Detailed Information on the
Student Aid Administration Assessment

Better integrate data into decision-making, including the development of a more comprehensive approach to eliminating program fraud and error.

Improve contract oversight and performance management.

Implement a new data strategy that yields more timely and accurate financial and program data.

Maintain progress on system integration efforts.

Complete development of a unit-cost framework and meaningful efficiency targets.

Measure: Move student aid off the GAO high-risk list by 2005.

Explanation:The Department has worked with GAO to develop and implement a comprehensive plan including all the steps needed to remove the student aid programs from the high-risk list.

Measure: Recovery rate on Department-held defaulted loans.

Explanation:Recovery rate = (sum of FSA collection on defaults) - (collections through consolidations) / outstanding default portfolio from the previous year.

Measure: Reduce the percentage of Pell Grant overawards.

Explanation:While total Pell Grant overawards rose from 2001 to 2002, they fell slightly as a percentage of total awards, from 3.4 percent to 3.3 percent.

Measure: Improve timeliness of FSA system reconciliations to the general ledger.

Explanation:The goal of the measure is to have all systems fully reconciled to the general ledger for a given month within 30 days of the month-end close or less.

Measure: Meet 100 percent of system integration targets developed for each fiscal year.

Explanation:Annual targets are developed before the start of each fiscal year and are included in the annual plan.

Measure: Improve customer service.

Explanation:Target are being developed in FY03

Measure: Reduce the unit cost of student aid processes. [Baselines and targets under development.]

Explanation:Target are being developed in FY06

Measure: Increase the recovery rate on Department-held defaulted loans.

Explanation:Recovery rate =(sum of FSA collection on defaults)-(collections through consolidations)/outstanding default portfolio from the previous year.

Measure: Reduce Pell Grant overawards.

Explanation:While total Pell Grant overawards rose from 2001 to 2002, they fell slightly as a percentage of total awards, from 3.4 percent to 3.3 percent.

Measure: Improve customer service.

Explanation:Targets are being developed in FY03

Measure: Reduce the unit cost of student aid processes. [Baselines and targets under development.]

Explanation:Targets are being developed in FY06

Is the program purpose clear?

Explanation: The Higher Education Act provides six explicit purposes for the Office of Federal Student Aid (OFSA): 1) to improve service to student aid program participants; 2) to reduce the cost of student aid administration; 3) to increase accountability for program management officials; 4) to increase student aid management flexibility; 5) to integrate student aid information systems; and 6) to better ensure student aid program integrity.

Evidence: The program's purpose is established in Section 141 of the Higher Education Act of 1965, as amended (20 U.S.C. 1018).

Does the program address a specific and existing problem, interest, or need?

Explanation: The program addresses the need to effectively administer $50+ billion in Federal financial aid for higher education. Each year, the federal government makes available more than $50 billion in grants, loans, and work study to help students and parents pay for postsecondary education.

Evidence: The Higher Education Act of 1965, as amended, authorizes several Federal student aid programs, which are administered by the Office of Federal Student Aid.

Is the program designed so that it is not redundant or duplicative of any Federal, state, local or private effort?

Explanation: The program is inherently unique in that its purpose is to administer the federal responsibilities associated with the Department's student aid programs. While other state, local, and private entities are involved in administering some aspect of these programs, they play no explicit role in federal activities.

Evidence:  

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: There is no strong evidence that another approach or mechanism would be more efficient in administering the Department's student aid programs. That said, ED needs to develop a unit cost framework in order to measure and monitor the relative efficiency of the office's business functions. Moreover, the Department's student aid programs continue to be included on the General Accounting Office's high-risk list, and are the focus of several Inspector General reports. Finally, the Department's financial audits continue to identify reportable conditions associated with the student aid programs.

Evidence: At a minimum, ED still needs to complete its efforts to integrate OSFA's IT systems, and implement its new data strategy. This data strategy should improve the timeliness and quality of program/financial data, and integrate these data into short and long-term management decisions. As noted in the explanation, OFSA has begun to make critical management reforms. Most notably, these reforms contributed to the Department receiving an unqualified audit opinion in its FY 2002 financial statements. OFSA has also successfully initiated system integration efforts such as: (i) retiring the Central Data System (CDS); (ii) replacing proprietary Title IV Wide Area Network (TIVWAN) with an internet gateway; (iii) replacing Campus-Based Systems (CBS) with e-CB (electronic submission of data); (iv) implementing Forms 2000, an electronic payment and reporting system for guaranty agencies; (v) retiring the Financial Aid Recipients System (FARS); and (vi) integrating two major delivery systems (Direct Loan Origination System and Recipient Financial Management System) to create a student-centric process (COD) to originate and disburse Direct Loan and Pell funds.

Is the program effectively targeted, so program resources reach intended beneficiaries and/or otherwise address the program's purpose directly?

Explanation: This program consists entirely of Department of Education S&E funds to administer the Federal student aid programs.

Evidence: Department of Education budget and financial reports.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: Modernizing the student aid programs is a major objective of the Department's strategic plan, which includes six long-term measures to measure the effectiveness of student aid management activities. However, these measures are currently under review and may be changed or expanded to include more rigorous criteria involving unit costs and other aspects of FSA activity.

Evidence: Department of Education Strategic Plan, Goal 6, Objective 6.4. The six long-term measures include: (1) Leaving GAO's high risk list; (2) Increasing the default recovery rate; (3) Reducing overpayments in the Pell Grant program; (4) Improving the reconciliation of data between FSA's financial system and the Department's general ledger; (5) Improving customer service; and (6) Integrating OFSA's IT systems.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: Specific targets and timeframes are shown in the "Measures" tab. For two of these measures, targets are under development.

Evidence:  

Does the program have a limited number of specific annual performance measures that demonstrate progress toward achieving the program's long-term measures?

Explanation: The Department has annual goals and milestones relating to the modernization of student aid delivery and management. The six long-term measures identified in 2.1 also measure annual progress in improving the effectiveness of student aid management activities. These measures are currently under review and may be changed or expanded to include more rigorous criteria involving unit costs and other aspects of FSA activity.

Evidence: Department of Education Strategic Plan, Goal 6, Objective 6.4. As noted in 2.1, the long-term measures also measure annual performance.

Does the program have baselines and ambitious targets and timeframes for its annual measures?

Explanation: Specific targets and timeframes are shown in the "Measures" tab. For two of these measures, targets are under development.

Evidence: See "Measures" tab.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, etc.) commit to and work toward the annual and/or long-term goals of the program?

Explanation: Most OFSA contractors have committed to program goals through performance-based contracts that include incentives for high performance. However, some contracts (including contracts renegotiated in recent years) still do not include adequate performance incentives. Moreover, OIG audits have found problems with FSA's oversight of its contractors. Other program partners (in particular, schools that participate in the Federal student aid programs) provide program and financial data to the Department. The Department uses these data, in part, to certify schools' eligibility to participate in the Federal student aid programs.

Evidence: The Public Inquiry and Direct Loan Servicing and Consolidation contracts are examples of major contracts with built-in incentive provisions. Under these contracts, contractor payments increase or decrease based on their performance in completing activities on a timely basis. Still, other FSA contracts do not have such incentives.

Are independent and quality evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: The General Accounting Office and the Department's Inspector General have conducted a number of audits of FSA activities. Also, for the past year and a half, ED has conducted independent post-production validations designed to validate expected results for any major system changes to FSA's financial management systems.

Evidence: GAO and IG audits, IG investigations, independent post-production validations, and independent internal control reviews.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: OFSA conducts a rigorous annual planning process to determine the initiatives it will accomplish in the upcoming year. This process is driven by OFSA's Strategic Plan and are based on the goal to improve service, reduce cost, modernize systems and improve program integrity. This process is also influenced by the authorizing language that established OFSA as a Performance-Based Organization, the Department's Strategic Plan, and the Department's implementation of the President's Management Agenda. However, the Department has not completed a unit cost framework and thus the Department is unable to provide detail on how various initiatives and investments will affect the cost of daily and long-term activities. That said, FSA does a good job of evaluating the extent to which prior year initiatives are meeting strategic objectives and prioritizing initiatives for the upcoming year in terms of how it will further strategic goals.

Evidence: One of ED's key priorities in the first half of FY 2003 was to receive a clean opinion on the Department's Financial Statements. As a result, ED funded several initiatives that aimed to improve FSA's ability to receive a clean audit. These initiatives included enhancing the FMS "splitter" process, and implementing trial balance capabilities with operating partners to facilitate reconciliation. In addition, FSA is working with partners to re-engineer the case management and oversight process, has undertaken extensive market research to test the Common Servicers for Borrowers concept with actual players in the market, and continued to work with alternative bidders in the RFP process. ED prioritized both of these initiatives because of their potential to reduce costs, improve program integrity, modernize systems and improve service to FSA's customers.

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: The Department is in the process of reviewing its student aid administration performance measures to ensure that FSA's goals are integrated with the Department's overall goals, and that the goals and measures are sufficiently rigorous and broad in scope.

Evidence: Department of Education Strategic Plan, Goal 6, Objective 6.4.

Has the agency/program conducted a recent, meaningful, credible analysis of alternatives that includes trade-offs between cost, schedule, risk, and performance goals and used the results to guide the resulting activity?

Explanation: Alternative analyses are included in business cases developed for all major investments in consultation with the Department's Office of the Chief Information Officer; these analyses are reviewed by both the internal FSA management council and the Department-wide investment review board. However, the Department needs to develop a unit cost framework in order to make these analyses more meaningful. Moreover, the Department needs to more thoroughly assess schedule requirements when determining appropriate costs, in particular for establishing/negotiating performance-based contracts.

Evidence: Exhibit 300's and supporting business cases for FSA activities.

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: FSA is in the process of developing its data strategy, which will map out the Department's existing data transactions, evaluate the timeliness and accuracy of these data, and assess FSA's ability to use these data to manage the program. That said, the Department does collect some performance information for review and use by the FSA Management Council, the Department's Investment Review Board, and other ED senior leadership. ED uses these data to help make resource allocation and system re-engineering decisions.

Evidence: Performance information is included in FSA activity business cases and other Department financial and management reports. These data include, in part, customer and employee satisfaction data and preliminary unit cost data. Under its data strategy, FSA is mapping out all of its data transactions, and will determine how it can make these processes more efficient.

Are Federal managers and program partners (grantees, subgrantees, contractors, cost-sharing partners, etc.) held accountable for cost, schedule and performance results?

Explanation: All FSA senior managers have individual performance agreements that include performance targets and results, as well as schedules for system integration. In some cases, FSA managers and their major system contractors have developed business cases that include cost, schedule and performance results for new system integration initiatives (based on the Department's modernization plan). In addition, ED has renegotiated several major contracts to both reduce costs and include incentives/disincentives for meeting milestones and agreed upon levels of performance.

Evidence: All senior managers in FSA have performance agreements. Managers' bonuses are based on how well they performed on these performance agreements. The Public Inquiry, Direct Loan Servicing and Consolidation, and Common Origination and Disursement contracts are examples of major contracts with built-in incentive provisions. Under these contracts, contractor payments increase or decrease based on their performance in completing activities on a timely basis.

Are all funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: The Department obligates student aid administration funds with the overall program plan; a limited amount of unobligated funds remain at the end of the year. The Department has procedures in place for reporting actual expenditures, comparing them against the intended use, and taking timely and appropriate action when funds are not spent as intended.

Evidence: Department of Education financial management reports

Does the program have procedures (e.g., competitive sourcing/cost comparisons, IT improvements, approporaite incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: Many student aid administrative contracts and personnel agreements include built-in performance incentives. However, OFSA has not yet instituted procedures to measure and improve efficiency in program execution. As part of the President's Management Agenda, the Department is implenting its One-ED Plan -- an agency-wide initiative to re-evaluate the efficiency of every significant business function. Through One-ED, the Department will develop of cost and cycle time metrics for all the Department's major business functions, make competitive sourcing decisions for these functions, and make necessary IT improvements.

Evidence: The public inquiry and Direct Loan servicing, consolidation, and COD contracts are examples of major contracts with built-in incentive provisions. Under these contracts, contractor payments increase or decrease based on their performance in completing activities on a timely basis.

Does the program collaborate and coordinate effectively with related programs?

Explanation: Due to the nature of the Federal student aid programs, OFSA is required to coordinate with several other federal agencies, including the Department of Veterans Affairs, the Social Security Administration, the Department of Treasury (in particular, the Internal Revenue Service), and the Department of Health and Human Services. While there are no apparent flaws in OFSA's current coordination efforts, OFSA's data strategy will, in part, examine potential improvements to coordination efforts.

Evidence:  

Does the program use strong financial management practices?

Explanation: The General Accounting Office has consistently put the student aid programs on its High-Risk List, and the Department's Inspector General has raised several issues regarding potential fraud in the student aid programs. The Department has taken a number of steps to improve financial management and program integrity (resulting in an unqualified audit opinion in 2002 and 2003), and has made removing the student aid programs from the GAO high-risk list a priority. However, weaknesses still remain, as reflected in the reportable conditions cited in the audit report.

Evidence: FY 2002 audit opinion and accountability report. GAO and OIG reports.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: The Department has taken a number of steps to improve program management and implement more effective financial management systems, resulting in an unqualified opinion in the Department's 2002 and 2003 financial statement audit.

Evidence: FY 2002 and 2003 audit opinion. In addition, the Department has undertaken a multi-year effort to integrate the disparate computer systems that support various postsecondary programs and implement new accounting systems. In particular, the Department plans to develop a single financial system for the Department, if feasible, as part of its implementation of Oracle Financials 11i.

Is the program managed by maintaining clearly defined deliverables, capability/performance characteristics, and appropriate, credible cost and schedule goals?

Explanation: OFSA conducts a rigorous annual planning process to determine the initiatives it will accomplish in the upcoming year. This includes evaluating the extent to which prior year initiatives are meeting strategic objectives and prioritizing initiatives for the upcoming year in terms of how it will further strategic goals. The Department uses factors such improved service, reduced costs, modernization of systems, and improved program integrity to guide management decisions. However, the Department has not completed a unit cost framework and is thus unable to provide detail on how various initiatives and investments will affect the cost of daily and long-term activities.

Evidence:  

Has the program demonstrated adequate progress in achieving its long-term outcome performance goals?

Explanation: As shown in the "Measures" tab, the Department has made progress in meeting its long-term goals. However, student aid systems still remain on the GAO High-Risk list, and material weaknesses still remain.

Evidence: See performance data on "Measures" tab.

Does the program (including program partners) achieve its annual performance goals?

Explanation: As shown in the "Measures" tab, the Department has made progress in meeting its annual goals. However, student aid systems still remain on the GAO High-Risk list, and material weaknesses still remain.

Evidence: See performance data on "Measures" tab.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program performance goals each year?

Explanation: The Department has introduced significant new efficiencies in achieving student aid administration program goals, including the shift of substantial numbers of student applications from paper-based to electronic processing, and the creation of web-based solutions to replace the previous "wide-area" network. The Department is currently examining a number of other program redesign efforts that will further streamline student aid services. However, the Department has not yet implemented a unit cost framework for assessing program efficiency.

Evidence: Examples of improvements inlcude: (1) Electronic student aid applications (e.g., FAFSA online) have increased from 32 percent of overall applications in award year 1999-2000 to a projected 60 percent for award year 2002-2003; (2) FSA's renegotiation of contracts have resulted in FY 2002 savings of nearly $1 million in the Public Inquiry contract (PIC) and $26 million in the Virtual Data Center contract (VDC); (3) The retirement of the Financial Accounting and Reconciliation Sytem (FARS) will net between $8-$11 million in savings by FY 2005, and $4 million in annual savings thereafter; (4) OFSA's printing budget was reduced by almost $2 million in FY 2002; (5) Performance-based contracts with private collection agencies have increased collections of defaulted student loans ($925M) and reduced the costs of collections; and (6) Converting partner interfaces from a private network (TIV WAN) to the internet (SAIG) has yielded $3.6 million in annual savings. However, a unit cost framework will provide a more comprehensive assessment of FSA's progress on improving cost efficiency.

Does the performance of this program compare favorably to other programs, including government, private, etc., that have similar purpose and goals?

Explanation: OFSA conducts several business processes that may be comparable to similar processes in other federal agencies and the private sector (e.g., lenders, guaranty agencies). However, until OFSA has had the chance to complete its unit cost framework, it cannot reasonably compare OFSA's efficiency to other entities.

Evidence:  

Do independent and quality evaluations of this program indicate that the program is effective and achieving results?

Explanation: As noted in 2.6, the General Accounting Office and the Department's Office of the Inspector General have conducted a number of audits of FSA activities. While the findings of these audits are mixed, many of them identify several remaining issues. Also, for the past year and a half, ED has conducted independent post-production validations designed to validate expected results for any major system changes to FSA's financial management systems. Aside from these evaluations, to date the Department has not comissioned independent evaluations of other OFSA activities and processes.

Evidence:  

Were program goals achieved within budgeted costs and established schedules?

Explanation: In general, major student aid administration projects have been completed on time and within planned budgets.

Evidence: FY 2003 Apportionment back-up materials, which show planned versus actual spending by major contract.