
COO, this approach better ensures that only officials who have achieved 
goals important to the organization receive bonuses. Under the previous 
system, a manager that accomplished some, but not all, of his or her 
goals could still receive a bonus if the organization as a whole was 
successful. The COO told us that this arrangement had a crippling 
effect on accountability in the organization. By making officials 
accountable for individual goals, FSA can reward individuals that are 
successful even when the organization as a whole is not. We were also 
told that under the new system for awarding bonuses, the COO could make 
distinctions based on the level of responsibility carried by managers-
-those who accomplish tasks that diminish the risks and challenges 
faced by FSA could receive bigger bonuses than those who perform 
equally well but are in jobs that are considered less demanding. For 
example, it is possible for a manager who is responsible for systems 
integration to receive a larger bonus than a manager of an area deemed 
less critical, even if both received the same rating.

However, FSA has not established or communicated its criteria for 
awarding bonuses, which has the potential to undermine its other 
efforts to increase accountability of officials. Under the previous 
system, the criteria were articulated in managers' performance 
agreements. Specifically, the agreements stated that 50 percent of the 
bonuses would be determined based on a manger's overall contributions 
to the organization and the other 50 percent would be determined based 
on whether the agency as a whole was successful. The new agreements do 
not include such information. When we asked some senior officials to 
explain the criteria to us or provide related documentation, we were 
referred to the COO. The COO discussed the criteria and noted that the 
process for awarding bonuses was still under review. However, we were 
told that every manager was familiar with the process. The COO also 
stated that the final determination of whether or not a manager 
received a bonus was at the COO's discretion. Furthermore, responsible 
agency officials provided us with inconsistent information as to which 
senior officials received bonuses. Although the agency has taken 
additional steps to increase the accountability of its officials, the 
lack of clear criteria and transparency in the process for awarding 
performance bonuses could undermine the other efforts to increase 
accountability, such as using a system with three performance levels to 
evaluate and distinguish performance. Part of fostering a results-
oriented culture requires having a process for making awards for 
contributions to the organization in a way that is consistent, 
reliable, and transparent.

Conclusions:

FSA has devoted substantial time and resources to addressing management 
weaknesses and has made significant progress in some areas. However, 
FSA has not fully addressed all requirements established by the 
Congress when it created FSA as a PBO, or all concerns raised by others 
and us, and therefore, FSA needs to continue its efforts to improve its 
operations. Further, systems integration projects will continue for 
several years, and new challenges that could require different efforts 
and approaches to ensure program integrity may emerge.

FSA has taken steps to enhance the integrity of its programs and 
reported that its comprehensive compliance reviews were a significant 
part of this effort. However, FSA does not have guidance for its review 
teams to direct them in performing these reviews. Therefore, FSA cannot 
be certain that these reviews are being done consistently and 
appropriately. Thus, problems at some schools may go undetected.

While FSA has issued a 5-year performance plan, it has not fully met 
its planning and reporting responsibilities. FSA's plans and reports 
could be more clearly linked to facilitate review and determination of 
progress made. FSA's new 5-year performance plan is a good starting 
point for serving as the framework for setting agency goals and 
objectives and for preparing its annual plans and reports. But the 
action steps in the annual plan were not clearly linked to its 
strategic objectives in its 5-year performance plan and did not always 
include specific performance measures. As for its performance report, 
FSA did not include measures or trend data in the report as required. 
Without such information in the performance report, FSA has not clearly 
informed the Congress or the public about its progress toward achieving 
its purposes established by law.

FSA has also made progress in addressing its human capital management 
challenges, but weaknesses remain. The succession plan did not identify 
developmental projects or training for staff that would assume the 
duties of those who retired. These staff may not be able to perform 
their new duties, and the agency may not have staff with needed skills 
in all positions. As a result, the agency's ability to continue to make 
progress and fulfill its mission in an effective and efficient way may 
be hindered. Further, although FSA has devoted funds for the use of 
learning coupons to support external training, it does not know why 
these coupons are underutilized because the agency has not surveyed all 
of its employees to ascertain their views about their usefulness. 
Systematic evaluation of human capital initiatives is an integral part 
of planning that allows agencies to improve and invest wisely. Without 
such evaluation, FSA may not be investing its resources wisely. If FSA 
has excess funds budgeted for its learning coupons, funds may not be 
available to support other programs or agency projects.

Further, although FSA has taken several steps to increase the 
accountability of its senior officials, the agency has not clearly 
communicated its criteria for awarding bonuses to senior officials. 
This lack of clear criteria for awarding bonuses could undermine its 
other efforts, such as its performance evaluation system, that have 
helped to foster a culture of accountability at FSA.

Recommendations to the Secretary of Education:

We are making five recommendations to help FSA enhance its strategic 
planning and improve its human capital management planning. These 
recommendations will help FSA to fulfill its responsibilities under the 
HEA; strengthen efforts to protect its programs from fraud, waste, and 
abuse; or improve its human capital management initiatives.

We recommend that the Secretary of Education direct FSA's Chief 
Operating Officer to:

* issue clear guidance and detailed directions for teams to follow when 
performing comprehensive compliance reviews;

* develop 5-year performance plans with action steps that are linked to 
FSA's strategic objectives and with specific performance measures or 
targets for its objectives; and include measures or trend data in FSA's 
performance reports that clearly demonstrate whether the agency has 
made progress toward achieving its strategic objectives;

* revise the succession plan to include approaches that focus on the 
current and future capacity and needs as well as provide developmental 
projects or training for staff to prepare them to fulfill new duties;

* enhance systematic evaluation activities for its human capital 
initiatives such as the learning coupon; and:

* establish and communicate clear criteria for awarding bonuses to 
senior staff.

Agency Comments and Our Evaluation:

In written comments on a draft of this report, FSA generally agreed 
with our findings and recommendations. Specifically, FSA stated that it 
plans to or has taken steps to address four of the five recommendations 
made in this report. FSA stated that it is developing comprehensive 
guidance for conducting compliance reviews, creating appropriate 
measures or trend data in its 5-year plan, and revising individual 
performance plans to include an explanation of the awarding of any 
performance bonuses. FSA also said that it has revised its succession 
plan. However, we were not provided a copy of this plan. FSA did not 
specifically address the fifth recommendation--to enhance its 
evaluation of human capital initiatives such as the learning coupon--in 
its comments.

In addition, FSA stated that it has made significant progress in the 
area of systems integration. We agree that FSA has taken important 
steps toward establishing the necessary technical infrastructure to 
support its system integration. However, as previously stated in the 
report, FSA does not plan to complete all three major initiatives that 
are essential to achieving full integration of the systems supporting 
its student financial aid programs until 2008. Thus, fully meeting the 
requirement to integrate its systems, as established in the Higher 
Education Act in 1998, remains several years away.

FSA also provided technical corrections and comments that we 
incorporated where appropriate.

We are sending copies of this report to the Secretary of Education, the 
Chief Operating Officer of Education's Office of Federal Student Aid, 
the Director of the Office of Management and Budget, and appropriate 
congressional committees. Copies will also be made available to other 
interested parties upon request. Additional copies can be obtained at 
no cost from our Web site at www.gao.gov.

If you or your staff should have any questions, please call me at (202) 
512-8403. The key contributors to this report are listed in appendix V.

Signed by: 

Cornelia M. Ashby: 
Director, Education, Workforce, and Income Security Issues:

[End of section]

Appendix I: Scope and Methodology:

Overall Approach:

We performed several steps that contributed to both objectives of this 
review. We reviewed relevant laws and documentation, and we reviewed 
pertinent reports prepared by the Department of Education's Office of 
the Inspector General as well as our previously issued reports, 
testimonies, and other correspondence. Specifically, we analyzed the 
Higher Education Act (HEA) to understand the Title IV programs and to 
understand the purposes and requirements established for the Office of 
Federal Student Aid (FSA) when the Congress designated the agency as a 
performance-based organization (PBO). We analyzed key documentation 
that would provide insight about the agency's efforts to address the 
key management issues and human capital challenges. We also obtained 
and reviewed several reports prepared by the Department of Education's 
Office of the Inspector General that relate to these issues and 
challenges. We reviewed all GAO reports, testimonies, and 
correspondence issued since 2000 that discussed FSA or the student loan 
programs. We also reviewed GAO recommendations related to FSA and 
identified those that have been implemented as well as those that 
remained open as of July 10, 2004. For open recommendations, we talked 
with agency officials and obtained and reviewed the corresponding 
internal corrective action plans.

We also attended briefings presented by senior FSA officials and 
interviewed FSA and Department of Education officials to understand 
their plans and reasons for taking actions related to addressing the 
key management issues and the human capital matters. During January and 
February of 2004, we attended nine briefings presented by senior FSA 
officials on topics that would serve as the foundation for our work. 
These briefings were entitled (1) Financial Management and Internal 
Control, (2) FSA's High-Risk Designation/Management Improvement Team, 
(3) Default Prevention and Management, (4) Systems Integration, (5) 
Program Integrity, (6) PBO Accountability, (7) Human Capital 
Management, (8) FSA's Activity-Based Cost Model, and (9) FSA's Progress 
on Reducing Administrative Costs. Following these briefings, we 
interviewed senior officials and responsible program managers and had 
several meetings, phone conversations, and e-mail exchanges to follow 
up on and further clarify the information presented at the briefings.

Objective I: Key Management Issues:

In addition to taking our overall approach, we took specific steps to 
address the first objective--the extent to which FSA has made progress 
addressing key management issues related to financial management, 
systems integration, program integrity, and administrative costs, and 
fulfilling its planning and reporting responsibilities. We reviewed the 
guidance related to the Federal Financial Management Improvement Act 
because auditors found that the Department of Education and FSA did not 
comply with the act's requirements because of computer security 
weaknesses. We also reviewed the Government Performance and Results Act 
(GPRA) because the HEA stated that FSA's reporting requirements had to 
be consistent with GPRA and other laws.

We reviewed and analyzed numerous documents related to the topics 
covered in this objective. These documents included:

Financial management:

* audit reports submitted by auditors from Ernst and Young for fiscal 
years 2002 and 2003;

* corrective action plan for addressing reportable conditions 
identified in FSA's 2003 financial statement audit report;

* data summarizing erroneous payments for 2000-2002; and:

* administrative cost model and components:

Systems integration:

* information on FSA's enterprise architecture plans and documentation, 
such as its sequencing plan for transitioning from baseline to target 
architecture;

* business cases and timeline documents for the three major systems 
integration projects--Front-End Business Integration (FEBI), 
Integrated Partner Management (IPM), and Common Services for Borrowers 
(CSB);

* information documenting FSA's inventory of major legacy systems, 
including consolidation, retirement, and reengineering of some existing 
systems; and:

* information on the solicitation and request for proposal for the FEBI 
project:

Program integrity:

* proposed legislation for conducting IRS data matches;

* memoranda of understanding regarding data sharing with agencies such 
as the Social Security Administration and the Department of Justice;

* quality control procedures for determining student and school 
eligibility, and program monitoring;

* 2001 Program Review Guide for Case Management and Oversight and 
School Performance Improvement and Procedures Guidance;[Footnote 49]

* School Eligibility Channel: Case Management Process Model;

* inventory of 60 default management and prevention initiatives;

* Authentication Plan for New Foreign Schools;

* foreign school training module and lesson list;

* Student Financial Aid Handbook, Volume 2--School Eligibility and 
Operations, 2004-2005;

* Guidelines for Case Managing Services for New Title IV Participants, 
October 17, 2003;

* Default Prevention Workgroup charter and FSA-wide approach to default 
prevention strategies briefing slides, May -September 2003:

* minutes from Debt Management/Default Prevention Management group 
meeting September 10, 2003; and:

* Exit Counseling Guide for Direct Loan Borrowers:

Planning and reporting:

* annual plans for fiscal years 2002, 2003, and 2004;

* annual performance report for fiscal year 2003; and:

* draft and final 5-year performance plan covering fiscal years 2004-
2008.

We met with several senior FSA officials as well as responsible program 
managers. We met with officials from the agency's Chief Financial 
Office to discuss financial management, financial audits, and 
statements and its activity-based cost model. We met with officials 
from the office of the Chief Information Officer to discuss the 
agency's system integration efforts and sequencing plan, enterprise 
architecture, and current procurement projects related to systems 
integration such as Common Services for Borrowers. We met with 
officials in the Case Management and Oversight Office to discuss their 
procedures for monitoring schools and providing technical assistance 
and with officials that participate in FSA's Default Management Group.

Objective II: Human Capital:

We also took specific steps to determine whether FSA had created a 
comprehensive human capital plan and taken steps to increase the 
accountability of its officials. Several GAO publications and guidance 
documents on strategic workforce planning served as the criteria for 
our analyses. These publications included:

* Human Capital: Senior Executive Performance Management Can Be 
Significantly Strengthened to Achieve Results, May 2004, (GAO-04-614);

* Human Capital: A Guide for Assessing Strategic Training and 
Development Efforts in the Federal Government, March 2004, (GAO-04-
546G);

* Human Capital: Key Principles for Effective Strategic Workforce 
Planning, December 2003, (GAO-04-39);

* A Model of Strategic Human Capital Management, March 2002, (GAO-02-
373SP); and:

* Human Capital: A Self-Assessment Checklist for Agency Leaders, 
September 2000, (GAO/OCG-00-14G).

We obtained and reviewed the agency's documents related to its human 
capital planning and accountability measures. We analyzed FSA's draft 
human capital plan, its final version, and documentation related to its 
succession planning, reorganization efforts, staff deployments and 
buyout proposals, recruitment, Skills Catalog, and training resources. 
We were provided and reviewed hard copy information related to its 
online learning tools, but because these tools reside on the agency's 
intranet we did not analyze and review these materials firsthand. We 
also reviewed the Department of Education's Personnel Manual 
Instruction 430-2, dated November 6, 2002, entitled Education 
Department Performance Appraisal System (EDPAS) and the Department of 
Education's Personnel Manual Instruction 430-3, dated September 6, 
2001, entitled Senior Executive Performance Management System (SEPMS) 
since these are the systems used to assess FSA's senior officials. 
Additionally, we obtained and evaluated individual performance 
agreements, evaluation ratings, and data on bonuses awarded to senior 
officials and the Chief Operating Officer (COO).

We conducted several interviews with agency officials, and had an 
interview with a senior official from the union that represents FSA's 
employees. We talked with the agency's COO regarding past and present 
policies affecting performance agreements and bonuses. We also talked 
with the agency's human capital officer and other human resources staff 
regarding the agency's human capital strategy and plan, as well as the 
various components of the plan (i.e., the succession plan, and the 
Skills Catalog). During these meetings we also discussed past human 
capital initiatives and proposals for future initiatives. We also 
talked with a senior official from the agency's union, the American 
Federation of Government Employees, Council 252, to discuss its role in 
developing human capital policies and views about current proposals. We 
conducted our work for this engagement between November 2003 and August 
2004 in accordance with generally accepted government auditing 
standards.

[End of section]

Appendix II: GAO Recommendations to Education Related to Student 
Financial Aid and Status of Their Implementation:

Report: Financial Management: Poor Internal Controls Expose Department 
of Education to Improper Payments. September 2001 (GAO-01-1151); 
Recommendations: Establish appropriate edit checks to identify unusual 
grant and loan disbursement patterns; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Closed--implemented.

Report: Financial Management: Poor Internal Controls Expose Department 
of Education to Improper Payments. September 2001 (GAO-01-1151); 
Recommendations: Design and implement a formal, routine process to 
investigate unusual disbursement patterns identified by edit checks; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Closed--implemented.

Report: Education Financial Management: Weak Internal Controls Led to 
Instances of Fraud and Other Improper Payments. March 2002 (GAO-02-
406); 
Recommendations: Conduct on-site investigations, including interviews 
of school personnel and students at the 28 schools with characteristics 
similar to those GAO found that improperly disbursed Pell Grants to 
determine whether the grants were properly disbursed; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Closed--implemented.

Report: Education Financial Management: Weak Internal Controls Led to 
Instances of Fraud and Other Improper Payments. March 2002 (GAO-02-406); 
Recommendations: Follow up with the schools that had high 
concentrations of the $12 million in potential improper payments for 
which the department did not provide adequate supporting documentation; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Closed--implemented.

Report: Education Financial Management: Weak Internal Controls Led to 
Instances of Fraud and Other Improper Payments. March 2002 (GAO-02-
406); 
Recommendations: Implement a process to verify borrowers' Social 
Security numbers and dates of birth submitted by schools to the Loan 
Origination System; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Closed--implemented.

Report: Direct Student Loans: Additional Steps Would Increase 
Borrowers' Awareness of Electronic Debiting and Reduce Federal 
Administrative Costs. March 2002 (GAO-02-350); 
Recommendations: Update the Exit Counseling Guide for Borrowers to 
reflect the repayment incentives for Direct Loan borrowers who repay 
their loans through electronic debiting accounts (EDA) as well as 
borrowers' prepayment options; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Closed--implemented.

Report: Direct Student Loans: Additional Steps Would Increase 
Borrowers' Awareness of Electronic Debiting and Reduce Federal 
Administrative Costs. March 2002 (GAO-02-350); 
Recommendations: Take steps to inform EDA borrowers about steps they 
can take to prepay their loans. Such steps could include modifying EDA 
application to allow borrowers interested in prepaying their loans to 
designate withdrawal amounts in excess of their scheduled payments when 
they initially complete the EDA application; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Closed--implemented.

Report: Direct Student Loans: Additional Steps Would Increase 
Borrowers' Awareness of Electronic Debiting and Reduce Federal 
Administrative Costs. March 2002 (GAO-02-350); 
Recommendations: Consider renegotiating the fee provision in its 
contract with the Direct Loan servicer to eliminate the servicing fee 
for accounts with payments less than 7 days late; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Closed--implemented.

Report: Federal Student Aid: Additional Management Improvements Would 
Clarify Strategic Direction and Enhance Accountability. April 2002 
(GAO-02-255); 
Recommendations: Fully disclose in its performance plans and subsequent 
performance reports the bases of its unit cost calculation and clarify 
what costs are included in and excluded from the calculation; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Open--in process.

Report: Federal Student Aid: Additional Management Improvements Would 
Clarify Strategic Direction and Enhance Accountability. April 2002 
(GAO-02-255); 
Recommendations: 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; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Open[B].

Report: Federal Student Aid: Additional Management Improvements Would 
Clarify Strategic Direction and Enhance Accountability. April 2002 
(GAO-02-255); 
Recommendations: 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 default management goals; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Open--in process.

Report: Federal Student Aid: Additional Management Improvements Would 
Clarify Strategic Direction and Enhance Accountability. April 2002 
(GAO-02-255); 
Recommendations: Take steps necessary to ensure that complete and 
timely annual performance reports are submitted to the Congress; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Open[C].

Report: Federal Student Aid: Additional Management Improvements Would 
Clarify Strategic Direction and Enhance Accountability. April 2002 
(GAO-02-255); 
Recommendations: Coordinate closely with Education to develop and 
implement a comprehensive human capital strategy that incorporates 
succession planning and addresses staff development; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Open[D].

Report: Department of Education: Guaranteed Student Loan Program 
Vulnerabilities. November 2002 (GAO-03-268R); 
Recommendations: Implement a verification process to ensure that a 
foreign school applying to participate in the Federal Family Education 
Loan (FFEL) program actually exists and is recognized by an appropriate 
educational entity. Specifically, the Secretary should enter into a 
relationship with an organization such as the Department of State, 
which would verify the existence of a foreign school that applies for 
certification to participate in the FFEL program through site visits 
to the school and verification of its accreditation by local 
educational authorities; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Closed--implemented.

Report: Department of Education: Guaranteed Student Loan Program 
Vulnerabilities. November 2002 (GAO-03-268R); 
Recommendations: Review the process for certifying student loans and 
develop controls to prevent fictitious students from obtaining student 
loans; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Closed--implemented.

Report: Federal Student Aid: Progress in Integrating Pell Grant and 
Direct Loan Systems and Processes, but Critical Work Remains. December 
2002 (GAO-03-241); 
Recommendations: Develop metrics and baseline data to measure Common 
Origination and Disbursement (COD) benefits and develop a tracking 
process to assess the extent to which the expected results are being 
achieved; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Open--in process.

Report: Federal Student Aid: Progress in Integrating Pell Grant and 
Direct Loan Systems and Processes, but Critical Work Remains. December 
2002 (GAO-03-241); 
Recommendations: Establish a process for capturing lessons learned in a 
written product or knowledge base and for disseminating them to schools 
that have not yet implemented the common record; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Closed--implemented.

Report: Federal Student Aid: Timely Performance Plans and Reports Would 
Help Guide and Assess Achievement of Default Management Goals. February 
2003 (GAO-03-348); 
Recommendations: Produce a 5-year plan as required by HEA; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Open[E].

Report: Federal Student Aid: Timely Performance Plans and Reports Would 
Help Guide and Assess Achievement of Default Management Goals. 
February 2003 (GAO-03-348); 
Recommendations: Prepare and issue reports to the Congress on FSA's 
performance that are timely and clearly identify whether performance 
goals were met; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Open[F].

Report: Student Loans and Foreign Schools: Assessing Risks Could Help 
Education Reduce Program Vulnerability. July 2003 (GAO-03-647); 
Recommendations: Develop online training resources specifically 
designed for foreign school officials; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Open--in process.

Report: Student Loans and Foreign Schools: Assessing Risks Could Help 
Education Reduce Program Vulnerability. July 2003 (GAO-03-647); 
Recommendations: Undertake a risk assessment to determine how best to
ensure accountability while considering costs, burden to schools and 
students, and the desire to maintain student access to a variety of 
postsecondary educational opportunities. Further, after completing the 
risk assessment, if Education determines that legislative or regulatory 
changes are justified, the Secretary should seek any necessary 
legislative authority and implement any necessary regulatory changes; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Open--in process.

Report: Direct Student Loan Program: Management Actions Could Enhance 
Customer Service. November 2003 (GAO-04-107); 
Recommendations: Develop a process for collecting information from 
schools that decide to stop participating in the Direct Loan Program 
about the factors that influenced this decision and use this 
information to make improvements to the program; 
Status in GAO’s tracking system as of July 10, 2004[A]: 
Closed-Implemented. 

Source: GAO.

[A] GAO monitors agencies' progress in implementing recommendations. To 
accomplish this monitoring, GAO maintains information related to open 
recommendations in a Web-based automated program.

[B] FSA included a systems integration goal in its 5-year performance 
plan and annual performance report, but it did not meet all the 
requirements of the HEA.

[C] FSA submitted its 2003 annual report when due, but the report did 
not meet all the requirements of the HEA or GPRA.

[D] FSA developed a human capital strategy and succession plan in 
response to our 2002 report, but they have not been fully implemented.

[E] FSA issued its first 5-year performance plan in fiscal year 2004. 
However, the plan does not meet all the requirements of the HEA.

[F] FSA's annual performance report did not clearly identify whether 
strategic objectives had been met.

[End of table]

[End of section]

Appendix III: Definitions of Systems Supporting FSA's Student Aid 
Programs:

Central Data System receives recorded data from multiple loan 
origination systems, edits, and then sends the data to the Direct Loan 
Servicing System and the Financial Accounting and Reporting System.

Central Processing System uses information from both the paper-and Web-
based Free Application for Federal Student Aid (FAFSA) to calculate and 
confirm a student's eligibility for federal student financial 
assistance. This system includes the FAFSA on the Web, which is used by 
students to apply for federal student financial assistance via the 
Internet.

Common Origination and Disbursement System provides a common student 
record reporting system for requests, reports, and reconciliations 
related to both the Pell Grants and Direct Loans programs. This is a 
consolidated system consisting of three legacy systems--Pell Grant 
Recipient Financial Management System, Recipient Financial Management 
System, and Direct Loan Origination System.

Conditional Disability Discharge Tracking System stores loans for those 
borrowers being reviewed for permanent and total disability.

Debt Management and Collections System services all Title IV loans 
(Direct, Federal Family Education Loans, and Perkins) that have fallen 
into default. Also the system tracks rehabilitated loans, private 
collection agencies' referrals, or loans undergoing review by FSA.

Direct Loan Consolidation System consolidates student loan portfolios 
consisting of at least one Direct Loan.

Direct Loan Origination System records all Direct Loans awarded each 
year, tracks planned and actual disbursements, supports reconciliation, 
calculates eligibility amounts, books loans, and aggregates planned and 
actual disbursements by school.

Direct Loan Servicing System provides services to borrowers with Direct 
Loans while in school, in deferment status, or in repayment.

Electronic Campus-Based System tracks, at the school level, information 
related to campus-based funding; this includes receiving and processing 
Web-based applications from schools, calculating annual program awards, 
determining unused amounts, and processing appeals.

eZ-Audit provides a single point of submission via the Web for schools 
to submit financial statements and compliance audits.

Federal Family Education Loan System is used to pay interest and claims 
on defaulted loans to lenders and supports collection activity on 
student loans in default. This system consists of three consolidated 
program systems--Lender's Application Process (LAP), Lender's 
Reporting System (LaRS), and Form 2000.

Financial Accounting and Reporting System serves as the subsidiary 
ledger for the Direct Loan Servicing System, processing both cash and 
noncash financial transactions and then sending them to the 
department's general ledger.

Financial Management System provides a repository for financial 
information from all FSA programs. It is used to facilitate financial 
decision making and create reports for both internal and external 
customers.

National Student Loan Data System contains loan-and grant-level 
information; it is used by schools to screen student aid applicants to 
identify borrowers who are in default, have reached statutory loan 
limits, or are otherwise ineligible to receive aid.

Ombudsman Call Tracking System supports and tracks the life cycle of 
activities that will be required to process cases and supports and 
integrates with modules that support customer service, data center, 
call center, and service level agreement management functions.

Pell Grant Recipient Financial Management System records all Pell 
Grants awarded each year, tracks planned and actual disbursements, 
supports reconciliation, calculates eligibility amounts, aggregates 
planned Pell Grant disbursements by school and submits this information 
to the department's automated payment system to authorize drawdown of 
funds.

Postsecondary Education Participants System serves as FSA's management 
information repository for all entities participating in the Title IV 
student financial assistance programs. This system maintains 
eligibility and oversight data for schools, lenders, guarantors, and 
servicers and provides information to FSA's student aid delivery 
systems to ensure consistency.

[End of section]

Recipient Financial Management System records all Pell Grants awarded 
each year, tracks planned and actual disbursements, supports 
reconciliation, calculates eligibility amounts, aggregates planned 
Pell Grant disbursements by school and submits this information to the 
department's accounting systems to authorize drawdown of funds.

[End of section]

Appendix IV: Comments from the U.S. Department of Education:

FEDERAL STUDENT AID:

We Help Put America Through School:

CHIEF OPERATING OFFICER:

Ms. Cornelia Ashby: 
Director, Education, Workforce, and Income Security Issues:
United States Government Accountability Office: 
Washington, DC 20548:

SEP 02 2004:

Dear Ms. Ashby:

Thank you for the opportunity to respond to the U. S. Government 
Accountability Office's (GAO's) draft report entitled "Office of 
Federal Student Aid: Better Strategic and Human Capital Planning Would 
Help Sustain Management Progress" (GAO-04-922). Please note, to address 
specific updates and recommendations related to your draft report, I am 
attaching a document that includes technical corrections and comments 
for your consideration. We are happy to answer any questions on our 
technical corrections and comments and questions should be coordinated 
with Marge White at 202-377-3022.

We appreciate GAO's ongoing recognition of Federal Student Aid's 
(FSA's) significant progress in resolving financial integrity and 
management issues and sustaining improvements in the student financial 
aid programs. FSA has demonstrated strong commitment and senior-level 
leadership support for addressing issues and risks, ensured proper 
capacity in terms of staff and resources, and developed comprehensive 
action plans along with appropriate monitoring and validation 
procedures--resulting in sustained and meaningful progress. 
Specifically, FSA: 

* Institutionalized sound financial management and internal controls at 
every level, achieving unqualified audit opinions on both FSA's and the 
Department of Education's financial statements for fiscal year 2002 and 
2003 and eliminating all material internal control weaknesses in fiscal 
year 2003;

* Developed a multiyear sequencing plan for system and business process 
integration, completing several of the scheduled initiatives. FSA 
continues to make significant progress on future deliverables;

* Enhanced its program integrity efforts to ensure access to 
postsecondary education while reducing the vulnerability of student aid 
programs to fraud, waste, error and mismanagement;

* Reduced the default portion of the student loan portfolio from over 
16% in 1990 to 7% in 2003, as the overall outstanding student loan 
portfolio increased five-fold during that same period;

* Decreased the unit administrative cost of delivering student aid 
programs through efficiency and productivity gains in its business 
processes. These gains allow FSA to successfully manage dramatically 
increasing workloads;

* Implemented a comprehensive and strategic human capital management 
plan. The plan provides a detailed roadmap for addressing FSA's 
critical workforce issues, including leadership development and 
succession planning;

* Assembled an impressive senior leadership team possessing over 330 
years of experience in the private sector, the higher education 
community and in government. This team's world-class leadership and 
expertise ensures FSA achieves its strategic objectives, including 
managing the inherent risks in the programs; and:

* Aligned individual performance plans and goals for FSA's Management 
Council (those reporting directly to the Chief Operating Officer), 
other senior officials, and, in fact, for all FSA employees, to the 
accomplishment of FSA's strategic objectives and tied 100% of any 
potential annual bonus compensation to individual achievements and 
delivery of results.

In addition, FSA's accomplishments contributed to the Department of 
Education's achievement of "green" status on the President's Management 
Agenda (PMA) financial management initiative and enabled FSA to move to 
"green" on progress on the PMA initiative related to eliminating fraud 
and error in student aid programs and deficiencies in financial 
management.

FSA realized significant progress in the area of systems integration. 
This progress includes substantially completing the infrastructure 
required to support integration. We have installed middleware and 
deployed it throughout our business applications achieving efficiencies 
in and standardization of system interfaces. We established a 
centralized data center that hosts the majority of our applications. We 
successfully implemented a single FSA gateway for communication with 
our delivery partners and deployed portals and data marts to allow 
access to integrated data. We developed and implemented our integrated 
technical architecture, defined and published comprehensive technology 
standards, and completed our enterprise architecture.

With this foundation in place, the focus is on the continued 
consolidation and integration of business applications and processes 
running within our infrastructure. Because business requirements and 
technology change over time, we view this as a continuous endeavor, not 
a project with a beginning and an end. Since becoming a performance 
based organization (PBO), FSA has consolidated and integrated numerous 
applications and processes and will continue to do so as currently 
defined in its sequencing plan and as business requirements dictate. We 
implemented an integrated financial management system, consolidated our 
Pell Grant and Direct Loan origination and disbursement systems, 
retired our Central Data System, consolidated our guarantor and lender 
payment processing systems, and developed common records for our 
customers to use in communications with us. As we shared with you, our 
current integration efforts include Common Services for Borrowers 
(CSB), Integrated Partner Management (IPM), and the initiative to 
further integrate our front-end business systems and processes (FEBI).

To continue to improve monitoring and oversight, FSA is further 
enhancing its internal procedures and management controls to provide 
additional guidance for staff who perform comprehensive compliance 
reviews of its school partners, as you have recommended.

Currently, we are developing comprehensive guidance for our school 
oversight staff including common standards for record retention and for 
conducting compliance reviews, supervisory reviews, and off-site 
program reviews. An implementation action plan detailing staff training 
initiatives and additional monitoring activities is also under 
development. Additionally, FSA developed and distributed procedures to 
assist its school oversight staff in identifying and assisting 
institutions for additional program guidance. These procedures include 
documentation standards and criteria for consistency in actions, follow 
up, and measurement. Initial staff training on these procedures is 
complete. In fiscal year 2005, and in accordance with its integration-
sequencing plan, FSA will begin the requirements phase for a major 
system to further enhance the management and oversight of school 
compliance activities.

As presented to you in a briefing in February 2004, FSA is reducing the 
administrative cost of delivering student aid programs, through 
productivity and efficiency gains while supporting an increasing 
workload. Our new activity-based cost model, which your report notes 
will be fully operational in fiscal year 2005, is an additional 
management tool we will use to fine-tune and better measure the success 
of our cost reduction strategies. Additionally, CSB, which consolidates 
five separate legacy systems into one integrated system, will deliver 
an estimated $1 billion savings over the next ten years.

As recommended in your report, FSA is currently developing appropriate 
measures or trend data for each objective in our five-year strategic 
plan and will revise the five-year plan issued in fiscal year 2005 to 
include appropriate measurements. In that plan, the tactical goals will 
clearly link to the strategic objectives. The fiscal year 2005 annual 
plan will more clearly indicate how achievement of an annual goal 
results in progress toward a strategic objective. FSA's annual 
performance report to the Congress will include data plainly 
demonstrating our progress toward achieving each strategic objective.

We agree FSA faces human capital challenges, as all federal agencies 
do, and we are committed to addressing these challenges. FSA released 
its final Human Capital Management Plan in July 2004 and launched an 
aggressive drive to accomplish the goals defined in that Plan. The 
succession plan already is revised to include actions focusing on both 
short-and long-term staff readiness and on training and developmental:

assignments. Additionally, we are revising individual performance plans 
for members of FSA's Management Council to include an explanation of 
the awarding of any performance bonus. Specifically, the plans will 
detail how 100% of any potential annual bonus compensation is tied to 
an individual's achievements and delivery of results against the annual 
performance plan that is established for that individual.

We recognize improvements can always be made and we are committed to a 
culture of continuous improvement and, as such, will address the issues 
and recommendations raised in your report. With that said, we believe 
the Department's and FSA's sustained and meaningful progress in 
improving financial integrity and management exceeds the GAO criteria 
for removal of the high-risk designation from the federal student aid 
programs.

On a personal note, I am very proud of our accomplishments and those of 
our 1,100 plus workforce to ensure we fulfill our critical role in 
providing access to higher education for all Americans.

I am confident of our progress in addressing GAO's concerns and look 
forward to favorable consideration and removal of the federal student 
aid programs' high-risk designation when GAO issues an updated High-
Risk Series later this year.

Sincerely, 

Signed by: 

Theresa S. Shaw:

Chief Operating Officer:

Enclosure: 

[End of section]

Appendix V: GAO Contacts and Staff Acknowledgments:

GAO Contacts:

Carolyn M. Taylor (202) 512-2974 or taylorcm@gao.gov 
Mary Abdella (202) 512-5878 or abdellam@gao.gov:

Staff Acknowledgments:

In addition to those named above, the following individuals made 
important contributions to this report: Margie Armen, Joyce Corry, 
Carla D. Craddock, Elizabeth Curda, William Doherty, Mary Dorsey, Susan 
Higgins, Barbara Hills, Miguel Lujan, Valerie Melvin, Diane Morris, 
Corrina Nicolaou, Robert Owens, Lisa Shames, and William Wright.

[End of section]

Related GAO Products:

Direct Student Loan Program: Management Actions Could Enhance Customer 
Service, GAO-04-107. Washington, D.C.: November 2003.

Student Loan Programs: As Federal Costs of Loan Consolidation Rise, 
Other Options Should Be Examined, GAO-04-101. Washington, D.C.: October 
2003.

Student Loans and Foreign Schools: Assessing Risks Could Help Education 
Reduce Program Vulnerability, GAO-03-647. Washington, D.C.: July 2003.

Taxpayer Information: Increased Sharing and Verifying of Information 
Could Improve Education's Award Decisions, GAO-03-821. Washington, D.C. 
July 2003.

Federal Student Aid: Timely Performance Plans and Reports Would Help 
Guide and Assess Achievement of Default Management Goals, GAO-03-348. 
Washington, D.C.: February 2003.

High Risk Series: An Update, GAO-03-119. Washington, D.C.: January 
2003.

Major Management Challenges and Program Risks: Department of Education, 
GAO-03-99. Washington, D.C. January 2003.

Federal Student Aid: Progress in Integrating Pell Grant and Direct Loan 
Systems and Processes, but Critical Work Remains, GAO-03-241. 
Washington, D.C.: December 2002.

Department of Education: Guaranteed Student Loan Program 
Vulnerabilities, GAO-03-268R. Washington, D.C.: November 2002.

Federal Student Aid: Additional Management Improvements Would Clarify 
Strategic Direction and Enhance Accountability, GAO-02-255. 
Washington, D.C.: April 2002.

Student Financial Aid: Use of Middleware for Systems Integration Holds 
Promise, GAO-02-7. Washington, D.C.: November 2001:

Benefit and Loan Programs: Improved Data Sharing Could Enhance Program 
Integrity, GAO/HEHS-00-119. Washington, D.C.: September 2000.

FOOTNOTES

[1] The former Guaranteed Student Loan Program, now called the Federal 
Family Education Loan Program, was included in our 1990 high-risk list; 
in 1995 we revised this designation to include all student financial 
aid programs included under Title IV of the Higher Education Act of 
1965.

[2] The Chief Financial Officers Act of 1990 is P.L. 101-576, and the 
Government Performance and Results Act of 1993 is P.L. 103-62.

[3] GAO, High Risk Series--An Update, GAO-03-119 (Washington, D.C.: 
January 2003). 

[4] Program integrity refers to processes to reduce vulnerability to 
fraud, waste, and abuse.

[5] On April 2001, the Secretary of Education assembled a team of 
senior managers and employees--the Management Improvement Team--to 
focus on many long-standing management challenges facing the 
department. The MIT was tasked with making short-term management 
recommendations and developing a plan to address longer-term and 
structural issues. 

[6] FSA and postsecondary institutions jointly administer campus-based 
programs, which include the Federal Work-Study Program, the Federal 
Perkins Loan Program, and the Federal Supplemental Educational 
Opportunity Grant Program.

[7] State and private nonprofit guaranty agencies provide a variety of 
services, including payment of defaulted loans, collection of some 
defaulted loans, default avoidance activities, and counseling to 
schools and students.

[8] GAO, Student Financial Aid: Data Not Fully Utilized to Identify 
Inappropriately Awarded Loans and Grants, GAO/HEHS-95-89 (Washington, 
D.C.: July 1995).

[9] The U.S. Patent and Trademark Office was established as a PBO in 
March 2000, and the Federal Aviation Administration's Air Traffic 
Organization was established as PBO in December 2000. 

[10] While FSA's operating budget was $621 million in 2004, its total 
program and operating budget, which includes $195 million in account 
maintenance fees for guaranty agencies and $226 million for loan 
consolidations and default collections, was approximately $1 billion.

[11] GAO, Federal Student Aid: Additional Management Improvements Would 
Clarify Strategic Direction and Enhance Accountability, GAO-02-255 
(Washington, D.C.: April 2002).

[12] The American Federation of Government Employees, Council 252, 
represents all eligible employees of Education, including those in FSA.

[13] Reportable conditions are matters coming to the auditor's 
attention relating to significant deficiencies in the design or 
operation of internal control that could adversely affect the entity's 
ability to record, process, summarize, and report financial data 
consistent with the assertions by management in the financial 
statements. 

[14] A material weakness is a reportable condition in which the design 
or operation of one or more of the internal control components does not 
reduce to a relatively low level the risk that errors or fraud in 
amounts that would be material in relation to the financial statements 
being audited may occur and not be detected within a timely period by 
employees in the normal course of their assigned duties.

[15] Beginning with fiscal year 2004, FSA and other government agencies 
are required to produce audited financial statements within 45 days 
after the end of the fiscal year, compared with 120 days in the 
previous two fiscal years. 

[16] GAO, Financial Management: Poor Internal Controls Expose 
Department of Education to Improper Payments, GAO-01-1151 (Washington, 
D.C.: September 2001) and GAO, Education Financial Management: Weak 
Internal Controls Led to Instances of Fraud and Other Improper 
Payments, GAO-02-406 (Washington, D.C.: March 2002).

[17] FFMIA is intended to ensure that federal financial management 
systems can and do provide reliable, consistent financial data and that 
they do so on a basis that is uniform across the federal government 
using generally accepted accounting principles. 

[18] Functionality refers to the capabilities or behaviors of a 
program, part of a program, or system, seen as the sum of its features. 


[19] Office of Management and Budget, Management of Federal Information 
Resources, OMB Circular A-130 (November 30, 2000).

[20] The three systems that FSA incorporated into COD were the Pell 
Grant Recipient Financial Management System, the Recipient Financial 
Management System, and the Direct Loan Origination System.

[21] Middleware is a type of software that enables databases located on 
different systems to work together as if they all resided in a single 
database.

[22] The three systems incorporated into FSA's Financial Management 
System were the Federal Family Education Loan System, the Financial 
Accounting and Reporting System, and the Central Data System. 

[23] The Common Services for Borrowers initiative is planned to be 
completed by 2006 and would combine the functionality of four systems-
-Debt Management and Collection System, Direct Loan Consolidation 
System, Direct Loan Servicing System, and Conditional Disability 
Discharge Tracking System. 

[24] The other systems include the Electronic Campus-Based System, the 
National Student Loan Data System, and the Ombudsman Call Tracking 
System. 

[25] According to FSA headquarters officials, a comprehensive 
compliance review involves looking at data about the school that are 
contained in FSA's databases, in the public domain, and in 
communications to FSA. It may include a visit to the school if 
warranted.

[26] GAO, Student Loans and Foreign Schools: Assessing Risk Could Help 
Education Reduce Program Vulnerability, GAO-03-647 (Washington, D.C.: 
July 2003); GAO, Department of Education: Guaranteed Student Loan 
Program Vulnerabilities, GAO-03-268R (Washington, D.C.: November 
2002).

[27] GAO, Taxpayer Information: Increased Sharing and Verifying of 
Information Could Improve Education's Award Decisions, GAO-03-821 
(Washington, D.C.: July 2003); GAO, Benefit and Loan Programs: Improved 
Data Sharing Could Enhance Program Integrity, GAO/HEHS-00-119 
(Washington, D.C.: September 2000); and OIG, Department of Education, 
Accuracy of Student Aid Awards Can Be Improved by Obtaining Income Data 
from the Internal Revenue Service, ACN: 11-5001 (Washington, D.C.: 
January 29, 1997).

[28] This bill, entitled Student Aid Streamlined Disclosure Act of 
2003, H.R. 3613, was referred to the House Committee on Ways and Means 
on November 21, 2003.

[29] FSA's Exit Counseling Guide for Direct Loan Borrowers provides 
information for borrowers no longer in school on repaying their federal 
student loans.

[30] Federal Accounting Standards Advisory Board, Statements of Federal 
Financial Accounting Standards (SFFAS) No. 4, Managerial Cost 
Accounting Concepts and Standards for the Federal Government. (July 31, 
1995). 

[31] The sixth goal is to "deliver student aid effectively and 
accurately." FSA officials could not describe this goal beyond what is 
contained in the title heading of the table.

[32] The HEA requires that the annual report include, among other 
things, financial and performance requirements applicable to the PBO 
under the Chief Financial Officer Act of 1990 and the Government 
Performance and Results Act of 1993, results achieved in the previous 
year, and evaluations ratings and the amounts awarded as bonuses to the 
COO and senior managers.

[33] In 2002 we recommended that FSA develop and implement a 
comprehensive human capital strategy that incorporates succession 
planning and addresses staff development; and since 2001, we have 
reported that human capital management was a challenge facing FSA and 
agencies governmentwide.

[34] The Partnership for Public Service is a nonprofit organization 
that works to revitalize interest in public service through educational 
outreach, research, legislative advocacy, and hands-on partnerships 
with agencies on workforce management issues.

[35] GAO, Human Capital: Insights for U.S. Agencies from Other 
Countries' Succession Planning and Management Initiatives, GAO-03-914, 
(Washington, D.C.: September 2003).

[36] GAO-02-255.

[37] GAO, Guide for Assessing Strategic Training and Development 
Efforts in the Federal Government, GAO-04-546G (Washington, D.C.: March 
2004). 

[38] Early retirement for federal employees was first authorized under 
P.L. 93-39 in 1973 and clarified through subsequent legislation 
detailing eligibility criteria in P.L. 105-174. The purpose of the 
legislation was to provide agencies with a tool to minimize the 
involuntary separation of employees in major periods of downsizing by 
qualifying for early retirement. Voluntary incentive separation 
payments were authorized through P.L. 104-208 and provide agencies with 
the authority to make lump-sum payments of no more than $25,000 to 
eligible employees who voluntarily agree to resign, retire, or retire 
under voluntary early retirements.

[39] GAO-04-546G.

[40] For example, personnel in managerial, leadership, and other 
positions, such as team leaders or project managers, are expected to 
demonstrate core managerial skills and knowledge including business 
acumen, employee development and empowerment, financial management, 
knowledge sharing, problem solving and decisionmaking, program and 
project management, and team building.

[41] In 2004, agency officials surveyed learning coupon users to 
determine both user satisfaction and the effectiveness of the coupon.

[42] Our analysis included those senior officials that served on the 
FSA Management Council and reported directly to the agency's Chief 
Operating Officer.

[43] These systems are known as the Education Department Performance 
Appraisal System (EDPAS) and Senior Executive Performance Management 
System (SEPMS). EDPAS is for managers and staff. SEPMS is for all SES 
employees hired under the flexible hiring authority under the HEA. 

[44] The three performance levels are unsatisfactory, minimally 
satisfactory, and successful, and the five performance levels are 
unacceptable, minimally successful, successful, highly successful, and 
outstanding.

[45] GAO, Human Capital: Senior Executive Performance Management Can Be 
Significantly Strengthened to Achieve Results, GAO-04-614 (Washington, 
D.C.: May 2004). 

[46] These goals were (a) leaving the GAO high risk list, (b) achieving 
a default recovery rate of 7.2%, (c) limiting Pell Grant overpayments 
to $138 million, (d) making timely reconciliations to the general 
ledger, (e) improving customer service, and (f) completing all FSA 
system integration targets. 

[47] Attached to each senior official's performance agreement is FSA's 
2003 Annual Planning Matrix. Agency officials told us that this 
internal document is equivalent to the agency's annual plan for the 
same fiscal year and includes additional goals scheduled for action but 
not funded. The published fiscal year 2003 annual plan, on the other 
hand, includes only those goals that were funded. For the purposes of 
this review, we looked at those goals under the performance elements 
"organizational priorities/job specifics" that most closely relate to 
the agency's annual plan.

[48] These 11 officials included 4 who were members of the FSA 
Management Council in 2002 and continued in 2003, and 7 more who began 
their service on the council in 2003.

[49] Case management includes processes for monitoring schools such as 
reviews and analysis of reports to help ensure compliance with program 
regulations.

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