Office of Federal Student Aid:

Better Strategic and Human Capital Planning Would Help Sustain Management Progress

GAO-05-31: Published: Oct 6, 2004. Publicly Released: Oct 6, 2004.

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Cornelia M. Ashby
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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.

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.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On November 30, 2004, FSA issued comprehensive compliance review procedures to teams responsible for monitoring institutions participating in the FSA program to ensure compliance with federal legislation, regulations and policies. These procedures describe how comprehensive compliance reviews are performed as a part of FSA's case management process.

    Recommendation: To help FSA enhance its strategic planning and improve its human capital management planning, the Secretary of Education should direct FSA's Chief Operating Officer to issue clear guidance and detailed directions for teams to follow when performing comprehensive compliance reviews.

    Agency Affected: Department of Education

  2. Status: Closed - Implemented

    Comments: FSA has included in its 5-year plan for 2006-2010, trend data and performance standards for measuring progress for each strategic objective. In addition, FSA's fiscal year 2006 annual performance report includes established targets and shows whether FSA has met its established targets for each strategic objective.

    Recommendation: To help FSA enhance its strategic planning and improve its human capital management planning, the Secretary of Education should direct FSA's Chief Operating Officer to 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.

    Agency Affected: Department of Education

  3. Status: Closed - Implemented

    Comments: Building on its initial efforts in 2004, Federal Student Aid (FSA) in 2008 completed two initiatives to develop its succession management planning: Leadership Development Blueprint (Blueprint) and Foundations of Leadership Program (FLP). According to officials, these two elements, along with other components of FSA's leadership development and succession strategy, develop leaders at all levels of FSA. The FSA Blueprint describes leadership competencies, consistent with the Office of Personnel Management's Executive Core Qualifications, needed at all levels: non-supervisor, supervisor, manager and executive. The Blueprint also identifies training and development activities recommended for developing and improving competencies. The FLP is also designed to build leadership competencies appropriate to the level of the participants, increase participant knowledge about the business of FSA, and promote networking and the accomplishment of work across organizational boundaries. FLP participants complete assessments designed to provide feedback about their leadership styles and skills and create individual leadership development plans. FSA also administers a Leadership Development Fund to improve the skills of current and/or experienced supervisors, managers and executives. The fund is used to support participation in external management or leadership development programs offered by such recognized organizations as the Center for Creative Leadership, the Office of Personnel Management, USDA Graduate School and the Council for Excellence in Government. FSA has a robust Summer Intern Program, and recruits college students with the hope of eventually retaining them permanently. During 2008, FSA revitalized use of the Career Intern Program, and hired several, putting them on individualized development plans to ensure their growth and development and encourage high performance and retention. Additionally, FSA trained nearly all of its new supervisors through the Cornerstones of Supervision Program. This program runs for several months and allows new supervisors in FSA to build supervisory skills and to share and work through challenges they are facing in their new role.

    Recommendation: To help FSA enhance its strategic planning and improve its human capital management planning, the Secretary of Education should direct FSA's Chief Operating Officer to 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.

    Agency Affected: Department of Education

  4. Status: Closed - Implemented

    Comments: According to agency officials, Federal Student Aid's (FSA) human capital activities are now coordinated under the Department of Education's Human Capital Accountability Policy, ED Personnel Management Instruction 250-1. This policy is in conformance with Executive Order 13197 that required agencies to establish and maintain a system of accountability that contributes to agency performance by: 1) monitoring and evaluating the results of its human capital policies, programs and activities; 2) analyzing compliance with merit systems principles; and 3) identifying and monitoring necessary improvements. Federal Student Aid/Human Resources has clearly designated responsibilities for performing, monitoring, reviewing and evaluating human capital management activities, and for coordinating with the Department to report on these activities. In addition, FSA monitors and documents current fiscal year human capital initiatives through its Human Capital Implementation Plan Monthly Milestones Chart.

    Recommendation: To help FSA enhance its strategic planning and improve its human capital management planning, the Secretary of Education should direct FSA's Chief Operating Officer to enhance systematic evaluation activities for its human capital initiatives such as the learning coupon.

    Agency Affected: Department of Education

  5. Status: Closed - Implemented

    Comments: According to agency officials, the Department of Education has amended its Incentive Awards policy, Personnel Manual Instruction, (PMI) 451-1, effective January 28, 2008. Per this instruction, there is now one standard award program (e.g., spot cash, time off) in the Department. Principal Offices (POs) will no longer have separate award programs. In addition, Federal Student Aid (FSA) drafted a policy and procedures for excepted service appointments that includes criteria for awarding bonuses, which is currently being reviewed.

    Recommendation: To help FSA enhance its strategic planning and improve its human capital management planning, the Secretary of Education should direct FSA's Chief Operating Officer to establish and communicate clear criteria for awarding bonuses to senior staff.

    Agency Affected: Department of Education


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