oversight

Student Financial Aid Systems: Absence of Guiding Architecture Reduces Efficiency, Ease of Use

Published by the Government Accountability Office on 1997-07-29.

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

                          United States General Accounting Office

GAO                       Testimony
                          Before the Subcommittee on Postsecondary
                          Education, Training and Life-Long Learning
                          House Committee on Education and the Workforce


For Release on Delivery
Expected at
9:30 a.m.
                          STUDENT FINANCIAL
Tuesday,
July 29, 1997             AID SYSTEMS

                          Absence of Guiding
                          Architecture Reduces
                          Efficiency, Ease of Use
                          Statement of Joel C. Willemssen
                          Director, Information Resources Management
                          Accounting and Information Management Division




GAO/T-AIMD-97-147
Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss the results of our
just-completed review of the Department of Education’s progress in
integrating its National Student Loan Data System, or NSLDS, with other
student financial aid systems, as required by law. NSLDS was designed to
track loan and grant information on programs authorized under title IV of
the Higher Education Act of 1965, (HEA) as amended. It also was to provide
a research database, and support operations, including prescreening of aid
applicants for eligibility and student enrollment status.

For millions of Americans, such student aid programs are the deciding
factor in whether postsecondary education is within financial reach. As
such, it is critical that the information contained in these systems be
accurate. More than $47 billion is to be made available on behalf of about
8 million students for the 1998-99 academic year—about 80 percent of it
through student loans.

As described in detail in our report being released at this hearing today,1
the Department of Education has made only limited progress in integrating
NSLDS with the other student financial aid systems that support title IV
programs. This is largely because the Department has not developed an
overall systems architecture, a framework needed to allow these disparate
systems to operate in concert with each other. As a result, while
information can be shared among systems, the process is cumbersome,
expensive, and unreliable.

Further, the lack of a systems architecture allows the proliferation of
individual stand-alone systems. This is expensive, not only with respect to
system procurement, operation, and maintenance, but also in terms of
efficiency. Such an approach has served immediate program needs on a
limited basis, but undermines sharing of student financial aid information
across programs. This, in turn, can result in different databases containing
different and perhaps conflicting information on the status of a student
loan or grant. Our report recommends specific actions that we believe
offer a realistic approach as the Department works to address these
challenges.




1
 Student Financial Aid Information: Systems Architecture Needed To Improve Programs’ Efficiency
(GAO/AIMD-97-122, July 29, 1997).



Page 1                                                                      GAO/T-AIMD-97-147
                         Four major sources of student aid are currently available: the Federal
NSLDS Intended to Be     Family Education Loan Program (FFELP),2 the Pell Grant Program, the
Central Repository for   Federal Direct Loan Program, and Campus-Based Programs.3 Before the
Title IV Program         recent 5-year phase-in of the direct loan program, FFELP and the Pell Grant
                         programs were the largest sources of federally financed educational
Information              assistance. FFELP provides loans through private lenders; these loans are
                         guaranteed against default by about 36 guaranty agencies
                         nationwide—state and nonprofit private agents of the federal government
                         whose services include, among others, payment of claims on defaulted
                         loans. The loans are ultimately insured by the federal government. The Pell
                         program provides for grants to economically disadvantaged students.

                         Over the years, both FFELP and the Pell Grant Program have been subject
                         to waste, fraud, and abuse. Because of the limited risks to schools,
                         lenders, and guaranty agencies, and the billions of dollars in available aid,
                         the structure of FFELP created the potential for large losses, sometimes
                         through abuse. In fiscal year 1995, for example, the federal government
                         paid out over $2.5 billion to make good the guarantee on defaulted student
                         loans. In our past work we found that students who had previously
                         defaulted on student loans were nonetheless subsequently able to obtain
                         additional loans.4 The Pell program has likewise experienced abuse, such
                         as students’ receiving grants while attending two or more schools
                         concurrently. Since the inception of the program in 1973, students have
                         been limited to receiving Pell grants from only one school at a time.

                         The Department’s student financial aid programs are one of 25 areas we
                         have categorized as high risk because of vulnerability to waste, fraud, and
                         abuse.5 Although progress has been made, the Department’s controls for
                         ensuring data accuracy and management oversight remain inadequate. The
                         Department has long recognized its significant problems with title IV data
                         reliability. In fact, it reported this as a material weakness under the
                         Federal Managers’ Financial Integrity Act. Plans are now underway to
                         address this issue through a major initiative started last December to
                         reconcile NSLDS data with data in the program-specific databases.



                         2
                          Formerly the Guaranteed and Stafford Student Loan programs.
                         3
                          The Campus-Based Programs include the Federal Work-Study Program, the Federal Perkins Loan
                         Program, and the Federal Supplemental Educational Opportunity Grant Program.
                         4
                          Student Financial Aid: Data Not Fully Utilized to Identify Inappropriately Awarded Loans and Grants
                         (GAO/HEHS-95-89, July 11, 1995).
                         5
                          High-Risk Series: Student Financial Aid (GAO/HR-97-11, February 1997).



                         Page 2                                                                         GAO/T-AIMD-97-147
                     Similarly, because of the poor quality and unreliability of financial data
                     remaining in the Department’s systems, Education staff cannot obtain the
                     complete, accurate data necessary for reporting on its financial position.
                     In fact, the Department’s Office of Inspector General was unable to
                     express an opinion on the fiscal year 1994 FFELP principal financial
                     statements, taken as a whole, because of the unreliability of student loan
                     data on which the Department based its expected costs to be incurred on
                     outstanding guaranteed loans. Education received a disclaimer of audit
                     opinion on the 1995 financial statements for the same reason. The
                     Department’s acting chief financial officer, therefore, had to present
                     unaudited 1996 financial statements in Education’s March 1997 annual
                     accountability report (covering fiscal year 1996). According to this report,
                     the audited statements—with auditor’s report—were to be available
                     “around July 31, 1997.”

                     NSLDS  was authorized under the 1986 HEA amendments as a means of
                     improving compliance with repayment and loan-limitation provisions, and
                     to help ensure accurate information on student loan indebtedness and
                     institutional lending practices. The 1992 HEA amendments required that
                     Education integrate NSLDS with the databases of the program-specific title
                     IV systems by January 1, 1994. In January 1993 the Department awarded a
                     5-year, $39-million contract to develop and maintain NSLDS.


                     Despite the mandate of the 1992 HEA amendments—and the conclusions of
Department Actions   studies carried out both within Education and by the Advisory Committee
Fall Short of Full   on Student Financial Assistance6—the Department’s actions have fallen
Integration          short of full integration. Education officials chose to establish NSLDS as a
                     data repository, to receive information from the other title IV systems. Yet
                     operating in such an environment presents complications due to the lack
                     of uniformity in how the systems handle and store information.

                     The lack of data standards has complicated data matching between
                     systems. To assist in achieving integration7 of the Department’s title IV
                     systems, the 1992 amendments included specific requirements for the
                     establishment of common identifiers and the standardization of data

                     6
                      The committee was created as part of the HEA amendments of 1986; it serves as an independent
                     public advisory body to the Department and to the Congress.
                     7
                      Information integration is defined by the National Institute of Standards and Technology as
                     establishment of the appropriate computer hardware/software, methodology, and organizational
                     environment to provide a unified and shared information management capability for a complex
                     business enterprise (Information Management Directions: The Information Challenge, special
                     publication 500-167, September 1989).



                     Page 3                                                                       GAO/T-AIMD-97-147
reporting formats, including definitions of terms to permit direct
comparison of data. This has still not been accomplished. Hence, the NSLDS
database cannot be updated without expensive conversion workaround
programs. The result is a collection of independent systems, many of
which keep data that duplicate information stored in NSLDS. This lack of
integration promotes an environment of reduced management efficiency,
compromised system integrity, and escalating costs as new stand-alone
systems are developed.

While NSLDS was envisioned as the central repository for student financial
aid data, it is not readily compatible with most of the other title IV
systems. These various systems are operated by several different
contractors and have different types of hardware, operating systems,
application languages, and database management systems. Along with
Education’s internal systems, thousands of schools and numerous
guaranty agencies also employ disparate systems through which they send
data to NSLDS. Therefore, to accept data from these other systems, NSLDS
must have the necessary workarounds in place.

Education and its data providers currently use over 300 computer
formatting and editing programs—many of them workarounds—to bridge
the gaps in this complex computing environment. These programs,
however, may themselves introduce errors and that would not be
necessary in a fully integrated environment. Such programs contribute to
the rapidly escalating costs for the 5-year NSLDS contract—from an original
$39 million estimate to about $83 million today.

Department officials have acknowledged that integration is important and
has not been fully achieved. They told us, however, that they had little
time to consider viable alternatives in designing and implementing NSLDS
because of statutory requirements and the large number of diverse
organizations from which data had to be gathered.

The nonstandard use of student identifiers by various title IV systems
complicates tracking of students across programs, making the task
cumbersome and time-consuming. Likewise, identifying institutions can be
problematic because multiple identifiers are used; for instance, the same
school may have different identifying numbers for each of the title IV
programs in which it participates. The 1992 amendments required common
institutional identifiers by July 1, 1993; as of now, the Department’s plans
call for their development and implementation for the 1999-2000 academic
year.



Page 4                                                     GAO/T-AIMD-97-147
                          Beyond simply having common identifiers, it is important that data
                          standards be established; this is the accepted technique used to govern the
                          conventions for identifying, naming, and formatting data. The absence of
                          such standards usually results at best in confusion, at worst in possible
                          misinformation leading to the improper awarding of aid. Having data
                          standards in place means that everyone within an organization
                          understands the exact meaning of a specific term. While each title IV
                          system uses the format specified by NSLDS to report data, the Department
                          permits each program to use its own data dictionary—defining terms in
                          different ways.

                          One example of how this disparity can affect program operations can be
                          seen in the differences in how student enrollment status is stored in NSLDS,
                          compared with the system that supports the Pell Grant Program. Properly
                          determining enrollment status is important because students generally
                          begin repaying loans following a 6-month grace period after leaving
                          school. Because NSLDS and the Pell system report enrollment status in
                          different formats—alpha versus numeric—and use different definitions,
                          exact comparisons cannot be made, and queries may well produce
                          inconsistent responses. This can lead to misinterpretations of a student’s
                          true enrollment status. Problems such as these resulting from data
                          inconsistencies between systems can take school officials weeks or
                          months to resolve—if they are even detected.


                          Over the last decade, computer-based information systems have grown
Systems Architecture      dramatically; with this growth has come vastly increased complexity. As a
Essential for Efficient   means of handling such size and complexity, reliance on systems
Information Sharing       architectures has correspondingly increased. As discussed briefly earlier,
                          an architecture is simply a framework or blueprint to guide and constrain
                          the development and evolution of a collection of related systems. Used in
                          this way, it can help significantly to avoid inconsistent system design and
                          development decisions, and along with them the cost increases and
                          performance shortfalls that usually result.

                          Leading public and private organizations are today using systems
                          architectures to guide mission-critical systems acquisition, development,
                          and maintenance. The Congress has also recognized the importance of
                          such architectures and their place in improving federal information
                          systems. The Clinger-Cohen Act of 1996 requires department-level chief
                          information officers to develop, maintain, and facilitate the




                          Page 5                                                     GAO/T-AIMD-97-147
                        implementation of integrated systems architectures. And experts in
                        academia have likewise championed this approach.

                        A systems architecture could significantly help Education in overcoming
                        its continuing problems integrating NSLDS and the other title IV systems. It
                        should also reduce expenses by obviating the need for more stand-alone
                        systems and their requirement for workarounds, since one function of an
                        architecture is to ensure that systems will be interoperable.

                        Despite the importance of a systems architecture, Education officials have
                        not devoted the time or effort necessary to develop such a blueprint.
                        According to these officials, two factors accounting for this are the
                        Department’s focus on responding to legislative mandates and its
                        lack—until recently—of a chief information officer. However, the
                        Department reports that work on an architecture has begun and that it
                        expects completion by June 30, 1998.

                        We have conducted a preliminary review of the technical portion of the
                        draft architecture, and we believe that Education is underestimating what
                        will be required to fully develop and implement a systems architecture
                        departmentwide. Further, we are concerned that the Department has
                        drafted the technical component before the “logical” component.8 The
                        logical part should be developed first because it is derived from a strategic
                        information systems planning process that clearly defines the
                        organization’s mission, the business functions required to carry out that
                        mission, and the information needed to perform those functions.


                        The Department has a compelling need for a systems architecture that
Acquisition of          would enable the eventual integration of all title IV systems. In spite of
Stand-Alone Systems     this, however, it continues to acquire multiple stand-alone systems. Today
Continues, Increasing   the Department manages 9 major systems, supported by 16 separate
                        contracts, to administer student financial aid programs. They range from
Problems and Cost       legacy mainframe systems, several developed over 15 years ago, to a new
                        client-server system. For the most part, these systems operate
                        independently, and cannot communicate or share data with one another.

                        They are also expensive. As I mentioned earlier, this is a costly approach
                        to systems acquisition. Our chart, reproduced at the end of this statement,

                        8
                         The logical component of an architecture first defines the organization’s functions, providing
                        high-level descriptions of its information systems and their interrelationships and specifying how and
                        where information flows. Then, the technical component explains operations in technical terms, such
                        as specifying hardware, software, data, communications, security, and performance characteristics.



                        Page 6                                                                          GAO/T-AIMD-97-147
shows that Education’s information technology costs have almost tripled
since fiscal year 1994. The reported cost of these systems in fiscal year
1994 was $106 million; for fiscal year 1998 it is expected to be about
$317 million.

Many of the systems, including NSLDS, were developed independently over
time by multiple contractors responding to new functions, programs, or
mandates—and not as part of a long-range, carefully considered
systems-design strategy. This has evolved into a patchwork of stovepipe
systems that rely heavily on contractor expertise to develop and maintain
systems responsible for administering critical student financial aid
information.

A case in point: the Department recently awarded separate contracts to
three vendors for new, stand-alone systems to service direct loans.
Including the original servicer, the total cost for the four systems could be
as high as $1.6 billion through fiscal year 2003. This will result in four
different servicing systems for the same loan program, inviting problems
that stem from a likely lack of systems interoperability.

For over 2 years, the Advisory Committee on Student Financial Assistance
has been a consistent voice favoring movement away from this “stovepipe”
approach and toward integration. It has attributed deficiencies in the
delivery system for student financial aid to the lack of a fully functional,
title IV-wide recipient database that could integrate all program
operations.

Two years ago, a project was initiated that held the promise of
reengineering current processes and developing a system that would
integrate all players in the student financial aid community. Called Project
EASI, for Easy Access for Students and Institutions, it has endured loose
definition, a tentative start, and uncertain commitment from top
management. As such, whether it can achieve real process redesign and
systems integration is in doubt.9


In summary, the Department of Education continues its slow pace toward
compliance with the 1992 HEA amendments. While we understand the
difficulty of the challenges it faces, we nonetheless believe that the longer
the Department waits to develop a sound architecture and integrate its
systems, the more difficult and expensive that job will eventually be.

9
 See GAO/HR-97-11, February 1997.



Page 7                                                      GAO/T-AIMD-97-147
Accordingly, our report recommends that the Secretary of Education
direct the Department’s chief information officer to develop and enforce a
Departmentwide systems architecture by June 30, 1998; that all
information technology investments made after that date conform to this
architecture; and that funding for all projects be predicated on such
conformance, unless thorough, documented analysis supports an
exception.

Mr. Chairman, this concludes my statement. I would be pleased to respond
to any questions you or other Members of the Subcommittee may have at
this time.




Page 8                                                    GAO/T-AIMD-97-147
Page 9   GAO/T-AIMD-97-147
Attachment

Student Financial Aid Systems Contract
Costs Over 5 Years



             GAO           Student Financial Aid Systems
                           Contract Costs Over 5 Years
             Dollars in millions                                     $321
                                                                             Pell Grant Recipient Financial
                                                                             Management System (PGRFMS)

                                                             $283            Miscellaneous Systems
                                                                             National Student Loan Data System
                                                                             (NSLDS)

                                                                             FFELP System (FFELPS)

                                                     $215
                                                                             Central Processing System (CPS)
                                                                             (includes multiple data entry contracts)



                                                                             Federal Direct Loan Program (FDLP):
                                   $152
                                                                             -- Direct Loan Origination System
                                                                             -- Direct Loan Servicing Systems


                    $106




                   FY 94           FY 95             FY 96   FY 97   FY 98




                                           Page 10                                            GAO/T-AIMD-97-147
Page 11   GAO/T-AIMD-97-147
Related GAO Products


              Student Financial Aid Information: Systems Architecture Needed To
              Improve Programs’ Efficiency (GAO/AIMD-97-122, July 29, 1997).

              Department of Education: Multiple, Nonintegrated Systems Hamper
              Management of Student Financial Aid Programs (GAO/T-HEHS/AIMD-97-132,
              May 15, 1997).

              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, March 16, 1993).

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




(511231)      Page 12                                                     GAO/T-AIMD-97-147
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