oversight

Department of Education: Multiple, Nonintegrated Systems Hamper Management of Student Financial Aid Programs

Published by the Government Accountability Office on 1997-05-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                          United States General Accounting Office

GAO                       Testimony
                          Before the Committee on Labor and Human Resources,
                          U.S. Senate




For Release on Delivery
Expected at 10 a.m.
Thursday, May 15, 1997
                          DEPARTMENT OF
                          EDUCATION

                          Multiple, Nonintegrated
                          Systems Hamper
                          Management of Student
                          Financial Aid Programs
                          Statement of Cornelia M. Blanchette, Associate Director
                          Education and Employment Issues
                          Health, Education, and Human Services Division




GAO/T-HEHS/AIMD-97-132
Department of Education: Multiple,
Nonintegrated Systems Hamper
Management of Student Financial Aid
Programs
              Mr. Chairman and Members of the Committee:

              We are pleased to be here today to discuss Department of Education
              information management systems that support the financial aid programs
              authorized by title IV of the Higher Education Act of 1965, as amended
              (HEA). These programs include the Federal Family Education Loan
              Program (FFELP), the Ford Direct Loan Program (FDLP), the Federal Pell
              Grant Program, and campus-based programs.1 As you are aware, these
              programs are the largest source of federal financial aid to postsecondary
              students. In academic year 1998-99, title IV programs will make available
              over $47 billion in loans, grants, and other aid to about 8.1 million
              students.

              In 1990, we began a special effort to review and report on the federal
              programs we considered at high risk because of vulnerabilities to waste,
              fraud, abuse, and mismanagement. Federal student financial aid programs
              have been included in each of the three series of high-risk reports we have
              issued. The Department has taken various actions over the last few years
              in response to recommendations made by GAO and others. Many of these
              actions have likely played a major role in reducing the number of student
              loan defaults and the default rate.

              While in our latest series we commended the Department for its efforts
              over the last few years in response to recommendations we and others
              have made,2 we noted continuing concerns about the Department’s
              management and oversight of postsecondary student financial aid
              programs and the information systems in place to support them.

              Our comments today are based on the work we have done for our
              high-risk series and other studies we have done on federal student
              financial aid programs, as well as ongoing work analyzing the
              Department’s development and use of information systems (see list of
              related GAO products at the end of this statement). In summary, we are
              concerned that without effective information management that would
              result from fully implementing recent legislation—the Clinger-Cohen
              Act—the multiple, nonintegrated information systems currently operated
              by the Department may hamper its management of student financial aid
              programs.


              1
               The campus-based programs include the (1) Federal Work-Study Program, (2) Federal Perkins Loan
              Program, and (3) Federal Supplemental Educational Opportunity Grant Program.
              2
               High-Risk Series: Student Financial Aid (GAO/HR-97-11, Feb. 1997).



              Page 1                                                                GAO/T-HEHS/AIMD-97-132
                      Department of Education: Multiple,
                      Nonintegrated Systems Hamper
                      Management of Student Financial Aid
                      Programs




                      While the Department has taken actions to comply with HEA requirements
Management of Title   for the National Student Loan Data System (NSLDS),3 it still does not yet
IV Programs Is        have an accurate, efficient, and integrated system for national student
Hampered by           financial aid data. The Department continues to operate separate “stove
                      pipe” systems and lacks a strategy to integrate the systems supporting the
Multiple,             title IV programs.
Nonintegrated
                      The Department relies on data in its student financial aid information
Information Systems   systems to support a variety of student aid programs and financial
                      operations. The 1986 HEA amendments required the Secretary of Education
                      to develop NSLDS to ensure (1) the collection of accurate information on
                      student loan indebtedness and institutional lending practices and
                      (2) improved compliance with repayment and loan limitation provisions.
                      The 1992 HEA amendments expanded the scope of NSLDS by requiring the
                      Department to integrate NSLDS with the Pell grant applicant and recipient
                      databases by January 1, 1994, and with any other databases containing
                      information on student financial aid program participation. In response to
                      these legislative mandates, in January 1993, the Department awarded a
                      5-year contract to develop and maintain NSLDS. Loan information is now
                      transmitted to NSLDS on a regular basis by schools, guaranty agencies, and
                      the FDLP servicer.

                      Over the past 30 years, separate information systems—including the FFELP
                      System4 for the guaranteed loan program, the Pell Grant Recipient and
                      Financial Management System, the FDLP systems,5 and now NSLDS—have
                      been developed to support student financial aid programs. These multiple
                      systems contain incompatible data in nonstandard formats—a situation
                      that has led to inaccurate information, inefficient systems, and high costs.
                      The fiscal year 1997 budget for contracts to maintain 11 separate,
                      nonintegrated systems was $281.9 million and is expected to climb to
                      $320.5 million in fiscal year 1998—an increase of $38.6 million, or
                      14 percent (see app. I). Through the 5-year period ending with fiscal year
                      1998, student financial aid systems’ costs will have tripled (see app. II).

                      Federal student financial aid programs remain vulnerable to losses as a
                      result of fraud, waste, abuse, and mismanagement due to a large extent
                      because the Department, guaranty agencies, schools, and lenders often do

                      3
                       NSLDS is the first national source of current student loan and grant data on student financial aid
                      participants.
                      4
                       The FFELP System has a number of subsystems—a debt collection system, guaranty agency system,
                      lender and school system, and support system.
                      5
                       The FDLP system includes an origination system, a central database, and four servicing systems.



                      Page 2                                                                    GAO/T-HEHS/AIMD-97-132
Department of Education: Multiple,
Nonintegrated Systems Hamper
Management of Student Financial Aid
Programs




not have the accurate, complete, and timely information they need to
effectively and efficiently operate and manage the programs. The resultant
program operation and monitoring difficulties stem from the lack of a fully
functional integrated database covering all title IV financial aid programs
that can integrate recipient information from all available sources. NSLDS is
not such a database, but a repository for data from multiple data
providers. Furthermore, as we reported in 1996, the Department’s Office of
Inspector General and we believe that the Department has not adequately
tested the accuracy and validity of loan data submitted to NSLDS.6

One of the causes of the current information systems’ difficulties appears
to be the lack of a sound, integrated information technology or systems
architecture for managing the Department’s portfolio of information
systems that support student financial aid programs. A systems
architecture or strategy is a blueprint for developing and maintaining
integrated information systems that are appropriate for (1) an
organization’s mission; (2) the operations that must be executed and their
necessary relationships and informational needs; and (3) ensuring, on a
technical level, the rules and standards required for interrelated systems to
work together efficiently and effectively over a network. The architecture
ensures that the systems have computer programs that can be transferred
from one hardware configuration and/or software environment to another,
and are maintainable. In other words, a sound systems architecture would
ensure that the data being collected and maintained within an organization
are structured and stored in a manner that makes them accessible,
understandable, and useful throughout the organization.

With respect to the totality of federal student financial aid programs, the
lack of a sound information systems architecture seems to have
contributed, in part, to the development of a multitude of nonintegrated
systems across the Department. This, in turn, has led to problems in
systems interface and data exchange, confusion for users, and delays in
program operations. For example, large amounts of redundant data on
student financial aid recipients are generated by schools, lenders, guaranty
agencies, and several internal departmental systems, and then stored in
numerous databases. Often data stored on these separate systems’
databases are in conflict with data in NSLDS as a result of differences in the
timing of updates between data providers. We also found that erroneous
data submitted to NSLDS may result in duplicate loan records being created.



6
 Department of Education: Status of Actions to Improve the Management of Student Financial Aid
(GAO/HEHS-96-143, July 12, 1996).



Page 3                                                                GAO/T-HEHS/AIMD-97-132
                            Department of Education: Multiple,
                            Nonintegrated Systems Hamper
                            Management of Student Financial Aid
                            Programs




                            The Department, with the guaranty agencies, is undertaking a major
                            reconciliation effort to clean up the erroneous loan records.

                            Another related cause of the current information problems is a lack of
                            common identifiers for students and institutions, making it difficult to
                            track students and institutions across systems. The 1992 amendments
                            required the Department to establish, no later than July 1, 1993, common
                            identifiers for students and institutions. However, the Department’s
                            current plans for institutions do not call for the development and
                            implementation of common identifiers until academic year 1999-2000. For
                            students, the Department has required that all applicants for federal
                            student aid provide their Social Security numbers, which the Department
                            has stated are its common student identifiers. However, identification of
                            student records across systems is still a cumbersome process because
                            each system uses, in addition to the Social Security number, different
                            combinations of data fields to uniquely identify, access, and update
                            student records. This nonstandard method for accessing and updating
                            student records across systems may be one of the factors contributing to
                            the significant number of duplicate records on the NSLDS.


                            The Clinger-Cohen Act of 1996 makes agency heads directly responsible
Improvements Could          for effective information technology. Among their key duties, agency
Result From the             heads are to
Proper
                        •   establish goals to improve the efficiency and effectiveness of agency
Implementation of the       operations and, as appropriate, the delivery of services to the public
Clinger-Cohen Act           through the effective use of information technology;
                        •   prepare an annual report as part of the agency’s budget submission to the
                            Congress on the progress in achieving the agency’s information technology
                            goals; and
                        •   ensure that performance measurements are prescribed for information
                            technology used or acquired by the agency and that they measure how
                            well the information technology supports the agency’s programs.

                            To help them carry out these new responsibilities, the agency heads are to
                            designate a Chief Information Officer (CIO). The CIO is to be much more
                            than a senior technology manager. As a top-level executive reporting
                            directly to the agency head, the CIO is responsible for, among other duties,
                            developing, maintaining, and facilitating the implementation of a sound
                            and integrated information technology architecture.




                            Page 4                                                GAO/T-HEHS/AIMD-97-132
               Department of Education: Multiple,
               Nonintegrated Systems Hamper
               Management of Student Financial Aid
               Programs




               The Department could benefit greatly by fully implementing the
               Clinger-Cohen Act. Full implementation of this law would provide another
               opportunity to correct many of the Department’s student financial aid
               system weaknesses. The Department has recently appointed an acting CIO.
               However, because the law is in the early stages of implementation, as we
               reported in February 1997, it is too early to predict how well the
               Department will implement the law. We believe that, as a first step, the
               Department must develop a sound information systems architecture, as
               called for in the Clinger-Cohen Act, for the student financial aid programs
               to guide the Department as it makes key information management
               decisions.


               Mr. Chairman, this concludes my prepared testimony. My colleagues and I
               will be happy to answer any questions that you or Members of the
               Committee may have.


               For more information on this testimony, please call David B. Alston,
Contributors   Assistant Director, at (202) 512-6369 or Joseph J. Eglin, Jr., Assistant
               Director, at (202) 512-7009. Other major contributors included Paula N.
               Denman, Joel R. Marus, Glenn R. Nichols, and M. Yvonne Sanchez.




               Page 5                                               GAO/T-HEHS/AIMD-97-132
Appendix I

Department of Education Student Financial
Aid Systems


                System                                      Contractor                    FY 98 Budget
                                                                                          (dollars in millions)
Federal Direct Loan Program (FDLP):                                                                       $170.0

· Direct Loan Origination System              Computer Data Systems, Inc. (old)
                                              and Electronic Data Systems (new)

· Direct Loan Servicing Systems               Computer Data Systems, Inc.;
                                              Electronic Data Systems;
                                              Raytheon/E-Systems, Inc.; and
                                              Education Loan Servicing Center, Inc.

National Student Loan Data System             Raytheon/E-Systems, Inc.                                     31.6
(NSLDS)
FFEL System (FFELS)                           Raytheon/E-Systems, Inc.                                     30.5
Multiple Data Entry Contracts                 INET and American College Testing                            27.1

Central Processing System (CPS)               National Computer Systems                                     23.9
Title IV Wide Area Network                    National Computer Systems                                    17.2
Pell Grant Recipient and Financial            Planning Research Corp., Inc.                                 10.8
Management System (PGRFMS)
Project Easy Access for Students and          Price Waterhouse                                               5.0
Institutions
Postsecondary Education Participants          Computer Business Machines, Inc.,                              2.5
System                                        and Madentech
Campus-Based Systems                          Universal Automation Labs, Inc.                               1.9
                                                                                  Total                  $320.5




                                     Page 6                                                GAO/T-HEHS/AIMD-97-132
Appendix II

Student Financial Aid Systems’ Contract
Costs Over 5 Years


Dollars in Millions
350
                                                       Pell Grant Recipient and Financial
                                                       Management System (PGRFMS)
300                                                    Miscellaneous Systems
                                                       National Student Loan Data System
                                                       (NSLDS)
250                                                    FFEL System (FFELS)

                                                       Central Processing System (CPS)
200                                                    (includes multiple data entry contracts)


                                                       Federal Direct Loan Program (FDLP):
150                                                    -- Direct Loan Origination System
                                                       -- Direct Loan Servicing Systems


100


 50


  0
          FY 94       FY 95   FY 96    FY 97   FY 98

       PGRFMS
       Misc Sys
       NSLDS
       FFELS
       CPS
       FDLP




                              Page 7                                       GAO/T-HEHS/AIMD-97-132
Related GAO Products


              High Risk Series: Student Financial Aid (GAO/HR-97-11, Feb. 1997).

              Reporting of Student Loan Enrollment Status (GAO/HEHS-97-44R, Feb. 6,
              1997).

              Department of Education: Status of Actions to Improve the Management
              of Student Financial Aid (GAO/HEHS-96-143, July 12, 1996).

              Student Financial Aid: Data Not Fully Utilized to Identify Inappropriately
              Awarded Loans and Grants (GAO/T-HEHS-95-199, July 12, 1995).

              Student Financial Aid: Data Not Fully Utilized to Identify Inappropriately
              Awarded Loans and Grants (GAO/HEHS-95-89, July 11, 1995).

              Federal Family Education Loan Information System: Weak Computer
              Controls Increase Risk of Unauthorized Access to Sensitive Data
              (GAO/AIMD-95-117, June 12, 1995).

              Financial Audit: Federal Family Education Loan Program’s Financial
              Statements for Fiscal Years 1993 and 1992 (GAO/AIMD-94-131, June 30, 1994).

              Financial Management: Education’s Student Loan Program Controls Over
              Lenders Need Improvement (GAO/AIMD-93-33, Sept. 9, 1993).

              Financial Audit: Guaranteed Student Loan Program’s Internal Controls and
              Structure Need Improvement (GAO/AFMD-93-20, Mar. 16, 1993).

              Department of Education: Management Commitment Needed to Improve
              Information Resources Management (GAO/IMTEC-92-17, Apr. 20, 1992).




(104892)      Page 8                                                GAO/T-HEHS/AIMD-97-132
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