Major Management Challenges and Program Risks: Department of Education
(Letter Report, 01/01/99, GAO/OCG-99-5).

As part of its Performance and Accountability Series, GAO provided
information on the major management challenges and program risks facing
the Department of Education.

GAO noted that: (1) Education continues to experience challenges in its
management of student financial aid programs; (2) Education lacks the
financial and programmatic information necessary to effectively budget
for and manage these programs and to accurately estimate the
government's liabilities; (3) some of the Department's mission-critical
information systems are not yet year 2000 compliant; (4) Education faces
challenges in administering elementary and secondary programs that are a
joint responsibility with state and local agencies; (5) Congress has
eased some federal reporting requirements to reduce paperwork and
regulatory burden as it increased state and local responsibilities for
managing programs; (6) as a result, the Department does not have enough
information on program effectiveness to meet the information needs of
Congress and other decisionmakers; (7) GAO's work has shown that
billions of federal education dollars are distributed through hundreds
of programs and more than 30 agencies, which creates the possibility of
overlap and duplication in federal education programs; (8) the
Department has been improving the management of its programs by
establishing goals, key strategies, and performance measures for each of
its 22 strategic objectives and by developing 99 performance plans for
individual programs; (9) in its annual strategic plans, Education
identified some of its many programs and laid the groundwork for
developing needed information about them; (10) while Education has made
progress in improving program management and providing information
needed by Congress, GAO's review of Education's fiscal year 1999
performance plan suggested the need for additional action in several
areas; and (11) the Department must address the need for adequately
testing revisions to its financial information systems, while developing
business continuity and contingency plans, to provide reasonable
assurance that new or modified year 2000 compliant systems will not
jeopardize the Department's ability to perform core operations.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  OCG-99-5
     TITLE:  Major Management Challenges and Program Risks: Department 
             of Education
      DATE:  01/01/99
   SUBJECT:  Intergovernmental relations
             Information resources management
             Management information systems
             Strategic planning
             Accountability
             Risk management
             Student financial aid
             Performance measures
             Financial management
             Aid for education
IDENTIFIER:  Performance and Accountability Series 1999
             Federal Family Education Loan Program
             Y2K
             Dept. of Education National Student Loan Data System
             
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Cover
================================================================ COVER


Performance and Accountability Series

January 1999

MAJOR MANAGEMENT CHALLENGES AND
PROGRAM RISKS - DEPARTMENT OF
EDUCATION

GAO/OCG-99-5

Education Challenges


Abbreviations
=============================================================== ABBREV

  EASI - Easy Access for Students and Institutions
  NSLDS - National Student Loan Data System
  OIG - Office of Inspector General
  OMB - Office of Management and Budget
  PBO - performance-based organization

Letter
=============================================================== LETTER



January 1999

The President of the Senate
The Speaker of the House of Representatives

This report addresses the major performance and management challenges
that have limited the effectiveness of the Department of Education in
carrying out its mission.  It also addresses corrective actions that
Education has taken or initiated on these challenges--including a
number of management initiatives to improve controls over the
Department's student financial aid programs--and further actions that
are needed.  For many years, we and others have reported significant
management problems at Education.  These problems are the result of
serious deficiencies in information and financial management systems
and the challenge of balancing two conflicting objectives--achieving
federal program oversight while offering implemention flexibility to
the state and local entities carrying out the programs. 

Education is making progress in addressing vulnerabilities in its
financial management system.  It has implemented a new core payment
system, and it received an unqualified financial audit opinion on its
fiscal year 1997 financial statements.  However, Education continues
to lack the financial and programmatic information necessary to
effectively budget for and manage its student financial aid programs
and to accurately estimate the government's liabilities.  For
example, Education continues to lack accurate, reliable data on costs
associated with outstanding student loans.  Therefore, GAO continues
to designate these programs as high risk.  Education has improved the
management of its elementary and secondary education programs by
developing sound performance plans containing key strategies and
performance measures.  However, it needs to improve coordination with
other agencies that provide educational services.  In addition, it
still faces challenges in obtaining performance information for many
of its programs that are designed to give state and local entities
the opportunity to tailor programs to local circumstances. 

This report is part of a special series entitled the Performance and
Accountability Series:  Major Management Challenges and Program
Risks.  The series contains separate reports on 20 agencies--one on
each of the cabinet departments and on most major independent
agencies as well as the U.S.  Postal Service.  The series also
includes a governmentwide report that draws from the agency-specific
reports to identify the performance and management challenges
requiring attention across the federal government.  As a companion
volume to this series, GAO is issuing an update to those government
operations and programs that its work has identified as "high risk"
because of their greater vulnerabilities to waste, fraud, abuse, and
mismanagement.  High-risk government operations are also identified
and discussed in detail in the appropriate performance and
accountability series agency reports. 

The performance and accountability series was done at the request of
the Majority Leader of the House of Representatives, Dick Armey; the
Chairman of the House Government Reform Committee, Dan Burton; the
Chairman of the House Budget Committee, John Kasich; the Chairman of
the Senate Committee on Governmental Affairs, Fred Thompson; the
Chairman of the Senate Budget Committee, Pete Domenici; and Senator
Larry Craig.  The series was subsequently cosponsored by the Ranking
Minority Member of the House Government Reform Committee, Henry A. 
Waxman; the Ranking Minority Member, Subcommittee on Government
Management, Information, and Technology, House Government Reform
Committee, Dennis J.  Kucinich; Senator Joseph I.  Lieberman; and
Senator Carl Levin. 

Copies of this report series are being sent to the President, the
congressional leadership, all other Members of the Congress, the
Director of the Office of Management and Budget, the Secretary of
Education, and the heads of other major departments and agencies. 

David M.  Walker
Comptroller General of
the United States


OVERVIEW
=========================================================== Appendix 0

The Department of Education is the primary agency responsible for
overseeing the more than $73 billion annual federal investment in
support of educational programs for Americans.  The Department is
also responsible for tracking approximately 93 million student loans
and 15 million grants as well as collecting more than $150 billion
owed by students.  While the federal government provides only a
portion of the resources used for educational activities nationwide,
education is seen by most Americans as a critical issue in which the
federal government can play a part.  In order to maximize the success
of federal efforts to assist education, and therefore ultimately
produce a more informed citizenry and improve the quality of American
workers, the Department of Education must address several major
performance and management challenges. 

THE CHALLENGES


      EDUCATION'S ADMINISTRATIVE
      EFFORT IS INADEQUATE TO
      ENSURE ACCESS TO
      POSTSECONDARY INSTITUTIONS
      WHILE PROTECTING FEDERAL
      FINANCIAL INTERESTS
------------------------------------------------------- Appendix 0:0.1

Education continues to experience challenges in its management of
student financial aid programs, which we have designated as at high
risk for fraud, waste, abuse, or mismanagement.  These programs are
at risk because they provide grants and federally backed loans to a
population that is composed largely of low-income students who are
not creditworthy and would not otherwise have access to the funds
necessary to enter the college or university of their choice.  Of
most importance, the Department lacks the financial and programmatic
information necessary to effectively budget for and manage these
programs and to accurately estimate the government's liabilities. 
For example, in fiscal year 1997, the federal government paid out
over $3.3 billion to make good its guarantee on defaulted student
loans.  Yet the Department lacks the integrated financial systems to
provide basic information.  For example, the current system cannot
always identify where a student is enrolled, even after a student
grant or loan is awarded and thousands of dollars in student aid have
been disbursed.  As a result, ineligible students could be receiving
funds. 


      YEAR 2000 COMPUTER
      COMPLIANCE LACKING
------------------------------------------------------- Appendix 0:0.2

Some of the Department's mission-critical information systems are not
yet Year 2000 compliant.  Through its student aid programs, Education
has enabled millions of students to attend postsecondary educational
institutions.  Year 2000 issues threaten the Department's ability to
continue making this aid available to eligible students and parents. 
Specifically, these problems could result in (1) delays in
disbursement, such that lenders might not receive timely interest
subsidy payments if external data exchanges fail, and (2) a reduction
in the Department's ability to transfer payments, process
applications for program benefits, and monitor program operations. 
These problems also pose risks that student financial aid programs
may not function properly if they do not receive critical data for
originating loans and for reporting payments and financing
information. 


      BALANCING OVERSIGHT OF
      PROGRAMS AND PROGRAM
      FLEXIBILITY
------------------------------------------------------- Appendix 0:0.3

Education also faces challenges in administering elementary and
secondary education programs that are a joint responsibility with
state and local agencies.  Doing so requires striking a balance
between program flexibility and program controls.  Yet there is a
lack of consensus nationally on what the Department's role should be
in education.  In this connection, the Congress has, over the past
several years, eased some federal reporting requirements to reduce
paperwork and regulatory burden as it increased state and local
responsibilities for managing programs.  As a result, the Department
does not have enough information on program effectiveness to meet the
information needs of the Congress and other decisionmakers. 
Furthermore, statutes often delegate oversight of compliance to state
and local agencies.  This, too, results in a lack of accountability
information, particularly for elementary and secondary education
programs.  In fact, many of these programs have been converted into
little more than funding streams, distributed through formula-driven
funding mechanisms, thus further diminishing Education's role in some
programs.  Our work has also shown that billions of federal education
dollars are distributed through hundreds of programs and more than 30
agencies, which creates the possibility of overlap and duplication in
federal education programs. 

PROGRESS AND NEXT STEPS

The Department has been improving the management of its programs by
establishing goals, key strategies, and performance measures for each
of its 22 strategic objectives and by developing 99 performance plans
for individual programs.  Education reported these actions in its
strategic and annual plans as required under the Government
Performance and Results Act, commonly known as the Results Act.  In
these plans, the Department identified some of its many programs and
laid the groundwork for developing needed information about them. 
For the student financial aid programs, for example, the Department
has increased its oversight and management of the consolidation of
student loans and improved its process for recertifying participating
schools.  Education has also accelerated its efforts to become Year
2000 compliant. 

While Education has made progress in improving program management and
providing information needed by the Congress, our review of
Education's fiscal year 1999 performance plan suggested the need for
additional action in several areas.  For example, the Department
could better describe the relationship between its long-term
strategic goals and objectives and the short-term fiscal year 1999
performance goals in individual program performance plans.  Education
also needs to continue to improve its coordination with the other
agencies that provide educational services and engage in crosscutting
efforts.  For its student financial aid programs, Education needs to
address the data limitations and lack of financial information that
hinder its management of the programs and affect its ability to award
and track billions of dollars in student financial aid.  Further, the
Department must address the need for adequately testing revisions to
its financial information systems, while developing business
continuity and contingency plans, to provide reasonable assurance
that new or modified Year-2000-compliant systems will not jeopardize
the Department's ability to perform core operations. 


MAJOR PERFORMANCE AND MANAGEMENT
ISSUES
=========================================================== Appendix 1

The Department of Education leads the nation's long-term efforts to
improve the quality of education.  With a staff of about 4,600 and a
budget of about $34 billion in fiscal year 1999, the Department
manages much of the over $73 billion federal investment in education. 
Specifically, the Department operates multiple programs to promote
access to and equity in education, provides financial aid to
postsecondary students, and develops information and provides
research on best practices to improve the quality of education.  In
performing its mission, Education interacts with two major kinds of
educational institutions--elementary and secondary schools and
postsecondary institutions--as well as coordinates with other federal
agencies that provide educational resources, assistance, or both. 

The Department of Education faces two major management challenges if
it is going to effectively manage federal resources in support of
education.  First, the Department must fully protect federal
financial interests while carrying out its role in ensuring student
access to postsecondary institutions
--which, to date, it has not accomplished.  Student financial aid
programs administered by the Department have a number of features
that make them inherently vulnerable to fraud, waste, abuse, and
mismanagement, and the Department's administration of these programs
has not been adequate to overcome that vulnerability.  Second,
Education must ensure that its mission-critical information systems
are Year 2000 compliant and has recently accelerated its efforts to
do so.  In addition, Education faces significant challenges in
providing the information on preschool, elementary, and secondary
education programs that is needed by many different decisionmakers. 

EDUCATION'S ADMINISTRATIVE EFFORT
IS INADEQUATE TO ENSURE ACCESS TO
POSTSECONDARY INSTITUTIONS WHILE
PROTECTING FEDERAL FINANCIAL
INTERESTS

Through student financial aid programs administered by the Department
of Education, millions of students have been able to enroll in the
postsecondary education institutions of their choice.  In fiscal year
1998, for example, more than 8.5 million students received over $48
billion in student financial aid through Education-
administered student financial aid programs.  But these programs have
a number of features that make them inherently vulnerable to fraud,
waste, abuse, and mismanagement.  For example, they provide grants
and federally backed loans to a high-risk population, composed
largely of low-income students who are not creditworthy and would not
otherwise have access to the funds necessary to enter the college or
university of their choice.  Moreover, the programs operate
independently with different rules, processes, and data systems, and
many participants are involved--including millions of students;
thousands of schools; and thousands of lenders, guaranty agencies,
third-party servicers, and contractors.  The Federal Family Education
Loan Program (formerly known as the Guaranteed Student Loan Program),
for example, is particularly vulnerable because of its size (it
provided $20 billion in loans in fiscal year 1998), large number of
participants, and the federal guarantee under which the federal
government bears most of the risk when students default on their
loans.  For example, in fiscal year 1997, the federal government paid
out over $3.3 billion to make good its guarantee on defaulted student
loans. 

The Department's administration of these programs has also
contributed to federal exposure to mismanagement and abuses.  Our
audits and those of Education's Office of Inspector General (OIG)
have found instances in which students fraudulently obtained grants
and loans; schools were inappropriately recertified to continue
participating in federal student aid programs; state-designated
guaranty agencies misused federal funds in their custody; and a
contractor failed to properly make, record, and account for loans it
consolidated on Education's behalf.  This combination of
vulnerabilities, inherent in program design and exacerbated by
Department administration, has led us since 1992 to designate federal
student financial aid programs as an area at high risk of fraud,
waste, abuse, and mismanagement. 

Progress has been made in addressing many of the issues discussed in
our series of reports on this high-risk area.  For example, in the
1998 amendments to title IV of the Higher Education Act of 1965, the
Congress instructed the Department and the Internal Revenue Service
to cooperate in verifying students' income to prevent fraud.  The
1998 amendments also strengthened the controls over guaranty
agencies' use of the federal funds they hold in reserve.  Moreover,
the Department has improved the process by which it recertifies
schools for participation in student aid programs and has increased
its management and oversight of the consolidation of student loans. 

We are encouraged by the actions taken by the Congress and the
Department to address a number of program management and oversight
issues.  But several weaknesses continue to cause concern and have
contributed to our decision to maintain the high-risk designation for
the Department's administration of student financial aid programs. 
First, the Department's nonintegrated information management systems
often lack the accurate, complete, and timely data on program
participants needed to effectively manage and oversee the programs. 
Second, the Department lacks the financial information necessary to
effectively budget for and manage its student aid programs and to
accurately estimate the government's liabilities. 


      NONINTEGRATED INFORMATION
      SYSTEMS FAIL TO CONSISTENTLY
      PROVIDE MANAGERS ACCURATE
      AND TIMELY DATA ON PROGRAM
      PARTICIPANTS
------------------------------------------------------- Appendix 1:0.1

Federal student financial aid programs remain vulnerable to losses
because the Department, guaranty agencies, schools, and lenders often
do not have the accurate, complete, and timely information on program
participants needed to effectively and efficiently operate and manage
the programs.  These difficulties stem from the lack of a fully
functional integrated database covering all Department-administered
financial aid programs.  Our work has shown that the Department does
not have a sound, integrated information technology strategy to
manage its portfolio of information systems. 

Many of Education's student financial aid systems were developed
independently over time by multiple contractors in response to new
functions, programs, and mandates, rather than as part of a
long-range system design strategy.  As a consequence, a highly
heterogeneous environment has evolved that relies heavily on various
contractors to develop and maintain computerized systems of critical
student financial aid information.  These contractors operate the
systems in their own disparate hardware and software environments. 
The fiscal year 1998 budget to develop, operate, and maintain these
systems was $311 million, and spending is expected to increase in
fiscal year 1999. 

To address long-standing challenges associated with the student loan
programs' nonintegrated, heterogeneous systems environment, and to
improve the availability and quality of data on title IV program
participants, the Higher Education Amendments of 1992 required that
the Department integrate its databases containing information on
student financial aid program participants.  The amendments also
required the Department to do the following: 

  -- Establish common identifiers so that codes that are used to
     identify institutions and students are consistent across the
     different title IV programs, making it easier for managers and
     others to track students across programs.  Without such
     identifiers, the Department could assign an institution
     different identification numbers for each title IV program in
     which its students participate, making the identification of
     institutions problematic.  While the Department is working on
     establishing these identifiers, it has not completed this work. 

  -- Standardize data reporting formats to permit the direct
     comparison of data.  For example, the Department permits each
     title IV program to use its own data dictionary for its system;
     thus, data elements may have different meanings across programs. 
     The lack of data standards also contributes to concerns about
     data quality and reliability, which the Department has long
     recognized as a significant problem with its title IV data.  The
     Department began to address data quality through a major project
     in December 1996 aimed at reconciling data stored in the
     National Student Loan Data System (NSLDS)--the Department's
     principal student grant and loan database--with data in
     program-specific databases.  Although the Department has
     reconciled parts of its NSLDS data, it has only partially
     standardized its data reporting formats. 

In July 1997, we recommended that the Secretary of Education direct
the Department's chief information officer to (1) develop and enforce
a departmentwide systems architecture that includes a high-level
description of the organization's mission, functional requirements,
systems, and information flows among systems and (2) ensure that the
developed systems architecture addresses the title IV systems
integration, common identifiers, and data standards deficiencies.  We
also recommended that the Department's information technology
investments conform to the developed architecture and that funding
for all projects be predicated on such conformance. 

Although the Department has made improvements in its student aid data
systems that address many of these concerns, additional enhancements
are still needed.  For example, the Department is developing a major
reengineering project, Easy Access for Students and Institutions
(commonly referred to as Project EASI), to redesign the entire
student aid program delivery system to integrate the management and
control functions, but this project is a long-term undertaking. 

The Congress recently authorized the Department to operate student
financial aid programs under a performance-based organization
(PBO)--the first such organization in the federal sector.  PBOs
normally adhere to more flexible rules but operate under tougher
accountability standards.  Many functions, such as developing and
enforcing departmentwide management systems, will fall within the
responsibility of Education's PBO.  The PBO will have an opportunity
to address these issues as it begins taking over functions now
operated by the Department's Office of Postsecondary Education. 


      LACK OF ADEQUATE FINANCIAL
      DATA HINDERS MANAGEMENT OF
      STUDENT FINANCIAL AID
      PROGRAMS
------------------------------------------------------- Appendix 1:0.2

Education's chronic data systems challenges have hampered its ability
to prepare financial statements that fairly present the actual
financial condition of its student financial aid programs.  Each year
from 1992 through 1996, data reliability concerns have precluded our
auditors, Education's OIG, and independent public accountants from
rendering an opinion on Education's financial statements.  The
primary challenge has been that the Department has not been able to
obtain complete and accurate student loan data from its systems. 
Without accurate information, the Department cannot be certain of the
extent of the government's liability for the student loans it has
guaranteed. 

The Department has made progress in addressing vulnerabilities in its
financial management systems.  For example, in fiscal year 1998 it
received an unqualified audit opinion on its fiscal year 1997
consolidated financial statements--the first year it received such an
opinion.  The Department has also implemented its new core financial
management system and undertaken efforts to improve NSLDS.  The
Department also intends to improve data accuracy by obtaining
individual student loan data directly from lenders rather than
through guaranty agencies and by expanding efforts to verify the data
reported to NSLDS. 

Other aspects of its financial management activities, however,
continue to require the Department's attention and contribute to
concerns about the risk exposure to the federal government.  For
example, although the Department received an unqualified audit
opinion on its fiscal year 1997 consolidated financial statements, it
continues to lack accurate, reliable data on costs associated with
outstanding student loans.  Because Education did not have reliable
data from its own systems to develop the estimates of outstanding
loans, it obtained data from 10 of the larger guaranty agencies and
used these data to compute loan estimates for preparing its 1997
statements.  Because of this effort, Education did not meet the
annual March 1 deadline for completing the audit as required by the
Results Act.  Education's OIG issued its audit report on the fiscal
year 1997 financial statements on May 29, 1998.  Although the data
provided by the guaranty agencies were suitable to support the loan
estimates included with this audit report, Education's ability to
continue to prepare auditable loan estimates and meet the Results Act
audit time frame depends on its establishing a reliable source of
up-to-date historical loan data. 

Although the Department relies mainly on independent public
accountant audits to ensure the accuracy of information about monies
it is owed, it has not focused on receiving reports on audits and
performing quality control reviews on these audits.  Education also
does not know if required annual financial and compliance audits of
schools participating in federal student financial aid programs are
being performed.  Although Education has two systems for audit report
tracking and monitoring, neither system is used to identify late or
missing financial audit reports.  The Department has not followed up
on audit findings in a timely manner. 

The Department has also experienced difficulties in implementing and
operating its new core financial management system.  As a result, the
preparation of the fiscal year 1998 financial statements and the
related audit are being delayed until the Department completes
reconciling general ledger data and resolves significant differences
between the general ledger and other related information.  The
Department has hired contractors to assist with the reconciliation
process.  The Department's OIG has agreed to delay the audit of the
fiscal year 1998 financial statements until February 1999 because of
these issues.  Consequently, the Department will not meet the March
1, 1999, deadline for completing the fiscal year 1998 audit. 

Education recognizes the need to improve oversight over guaranty
agencies, and several corrective actions are under way.  In addition
to these actions, Education has started to use NSLDS to track
individual loan activity and loan balances.  We believe that
Education can take steps to eliminate major internal control
weaknesses and fully implement its new core financial management
system.  Because the Department has begun corrective actions and has
demonstrated a commitment to resolving its financial management
challenges, we believe it is making progress.  The unqualified audit
opinion on its 1997 financial statements was a significant
improvement over the disclaimers of opinion that the Department
received in past audits.  However, a sustained effort will be
critical if the Department is to have sound financial management and
reliable financial information. 


      KEY CONTACTS
------------------------------------------------------- Appendix 1:0.3

Carlotta C.  Joyner, Director
Education and Employment Issues
Health, Education, and Human Services
 Division
(202) 512-7014
[email protected]

Gloria L.  Jarmon, Director
Health, Education, and Human Services
 Accounting and Financial Management
Accounting and Information Management
 Division
(202) 512-4476
[email protected]

YEAR 2000 COMPUTER COMPLIANCE
LACKING

The Department of Education faces major risks that Year 2000 failures
could seriously disrupt the student financial aid delivery process. 
Because student financial aid systems are interdependent,
repercussions from Year-2000-related shortcomings could be felt
throughout the student financial aid community.  The Department has
been very slow in implementing a comprehensive Year 2000 program to
address these risks.  Education is now accelerating its program, but
with the slow start, the Department remains in a position of playing
catch-up.  Accordingly, the Department has major challenges ahead and
limited time remaining to adequately deal with them. 

According to Education's own assessments of the severity of possible
Year 2000 failures, the student financial aid delivery process could
experience major problems unless all systems are compliant in time. 
These problems include

  -- delays in disbursements, such that lenders might not receive
     timely interest subsidy payments if external data exchanges
     fail;

  -- reduction in the Department's ability to transfer payments,
     process applications for program benefits, and monitor program
     operations;

  -- risks that student financial aid programs might not function
     properly if they do not receive critical data for originating
     loans and for reporting payments and financial information; and

  -- risks that postsecondary education students might lack the
     ability to verify the current status of their loans or grants. 

Education has reported to the Office of Management and Budget (OMB)
that it has 14 mission-critical systems, of which 11 are student
financial aid systems.  Complete and thorough testing of the Year
2000 compliance of these mission-critical systems is essential to
provide reasonable assurance that new or modified systems will
process dates correctly and will not compromise core business
operations after the turn of the century.  It is also important to
work early and continually with agencies' and organizations' data
exchange partners so that testing can be effectively planned and
executed.  For Education, the tasks ahead require a cooperative,
coordinated, and thorough testing process across the disparate
systems in the student financial aid delivery network. 

Education must mitigate critical risks that affect its ability to
award and track billions of dollars in student financial aid. 
Specifically, the Department must address the need for adequate
testing, the renovation and testing of data exchanges, and the
development of business continuity and contingency plans.  Unless
these issues are effectively addressed, the ability of the Department
to deliver financial aid to students will be compromised.  The
Department's efforts include the following. 

  -- Beyond the testing of individual mission-critical systems,
     Education plans to devote a significant amount of time to
     end-to-end testing of its mission-critical business processes
     and supporting systems, including those associated with student
     financial aid delivery.  According to its documents, the
     Department plans to conduct such testing in the first half of
     1999, after all individual mission-critical systems have been
     certified as Year 2000 compliant. 

  -- Conflicting data exchange formats or data processed on
     noncompliant systems could introduce and propagate errors from
     one system to another.  Education's student financial aid data
     exchange environment is massive and complex.  It includes about
     7,500 schools, 6,500 lenders, and 36 guaranty agencies, as well
     as other federal agencies.  The Department plans to include
     testing of data exchanges in its end-to-end testing of
     mission-critical business processes. 

  -- Given the challenges Education faces in making sure that all of
     its mission-critical systems are adequately tested and in
     addressing the complexities of the massive number of data
     exchanges, it will be difficult for the Department to enter the
     new century without experiencing some challenges.  Therefore, it
     is critical that Education develop realistic contingency plans
     to ensure continuity of core business processes in the event of
     Year-2000-induced failures.  According to Department officials,
     Education is in the process of developing business continuity
     and contingency plans for each mission-critical business process
     and supporting system.  The Department expects to complete these
     plans by March 1999. 


      KEY CONTACT
------------------------------------------------------- Appendix 1:0.4

Joel C.  Willemssen, Director
Civil Agencies Information Systems
Accounting and Information Management
 Division
(202) 512-6408
[email protected]

BALANCING OVERSIGHT OF PROGRAMS
AND PROGRAM FLEXIBILITY

In administering programs that are a joint responsibility with state
and local agencies, Education must continually balance program
flexibility with maintaining program controls.  At the same time,
there is a lack of consensus on the federal role in education.  Over
the past several years, the Congress has loosened federal
requirements, thus increasing state and local responsibilities for
managing programs and determining how funds best meet local needs. 
As a result, the Department has too little information on program
effectiveness to meet the information needs of the Congress and other
decisionmakers.  But this absence of information often results not
from Education's lack of diligence in managing the programs but from
the nature of the programs themselves.  The challenge for the
Department is to get the information it needs in the face of other
issues that impede its data collection efforts, such as (1)
priorities that compete with and restrict data collection and
evaluation activities, such as the desire to reduce paperwork and
regulatory burden and promote flexibility in program implementation;
(2) the high cost of data collection; (3) the secondary role the
federal Department of Education plays, relative to local and state
government entities, in many programs; (4) the difficulty of
obtaining impact evaluation information; (5) the problem in assessing
overall effects from federal efforts involving multiple federal
programs in multiple agencies; and (6) until recently, a lack of
focus on results and accountability. 

In some Education programs, oversight of compliance is delegated to
state and local agencies, which results in a lack of accountability
information for the elementary and secondary education programs the
Department manages.  These programs are sometimes designed, by
statute, to provide considerable flexibility for states and local
school districts.  When flexibility is provided in a program's
implementation, the types of activities carried out can vary from
locality to locality.  This is often also true of program objectives,
information reporting, and measures of outcome and success.  As we
have seen in our review of the Safe and Drug-Free Schools and
Communities Act, cobbling this information together to form a
national picture can be difficult. 

Moreover, our work has also shown that billions of federal education
dollars are distributed through hundreds of programs and more than 30
agencies, which creates the possibility of overlap and duplication in
federal education programs.  Since the bulk of federal education
funds are distributed through formula-driven funding mechanisms, in
recent years some of these programs have been converted to little
more than funding streams.  (The term "funding stream" characterizes
programs for which there are federal fiscal objectives but whose
activities are primarily managed at the state or local level.) In the
words of state agency staff, "these aren't federal programs, they are
state programs that receive federal funds." Thus, Education's role in
some programs--such as Goals 2000, which provides funds to states and
localities for systemwide education reform efforts--may involve
little more than seeing that applications for funding are properly
submitted, compliance or audit issues are resolved, and money is
disbursed in a timely fashion.  As a result, little or no performance
information is available at the federal level.  Where grant-funded
activities are primarily managed at the local level--as in title VI
Innovative Education and Safe and Drug-Free Schools and
Communities--the state's role may be similarly limited.  Also, once
these funds are added to the overall budget for a state or local
activity, the federal dollars lose their identity, and their results
cannot be separated out--particularly when the federal share is
small.  Thus, the only program outcome measures available are likely
to be for the state or local service delivery program, not the
federal funding program. 

The strategic planning process under the Results Act, including its
interagency coordination component, provides an opportunity to
examine education programs managed across the government so that
overlapping, duplicative, and ineffective programs can be identified. 
Education's strategic and performance plans were basically sound. 
They provided OMB and the Congress with goals, key strategies, and
performance measures for each of Education's 22 strategic objectives
and 99 performance plans for individual programs; the plans also
mapped the interagency coordination for each program.  The Department
has also required states or localities to set performance objectives
for the activities or projects they choose to support with federal
funds--and to report the performance objectives to the federal agency
involved.  For example, in its use of waivers, the Department expects
to gain information on program outcomes in exchange for granting
temporary exemptions from certain federal program requirements
(waivers) to states or school districts.  However, state reporting is
uneven, providing insufficient information. 

While these activities provided a necessary first step to lay the
groundwork for developing needed information, much additional work
needs to be done in preschool, elementary, and secondary education to
(1) balance the competing objectives of collecting uniform program
information to assess performance with giving states and localities
the flexibility to implement their unique programs; (2) better link
Education's long-term strategic goals and annual performance plans in
order to demonstrate how the Department intends to make progress
toward achieving its strategic goals; and (3) use the Results Act to
identify performance goals for Education's crosscutting efforts,
laying out more details regarding the activities that each agency
will take to assess the effectiveness of such programs and eliminate
the extent of overlap and duplication of similar education programs
that are scattered among multiple agencies and departments. 


      KEY CONTACT
------------------------------------------------------- Appendix 1:0.5

Carlotta C.  Joyner, Director
Education and Employment Issues
Health, Education, and Human Services
 Division
(202) 512-7014
[email protected]


RELATED GAO PRODUCTS
=========================================================== Appendix 2

STUDENT FINANCIAL AID

Student Loans:  Improvements in the Direct Loan Consolidation Process
(GAO/HEHS-99-19R, Nov.  10, 1998). 

Direct Student Loans:  Efforts to Resolve Lenders' Problems With
Consolidations Are Under Way (GAO/HEHS-98-103, Apr.  21, 1998). 

Higher Education:  Verification Helps Prevent Student Aid Payments to
Ineligible Noncitizens (GAO/HEHS-97-153, Aug.  6, 1997). 

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). 

YEAR 2000 COMPLIANCE

Year 2000 Computing Crisis:  Updated Status of Department of
Education's Information Systems (GAO/T-AIMD-99-8, Oct.  8, 1998). 

Year 2000 Computing Crisis:  Significant Risks Remain to Department
of Education's Student Financial Aid Systems (GAO/T-AIMD-98-302,
Sept.  17, 1998). 

BALANCING OVERSIGHT AND
FLEXIBILITY

Goals 2000:  Flexible Funding Supports State and Local Education
Reform (GAO/HEHS-99-10, Nov.  16, 1998). 

Elementary and Secondary Education:  Flexibility Initiatives Do Not
Address Districts' Key Concerns About Federal Requirements
(GAO/HEHS-98-232, Sept.  30, 1998). 

Grant Programs:  Design Features Shape Flexibility, Accountability,
and Performance Information (GAO/GGD-98-137, June 22, 1998). 

Department of Education:  Information Needs Are at the Core of
Management Challenges Facing the Department (GAO/T-HEHS-98-124, Mar. 
24, 1998). 

Federal Education Funding:  Multiple Programs and Lack of Data Raise
Efficiency and Effectiveness Concerns (GAO/HEHS-98-77R, Jan.  21,
1998, and GAO/T-HEHS-98-46, Nov.  6, 1997). 

MANAGING FOR RESULTS

The Results Act:  Observations on the Department of Education's
Fiscal Year 1999 Annual Performance Plan (GAO/HEHS-98-172R, June 8,
1998). 

Managing for Results:  Agencies' Annual Performance Plans Can Help
Address Strategic Planning Challenges (GAO/GGD-98-44, Jan.  30,
1998). 

Managing for Results:  Using the Results Act to Address Mission
Fragmentation and Program Overlap (GAO/AIMD-97-146, Aug.  29, 1997). 

Managing for Results:  Analytic Challenges in Measuring Performance
(GAO/HEHS/GGD-97-138, May 30, 1997). 


PERFORMANCE AND ACCOUNTABILITY
SERIES
=========================================================== Appendix 3

Major Management Challenges and Program Risks:  A Governmentwide
Perspective (GAO/OCG-99-1)

Major Management Challenges and Program Risks:  Department of
Agriculture (GAO/OCG-99-2)

Major Management Challenges and Program Risks:  Department of
Commerce (GAO/OCG-99-3)

Major Management Challenges and Program Risks:  Department of Defense
(GAO/OCG-99-4)

Major Management Challenges and Program Risks:  Department of
Education (GAO/OCG-99-5)

Major Management Challenges and Program Risks:  Department of Energy
(GAO/OCG-99-6)

Major Management Challenges and Program Risks:  Department of Health
and Human Services (GAO/OCG-99-7)

Major Management Challenges and Program Risks:  Department of Housing
and Urban Development (GAO/OCG-99-8)

Major Management Challenges and Program Risks:  Department of the
Interior (GAO/OCG-99-9)

Major Management Challenges and Program Risks:  Department of Justice
(GAO/OCG-99-10)

Major Management Challenges and Program Risks:  Department of Labor
(GAO/OCG-99-11)

Major Management Challenges and Program Risks:  Department of State
(GAO/OCG-99-12)

Major Management Challenges and Program Risks:  Department of
Transportation (GAO/OCG-99-13)

Major Management Challenges and Program Risks:  Department of the
Treasury (GAO/OCG-99-14)

Major Management Challenges and Program Risks:  Department of
Veterans Affairs (GAO/OCG-99-15)

Major Management Challenges and Program Risks:  Agency for
International Development (GAO/OCG-99-16)

Major Management Challenges and Program Risks:  Environmental
Protection Agency (GAO/OCG-99-17)

Major Management Challenges and Program Risks:  National Aeronautics
and Space Administration (GAO/OCG-99-18)

Major Management Challenges and Program Risks:  Nuclear Regulatory
Commission (GAO/OCG-99-19)

Major Management Challenges and Program Risks:  Social Security
Administration (GAO/OCG-99-20)

Major Management Challenges and Program Risks:  U.S.  Postal Service
(GAO/OCG-99-21)

High-Risk Series:  An Update (GAO/HR-99-1)


The entire series of 21 performance and accountability reports and
the high-risk series update can be ordered by using the order number
GAO/OCG-99-22SET. 


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