Department of Education: Challenges in Promoting Access and Excellence in
Education (Testimony, 03/20/97, GAO/T-HEHS-97-99).

GAO discussed the major challenges the Department of Education faces in
achieving its mission to: (1) ensure access to postsecondary
institutions, while at the same time protecting the financial interests
of the government; and (2) promote access to and excellence in
elementary, secondary, and adult education.

GAO noted that: (1) although the Department has made progress in
ensuring access to postsecondary education and in providing financial
accountability, challenges remain, especially in providing educational
access to low-income and minority students in an era of rising tuition
costs and in protecting the financial interests of the federal
government; (2) the student aid programs make available billions of
dollars in loans and grants to promote access to education, but these
programs continue to be hampered by problems with process complexity,
structure, and program management; (3) the student aid process is a
complicated one, it has several participants who play different roles as
well as various processes for each of the grant or loan programs; (4)
the federal government continues to bear a major portion of the risk for
loan losses; (5) moreover, management shortcomings, especially
inadequate management information systems that contain unreliable data,
contribute to the Department's difficulties; (6) the Department also
faces challenges in promoting access to and excellence in preschool,
elementary, secondary, and adult education programs; (7) through
leadership and leverage, the Department works with states and local
education agencies to effect changes intended to improve the nation's
educational system; (8) demonstrating accountability is dependent on
having clearly defined objectives, valid assessment instruments, and
accurate program data; (9) in addition, it is unclear whether the
Department has the resources it needs to manage its funds, including
funds for the proposed Partnership to Rebuild America's Schools Act of
1997 and for helping schools integrate technology into the curriculum to
make students technologically literate; (10) similarly, the Department
only has selected information on the implementation of the title 1
program, the largest single federal elementary and secondary grant
program, for which $7.7 billion was appropriated in fiscal year 1997;
(11) thus, the Department does not have the informational basis to
determine whether mid-course changes are necessary; (12) in meeting
these challenges, the Department will need to improve its management;
(13) major pieces of recent legislation provide powerful tools in the
form of a statutory framework for improving agency operations and
accountability; and (14) the Department has made progress in implementi*

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

 REPORTNUM:  T-HEHS-97-99
     TITLE:  Department of Education: Challenges in Promoting Access and 
             Excellence in Education
      DATE:  03/20/97
   SUBJECT:  Student financial aid
             Elementary education
             Secondary education
             Adult education
             Federal/state relations
             Student loans
             Higher education
             Education program evaluation
             Management information systems
             Information resources management
IDENTIFIER:  Federal Family Education Loan Program
             William D. Ford Federal Direct Loan Program
             Pell Grant
             Dept. of Education Perkins Student Loan Program
             Dept. of Education National Student Loan Data System
             Dept. of Education Easy Access for Students and 
             Institutions Project
             
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Cover
================================================================ COVER


Before the Subcommittee on Human Resources, Committee on Government
Reform and Oversight, House of Representatives

For Release on Delivery
Expected at 10 a.m.
Thursday, March 20, 1997

DEPARTMENT OF EDUCATION -
CHALLENGES IN PROMOTING ACCESS AND
EXCELLENCE IN EDUCATION

Statement of Cornelia M.  Blanchette, Associate Director
Education and Employment Issues
Health, Education, and Human Services Division

GAO/T-HEHS-97-99

GAO/HEHS-97-99T


(104885)


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

  CFO - Chief Financial Officer
  FDLP - Ford Direct Loan Program
  FFELP - Federal Family Education Loan Program
  FTE - full-time-equivalent
  GPRA - Government Performance Results Act
  HEA - Higher Education Act
  IPOS - Institutional Participation and Oversight Service
  NSLDS - National Student Loan Data
  OIG - Office of Inspector General
  OMB - Office of Management and Budget

DEPARTMENT OF EDUCATION: 
CHALLENGES IN PROMOTING ACCESS AND
EXCELLENCE IN EDUCATION
============================================================ Chapter 0

Mr.  Chairman and Members of the Subcommittee: 

We are pleased to be here today to discuss several challenges the
Department of Education faces in carrying out its mission in a
cost-efficient and effective manner. 

The Department was created in 1980 with a mission that involves two
major kinds of institutions in which education is provided:  (1)
elementary and secondary schools and (2) postsecondary institutions. 
With a staff of about 4,600 in fiscal year 1997 and a budget of about
$29 billion, the Department manages the federal investment in
education and leads the nation's long-term effort to improve the
quality of education.  Specifically, the Department promotes access
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. 

With the Department's support, education is a state responsibility
under local control.  As shown in figure 1, the nation spends more
than $500 billion a year on education, with state, local, and private
expenditures accounting for about 91 percent of this spending. 

   Figure 1:  Total Expenditures
   for Education in the United
   States, 1995-96

   (See figure in printed
   edition.)

\a Includes expenditures of all federal agencies. 

\b Federally supported student aid that goes to higher education
institutions through students' tuition payments is shown under "All
Other" rather than under "Federal." Such payments would add
substantial amounts and several percentage points to the federal
share. 

Source:  U.S.  Department of Education. 

Although the cornerstone of our nation's future is a sound
educational system that meets the diverse needs of all Americans,
some 2,000 students drop out of school each day, and large numbers of
students graduate from school lacking the skills sought by employers. 
The strength of international competition has reinforced the link
between education and employment, which is shown in figure 2. 

   Figure 2:  Unemployment Rates
   of People 25 Years of Age and
   Older by Highest Level of
   Education Attained, 1995

   (See figure in printed
   edition.)

Source:  U.S.  Department of Education. 

At the same time, the nation's school-age population has become
increasingly poor, racially and ethnically diverse, and at risk of
school failure.  In addition, the Department has had a history of
management problems.  We identified significant operational
deficiencies in our 1993 management review and our high-risk series\1
that affect the Department's ability to protect the financial
interests of the government and to manage itself efficiently and
effectively.  The current environment places considerable pressure on
the Department to correct these deficiencies.  The public is
demanding more accountability from government agencies--more
assurance that tax dollars are not being wasted and that government
is operated in accordance with sound management practices. 

Today, I would like to discuss two major challenges the Department
faces in achieving its mission:  first, ensuring access to
postsecondary institutions, while at the same time protecting the
financial interests of the government, and second, promoting access
to and excellence in elementary, secondary, and adult education.  In
addition, I want to discuss how the Department's ability to meet
these challenges could be enhanced by the improved management that
the Congress envisioned in passing recent legislation.  My discussion
today is based on work we have done over several years.\2

Although the Department has made progress in ensuring access to
postsecondary education and in providing financial accountability,
challenges remain, especially in providing educational access to
low-income and minority students in an era of rising tuition costs
and in protecting the financial interests of the federal government. 
The student aid programs make available billions of dollars in loans
and grants to promote access to education.  But these programs
continue to be hampered by problems with process complexity,
structure, and program management.  The student aid process is a
complicated one--it has several participants who play different roles
as well as various processes for each of the grant or loan programs. 
The federal government continues to bear a major portion of the risk
for loan losses.  Moreover, management shortcomings, especially
inadequate management information systems that contain unreliable
data, contribute to the Department's difficulties. 

The Department also faces challenges in promoting access to and
excellence in preschool, elementary, secondary, and adult education
programs.  Through leadership and leverage, the Department works with
states and local education agencies to effect changes intended to
improve the nation's educational system.  Demonstrating
accountability is dependent on having clearly defined objectives,
valid assessment instruments, and accurate program data.  However, in
some instances, the Department does not have these prerequisites. 
For example, in our work on programs funded under the Adult Education
Act, we found that the Department had difficult ensuring
accountability for results, primarily because the programs did not
have clearly defined objectives.  In addition, it is unclear whether
the Department has the resources it needs to manage its funds,
including funds for the proposed Partnership to Rebuild America's
Schools Act of 1997 and for helping schools integrate technology into
the curriculum to make students technologically literate.  Similarly,
the Department only has selected information on the implementation of
the title 1 program, the largest single federal elementary and
secondary grant program, for which $7.7 billion was appropriated in
fiscal year 1997.  Thus, the Department does not have the
informational basis to determine whether mid-course changes are
necessary. 

In meeting these challenges, the Department will need to improve its
management.  Major pieces of recent legislation provide powerful
tools in the form of a statutory framework for improving agency
operations and accountability.  These laws include (1) the 1993
Government Performance and Results Act (GPRA), which requires
agencies to focus on results as they define their missions and
desired outcomes, measure performance, and use that information to
improve programs; (2) the expanded Chief Financial Officers (CFO)
Act, which requires agencies to prepare financial statements that can
pass the test of an independent audit; and (3) the 1995 Paperwork
Reduction Act and the 1996 Clinger-Cohen Act, which are intended to
help agencies better manage their information resources and make
wiser investments in information technology.  The Department has made
progress in implementing these laws, but work remains to be done
before the goal of improved management can be reached. 


--------------------
\1 High-Risk Series:  Guaranteed Student Loans (GAO/HR-93-2, Dec. 
1992); High-Risk Series:  Student Financial Aid (GAO/HR-95-10, Feb. 
1995); and High-Risk Series:  Student Financial Aid (GAO/HR-97-11,
Feb.  1997). 

\2 A list of related GAO products appears at the end of this
testimony. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

The Department of Education's basic functions are to provide
financial resources, primarily through student loans and grants for
higher education; provide research and information on best practices
in education; and ensure that publicly funded schools and education
programs observe civil rights laws.\3 It administers a variety of
grant and contract programs that provide aid for disadvantaged
children; aid for children and adults with disabilities; student
loans and grants for higher education; vocational and adult
education; and research and evaluation, as well as a variety of
smaller programs, such as the gifted and talented education program. 

According to its own data, the Department currently administers
approximately 180 programs, including the federal student financial
aid programs established under title IV of the Higher Education Act
of 1965, as amended (HEA).  These programs--the Federal Family
Education Loan Program (FFELP), the Ford Direct Loan Program (FDLP),
the Federal Pell Grant Program, the Federal Perkins Loan Program, and
several smaller financial aid programs--fund approximately 75 percent
of all postsecondary student financial aid in the nation.  The two
largest elementary/secondary programs are title I of the Elementary
and Secondary Education Act, which helps support the education of
over 6 million disadvantaged children in more than 50,000 schools
nationwide--about one-half of the nation's public schools--and
special education programs that assist over 5 million children with
disabilities from birth through age 21 in meeting their educational
and developmental needs. 

For fiscal year 1997, the Department has an estimated budget of $29.4
billion and is authorized 4,613 full-time-equivalent (FTE)
staff-years.  The administration's fiscal year 1998 budget request is
for $39.5 billion and 4,560 FTE staff.  This represents an increase
of about $10 billion, $5 billion of which the administration wants to
use to assist states in acquiring funds for school construction. 

The Department's spending for education leverages well beyond its
budget authority.  For example, the fiscal year 1998 budget request
of $12.7 billion for postsecondary student aid programs is expected
to generate $47.2 billion for more than 8 million students.  And $4
billion in federal appropriations for special education is expected
to leverage about $29.5 billion in state and local funds. 


--------------------
\3 The Department, through its Office for Civil Rights, is
responsible for enforcing the following civil rights laws as they
relate to schools at all levels:  (1) title VI of the Civil Rights
Act of 1964, which prohibits discrimination on the basis of race,
color, or national origin; (2) title IX of the Education Amendments
of 1972, which prohibits discrimination on the basis of sex in
education programs and activities; (3) section 504 of the
Rehabilitation Act of 1973, which prohibits discrimination on the
basis of disability; (4) the Age Discrimination Act of 1975, which
prohibits discrimination on the basis of age; and (5) title II of the
Americans With Disabilities Act of 1990, which prohibits public
entities from discriminating on the basis of disability. 


   ENSURING ACCESS TO
   POSTSECONDARY INSTITUTIONS
   WHILE PROTECTING FEDERAL
   FINANCIAL INTERESTS
---------------------------------------------------------- Chapter 0:2

Through its student aid programs, the Department has enabled millions
of students to attend postsecondary educational institutions;
however, the current economic conditions make continuing to ensure
such access difficult.  Rising tuition, coupled with the shift to
providing loans instead of grants, could result in fewer low-income
and minority students' staying in college.  At the same time the
Department is concerned with access, its ongoing challenge is to
improve its processes to ensure financial accountability in its
postsecondary student aid programs, particularly FFELP, FDLP, and the
Pell Grant Program.  In 1990, we designated the student financial aid
program one of 17 federal high-risk programs likely to cause the loss
of substantial amounts of federal money because of their
vulnerabilities to waste, fraud, abuse, and mismanagement.  Although
the Department has acted to correct many problems and improve program
controls, significant vulnerabilities remain, and we have included
the student financial aid program in our 1997 list of 25 high-risk
programs. 


      ENSURING EQUAL ACCESS IS
      BECOMING MORE DIFFICULT
-------------------------------------------------------- Chapter 0:2.1

The Department's success in meeting one of its major
challenges--ensuring access to postsecondary institutions--is
critical to the economic well-being of the nation's citizens.  As
shown in figure 2, level of education is closely linked to
unemployment.  In addition, level of education is a strong
determinant of wage earnings.  For example, college graduates earn
much more than those with only a high school education, and the
differential has been increasing.  According to Department data, in
1985 the median annual income of full-time male workers 25 years and
over was $41,892 for college graduates and $26,609 for those with
high school diplomas only, a difference of $15,283.  By 1994, the
difference between these two groups had grown to $21,191.  Low-income
and minority students have traditionally been underrepresented among
college students, and access is becoming more and more problematic as
the cost of attending college increases.  For example, as we reported
to the Congress in August 1996,\4 a public college education has
become less affordable in the last 15 years as tuition has risen
nearly three times as fast as household income.  The average tuition
for full-time in-state students increased from $804 per year to
$2,689, or 234 percent, and median household income, from $17,710 to
$32,264, or 82 percent.  Students and their families have responded
to this "affordability gap" by drawing more heavily on their own
financial resources and increasing their borrowing.  For example, the
annual average student loan at 4-year public schools rose from $518
per full-time student in fiscal year 1980 to $2,417 in fiscal year
1995, an increase of 367 percent, which is almost five times the
74-percent increase in the cost of living--as measured by the
consumer price index--for the same period.  If this trend continues,
rising tuition levels may deter many students from attending college. 

The Department's primary mechanism for ensuring access to
postsecondary institutions is the federal student financial aid
programs--principally FFELP, FDLP, and the Pell Grant Program.  While
federal student financial aid has been substantial in the past,
recent trends may inhibit broader college access.  A growing
proportion of federal aid has taken the form of loans rather than
grants since the 1970s.  For example, from 1977 to 1980, grant aid
exceeded loan aid; since 1985, however, loan aid has been about twice
the amount of grant aid.  With federal grant aid declining in
relative terms, students and their families have had to shoulder a
greater share of college expenses.  Many policymakers have expressed
concern that this trend in college costs and in financial aid
patterns, which increases students' net costs for higher education,
has diminished college access--both entry and attendance through
graduation--for low-income students. 

Our work supports this belief with respect to attendance through
graduation.\5 We concluded from our work that financial aid packages
with relatively high grant levels may improve low-income students'
access to higher education more than packages that rely more on
loans.  In addition, our analysis indicated that the sooner
low-income students receive grant assistance, the more likely they
are to stay in college.  We found that grants were most effective in
reducing low-income students' dropout probabilities in the first
year.  For these students, an additional $1,000 grant reduced the
dropout probability by 23 percent.  In the second year, the
additional grant reduced dropout probability by 8 percent, while in
the third year it had no statistically discernable effect. 
Therefore, we believe that restructuring federal grant programs to
feature frontloading\6 could improve low-income students' dropout
rates with little or no change in each student's overall 4-year
allocation of grants and loans.  We suggested that, if the Congress
was interested in increasing the number of low-income students who
stay in college, it could direct the Department to conduct a pilot
program for frontloading federal grants.  The Congress has yet to act
on this suggestion. 


--------------------
\4 Higher Education:  Tuition Increasing Faster Than Household Income
and Public Colleges' Costs (GAO/HEHS-96-154, Aug.  15, 1996). 

\5 Higher Education:  Restructuring Student Aid Could Reduce
Low-Income Student Dropout Rate (GAO/HEHS-95-48, Mar.  23, 1995). 

\6 Frontloading grants entails giving students mostly grant aid in
the first year and increasingly substituting loan aid in subsequent
years, culminating in an aid package consisting mostly of loans in
the final school year. 


      RECURRING PROBLEMS HAMPER
      THE DEPARTMENT'S ABILITY TO
      PROTECT FEDERAL FINANCIAL
      INTERESTS
-------------------------------------------------------- Chapter 0:2.2

Although major federal student aid programs, such as FFELP, FDLP, and
the Pell Grant Program, have succeeded in providing students access
to billions of dollars for postsecondary education, our work has
shown that the Department has been less successful in protecting the
financial interests of U.S.  taxpayers.\7 For example, in fiscal year
1996, while the Department made more than $40 billion available in
student aid, the federal government paid out over $2.5 billion to
make good its guarantee on defaulted student loans. 

The Congress addressed many of the student aid deficiencies that we,
the Department's Office of Inspector General (OIG), and others had
identified in the past through the 1992 and 1993 amendments to HEA. 
For example, the amendments required that financial and compliance
audits of guaranty agencies be conducted annually rather than every 2
years.  The Department also has planned and taken a number of actions
to correct its financial accountability problems, such as
reorganizing the Office of Postsecondary Education to permit it to
better administer and oversee federal student aid programs and
developing several new information systems to provide more accurate
and timely information.  Many of the Department's actions are likely
to have played a major role in reducing the amount of student loan
defaults from $2.7 billion in fiscal year 1992 to $2.5 billion in
fiscal year 1996 and in increasing collections on defaulted student
loans from $1 billion in fiscal year 1992 to $2.1 billion in fiscal
year 1996.  However, the Department's actions have not completely
resolved many of the underlying problems, and, therefore,
vulnerabilities remain. 

At the core of the Department's financial accountability difficulties
are persistent problems with the individual student aid programs'
processes, structure, and management.  These problems include (1)
overly complex processes, (2) inadequate financial risk to lenders or
state guaranty agencies for defaulted loans, and (3) management
shortcomings.\8

Our work has shown that the student aid programs have many
participants and involve complicated, cumbersome processes.  Three
principal participants--students, schools, and the Department of
Education--are involved in all the financial aid programs; two
additional participants--lenders and guaranty agencies--also have
roles in FFELP.  In general, each student aid program has its own
processes, which include procedures for student applications, school
verifications of eligibility, and lenders or other servicing
organizations that collect payments.  Further, the introduction of
FDLP, originally viewed as a potential replacement for FFELP, has
added a new dimension of complexity.  Rather than replacing FFELP as
initially planned, FDLP now operates along side it.  Essentially,
this means that the Department has two programs that are similar in
purpose but that operate differently. 

The structure of the student aid programs makes protecting the
financial interests of the government difficult for the Department
for two reasons.  First, because HEA placed nearly all the financial
risk for defaults on the federal government, it continues to bear a
major portion of the risk for FFELP and FDLP loan losses.  And,
although the 1992 and 1993 amendments to HEA established slightly
more risk sharing, the current structure still makes protecting the
taxpayers' financial interests difficult.  Protecting the financial
interests of the government is also difficult because the loan
programs now serve more students from low-income families and those
attending proprietary schools than in the past.  As the number of
these higher-risk borrowers has increased, so has the number of
defaults.  Both of these conditions enhance access for low-income
students, yet a tension exists because they jeopardize financial
accountability. 

Management shortcomings also continue as a major problem and
contribute to the Department's financial accountability difficulties. 
In the past, congressional hearings and investigations, reports by
the Department's OIG, our reports, and other studies and evaluations
have shown that the Department (1) did not adequately oversee schools
that participated in the programs; (2) managed each title IV program
through a separate administrative structure, with poor or little
communication among programs; (3) used inadequate management
information systems that contained unreliable data; and (4) did not
have sufficient and reliable student loan data to determine the
Department's liability for outstanding loan guarantees.  These
problems cannot be quickly or easily fixed.  The Department has taken
many actions, such as improving gatekeeping procedures for
determining which schools may participate, to address these problems. 
However, the Department's management problems, such as administrative
inefficiencies resulting from the separate administrative structures
used to manage each title IV program, have not yet been resolved. 


--------------------
\7 GAO/HR-97-11, Feb.  1997; Financial Audit:  Federal Family
Education Loan Program's Financial Statements for Fiscal Years 1994
and 1993 (GAO/AIMD-96-22, Feb.  26, 1996); Student Financial Aid: 
Data Not Fully Utilized to Identify Inappropriately Awarded Loans and
Grants (GAO/HEHS-95-89, July 11, 1995); and Financial Management: 
Education's Student Loan Program Controls Over Lenders Need
Improvement (GAO/AIMD-93-33, Sept.  9, 1993). 

\8 GAO/HR-97-11, Feb.  1997. 


      IMPROVED GATEKEEPING HAS
      SOMEWHAT ENHANCED PROTECTION
      OF FEDERAL FINANCIAL
      INTERESTS
-------------------------------------------------------- Chapter 0:2.3

We testified before this Subcommittee last June on issues related to
"gatekeeping"--the process for ensuring that students are receiving
title IV aid to attend only schools that provide quality education
and training.\9 At that time, we noted the history of concern about
the integrity of title IV programs stemming from our work, that of
the Department's OIG, and the Congress--work that led to the
conclusion that extensive abuse and mismanagement existed in these
programs.  For example, some schools received Pell grant funds for
students who never applied for the grants or enrolled in or attended
the schools.  In one instance, a chain of proprietary schools
falsified student records and misrepresented the quality of its
educational programs to increase its revenues from students receiving
Pell grants. 

In recent years, the Congress has enacted legislation to improve
oversight of participating schools by such means as setting maximum
default rates that schools cannot exceed and still participate in the
title IV programs.  Legislation also has strengthened the role of the
Department, states, and accrediting agencies--referred to as "the
triad"--in determining school eligibility.  HEA recognizes the triad
as having shared responsibility for gatekeeping.  As part of this
triad, the Department (1) verifies schools' eligibility and certifies
their financial and administrative capacity and (2) grants
recognition to accrediting agencies.\10 The Department has improved
the gatekeeping process by such actions as requiring all schools to
have annual financial and compliance audits, increasing the number of
program reviews, hiring additional staff to conduct the reviews, and
beginning to develop a new database of school information to help
Department staff monitor schools' performance. 

Nevertheless, as we reported in our recent high-risk report,\11

several weaknesses continue to cause concern.  For example, the
Department's OIG identified problems with the recertification process
that could increase the likelihood that schools not in compliance
with eligibility requirements are able to continue to participate in
title IV programs.  A review of a sample of Department
recertification actions showed that 27 percent of schools sampled had
violations such as unpaid debts or failures to meet financial
responsibility requirements.\12 The Department acknowledged that some
recertifications should not have been made and stated that it was
taking action to make current financial data available for future
recertification reviews. 

The Department is also implementing a gatekeeping initiative designed
to focus resources on high-risk schools:  the Institutional
Participation and Oversight Service (IPOS) Challenge.  Under the IPOS
Challenge, the Department plans to use a computer model to identify
schools for review on the basis of their risk of noncompliance. 
Because this initiative has only recently been undertaken, it is too
soon to assess its effectiveness. 


--------------------
\9 Higher Education:  Ensuring Quality Education From Proprietary
Institutions (GAO/T-HEHS-96-158, June 6, 1996). 

\10 For their part, states license and use a variety of approaches to
regulate schools in the normal course of regulating commerce within
their borders, and accrediting agencies provide nongovernmental, peer
evaluation of schools and programs to ensure a consistent level of
quality. 

\11 GAO/HR-97-11, Feb.  1997. 

\12 OIG, Subsequent Review to Follow-Up Review on Selected
Gatekeeping Operations, ACN:  11-60004 (Washington, D.C.:  U.S. 
Department of Education, June 7, 1996). 


   CHALLENGES IN PROMOTING ACCESS
   AND EXCELLENCE IN ELEMENTARY,
   SECONDARY, AND ADULT EDUCATION
   PROGRAMS
---------------------------------------------------------- Chapter 0:3

Excellence in education in America has become a major concern for the
public, and both the Congress and the Department have promoted
initiatives to improve the quality of American education.  These
efforts include improving the quality of the physical environment in
which students learn, ensuring schools have the ability to use the
technology needed to provide children with an education appropriate
for the 21st century, creating and promoting national standards to
shape curriculum and guide test development in order to measure
reading and math achievement, supporting efforts to improve the
quality of teachers and teacher preparation programs, and ensuring
equal access to education.  Major legislative efforts, such as Goals
2000:  Educate America Act, the Improving America's School Act, and
the School-to-Work Opportunities Act, are examples of efforts
focusing on improving the quality of America's public education. 

Because the federal role in funding elementary and secondary
education is relatively small, and states and local governments have
the primary responsibility for and control of education programs, the
Department faces a significant challenge in ensuring access and
promoting excellence.  Its tools are providing leadership, financial
leverage, and technical assistance and information.  The Department
exercises leadership by shining a spotlight on important national
education issues, facilitating communication on quality issues, and
fostering intergovernmental and public/private partnerships. 
However, when one considers how it leverages resources and provides
technical assistance and information, the extent to which Department
funds are fostering excellence and are being spent efficiently and
effectively is unclear.  Two questions arise:  Does the Department of
Education know if its programs are working?  And does the Department
have the resources to manage its funds and provide the needed
information and technical assistance? 


      MORE INFORMATION IS NEEDED
      TO DETERMINE HOW THE
      DEPARTMENT'S PROGRAMS ARE
      WORKING
-------------------------------------------------------- Chapter 0:3.1

The Department is responsible for funding over $22 billion in
elementary and secondary programs, including title 1, special
education, vocational education, adult education, and Safe and Drug
Free Schools.  A major challenge facing the Department is ensuring
that these programs are providing the intended outcomes.  To do this
the Department's programs must have clearly defined objectives and
complete, accurate, and timely program data. 

Title 1 of the Elementary and Secondary Education Act is the largest
federal elementary and secondary education grant program, with about
$7.7 billion appropriated in fiscal year 1997.  Its purpose is to
promote access to and equity in education for low-income students. 
The Congress modified the program in 1994, strengthening its
accountability provisions and encouraging the concentration of funds
to serve more disadvantaged children.  At this time, the Department
does not have the information it needs to determine whether the
funding is being targeted as intended.  Although the Department has
asked for $10 million in its fiscal year 1998 budget request to
evaluate the impact of title 1, it has only just begun a small study
of selected school districts to look at targeting so that necessary
mid-course modifications can be identified.  The ultimate impact of
the 1994 program modifications could be diminished if the funding
changes are not being implemented as intended. 

As another example, we found in our work on the programs funded under
the Adult Education Act\13 that the State Grant Program, which funds
local programs intended to address the educational needs of millions
of adults, had difficulty ensuring that the programs met these needs. 
The lack of clearly defined program objectives was one of the reasons
for the difficulty.  The broad objectives of the State Grant Program
give the states flexibility to set their own priorities but, as some
argue, they do not provide states with sufficient direction for
measuring results.  Amendments to the act required the Department to
improve accountability by developing model indicators that states
could adopt and use to evaluate local programs.  However, experts
disagree about whether developing indicators will help states to
define measurable program objectives, evaluate local programs, and
collect more accurate data. 


--------------------
\13 The Adult Education Act was designed, in part, to help states
fund programs to help adults acquire the basic skills needed for
literate functioning, benefit from job training, and continue their
education at least through high school.  Grants are made to states on
the basis of the number of people in each state who are at least 16
years of age, are not required to be in school, and lack a high
school diploma. 


      ADDITIONAL DEPARTMENTAL
      RESOURCES MAY BE NEEDED TO
      MANAGE FUNDS AND PROVIDE
      INFORMATION AND TECHNICAL
      ASSISTANCE
-------------------------------------------------------- Chapter 0:3.2

Recently, we have been examining two of the most basic elements of
education--the financing systems that undergird public education\14

and the buildings within which education takes place.\15

For example, in our school facilities series, we documented that
officials estimated that a third of our nation's schools had serious
facilities problems and that it would take $112 billion to bring our
schools into good overall condition.  In February, the administration
used our reports as the basis for proposing the Partnership to
Rebuild America's Schools Act, which, if enacted, would be
administered by the Department. 

Several members of the Congress have raised issues associated with
this proposed solution to improve schools' conditions, such as
whether the types of financial and information management problems
that we discussed earlier regarding postsecondary federal financial
aid programs would develop in the administration of this new program,
whether the Department has qualified staff to administer the program,
and whether information systems to monitor it and account for the
funds are available and operational. 

The administration has also been promoting excellence and access by
supporting technology, both through the leadership role of the
President and the Office of the Secretary and through the technology
programs the Department oversees.  In the 1998 budget, the
administration has doubled the amount of money requested for
educational technology to help schools integrate technology into the
curriculum in order to increase students' technological literacy and
improve the quality of instruction in core subjects.  In our
facilities work, we found that schools had large technology
infrastructure needs that the Department's Technology Literacy
Challenge Grants would only start to address.\16 Again, as in the
school construction situation, the Department is facing a large need
with relatively small amounts of funds. 


--------------------
\14 School Finance:  State Efforts to Reduce Funding Gaps Between
Poor and Wealthy Districts (GAO/HEHS-97-31, Feb.  5, 1997); School
Finance:  Three States' Experiences With Equity in School Funding
(GAO/HEHS-96-39, Dec.  19, 1995); School Finance:  Trends in U.S. 
Education Spending (GAO/HEHS-95-235, Sept.  15, 1995); and School
Finance:  Options for Improving Measures of Effort and Equity in
Title I (GAO/HEHS-96-142, Aug.  30, 1996). 

\15 We documented the nature and extent of facilities' problems in
our series on school facilities:  School Facilities:  Condition of
America's Schools (GAO/HEHS-95-61, Feb.  1, 1995); School Facilities: 
America's Schools Not Designed or Equipped for 21st Century
(GAO/HEHS-95-95, Apr.  4, 1995); School Facilities:  Accessibility
for the Disabled Still an Issue (GAO/HEHS-96-73, Dec.  29, 1995);
School Facilities:  States' Financial and Technical Support Varies
(GAO/HEHS-96-27, Nov.  28, 1995); School Facilities:  America's
Schools Report Differing Conditions (GAO/HEHS-96-103, June 14, 1996);
and School Facilities:  Profiles of School Condition by State
(GAO/HEHS-96-148, June 24, 1996). 

\16 GAO/HEHS-95-95, Apr.  4, 1995. 


   STATUTORY FRAMEWORK FOR
   IMPROVING THE DEPARTMENT'S
   MANAGEMENT PRACTICES
---------------------------------------------------------- Chapter 0:4

Adopting improved management practices can help the Department become
more effective in achieving its mission of ensuring equal access to
education and promoting educational excellence.  Recognizing that
federal agencies have not always brought the needed discipline to
their management activities, the Congress in recent legislation
provided a framework for addressing long-standing management
challenges.  The centerpiece of this framework is GPRA; other
elements are the 1990 CFO Act, the 1995 Paperwork Reduction Act, and
the 1996 Clinger-Cohen Act.  These laws each responded to a need for
more accurate, reliable information for executive branch and
congressional decision-making.  The Department has begun to implement
these laws, which, in combination, provide it with a framework for
developing (1) fully integrated information about the Department's
mission and strategic priorities, (2) performance data to evaluate
progress toward the achievement of those goals, (3) the relationship
of information technology investments to the achievement of
performance goals, and (4) accurate and audited financial information
about the costs of achieving mission outcomes. 


      EFFORTS IN PLANNING AND
      RESOURCE MANAGEMENT
-------------------------------------------------------- Chapter 0:4.1

The Department has a history of management problems.  In our 1993
review of the Department, we identified operational deficiencies such
as lack of management vision, lack of a formal planning process, poor
human resource management, and inadequate commitment to management
issues by the Department leadership.\17 In addition, financial and
information management were serious problems throughout the
Department, and not confined to postsecondary programs.  Further,
recent legislation--Goals 2000:  Educate America Act, the
School-to-Work Opportunities Act, and the Student Loan Reform
Act--requires strong management improvements to support sound
implementation. 

In response to our recommendations as well as to new legislative
responsibilities, the Department has taken steps to improve its
management approach.  It has developed a strategic plan that
describes its mission, priorities, and performance indicators, using
as its framework the key elements of GPRA.  Specifically, it has
begun the process of working with the Office of Management and Budget
(OMB) to meet the GPRA requirement that agencies prepare strategic
plans that establish long-term goals and develop annual performance
plans linked to these long-term goals.  GPRA also requires that
agencies consult with the Congress and other stakeholders to clearly
define their missions.  Accordingly, the Department has begun
discussions with the Congress and others about the challenges it
faces and the kinds of support it needs to move forward in achieving
its goals. 

According to OMB, the Department has developed a fairly broad plan. 
OMB raised two issues during its review of the plan:  (1) the lack of
specificity in program performance plans and (2) the extent to which
the objectives and indicators were beyond the agency's span of
control or influence.  With respect to the first concern, during the
past few months the Department has been developing specific
performance plans for all programs.  Regarding the second concern,
the Department responded to OMB by describing the nature of its
education goals and by recognizing that those goals are shared by
many entities.  According to the Department, the plan's objectives
and indicators recognize the multilevel, intergovernmental nature of
federal education support and the need for effective performance
partnerships to achieve jointly sought outcomes.  At the same time,
the Department is updating the strategic plan and intends to
differentiate those objectives and indicators that are under the
Department's full control more clearly from those that require action
from state education agencies, local districts, or postsecondary
institutions for effective results. 

Results-oriented management may also involve reviewing programs that
have the same or similar goals and objectives, but continue to be
administered separately by one or more federal agencies, to see
whether opportunities exist to consolidate and improve efficiencies. 
When we testified before this Subcommittee 2 years ago,\18 we
identified potential education program consolidation opportunities. 
Program consolidation could not only reduce administrative costs, but
the Department could better focus its management resources on
evaluating and improving the quality of its programs.  For example,
our review of federal programs that serve at-risk or delinquent youth
revealed that 131 programs served this target group in fiscal year
1995, 10 of which were administered by the Department of
Education.\19 This service delivery approach raises questions
concerning efficiency.  Our work suggests that efficiencies might be
gained by having a smaller number of consolidated programs for
at-risk or delinquent youth.  For example, it would probably be more
efficient to have one program covering a service/target-group
combination, administered by a single federal office, than several
programs administered by several different offices. 

The Department is continuing its long-term efforts to streamline its
operations.  In its fiscal year 1998 budget request, it has proposed
the elimination of 10 programs--representing more than $400 million
in funding--that it believes have achieved their purpose; that
duplicate other programs; or that are better supported by state,
local, or private sources.  Our work suggests that the Department
needs to continue its efforts to eliminate duplicative or wasteful
programs. 

The CFO Act, as expanded, requires the Department of Education as
well as the 23 other major federal agencies to prepare and have
audited annual financial statements beginning with those for 1996. 
Fiscal year 1995 was the first year the Department prepared
agencywide financial statements and had them audited.  However, the
independent auditor could not determine whether the financial
statements were fairly presented because of the insufficient and
unreliable FFELP student loan data underlying the Department's
estimate of $13 billion for loan guarantees.  Furthermore, because
guaranty agencies and lenders have a crucial role in the
implementation and ultimate cost of FFELP, the auditors stressed the
need for the Department to complete steps under way for improving
oversight of guaranty agencies and lenders.  Until such problems are
fully resolved, the Department will continue to lack the financial
information necessary to effectively budget for and manage the
program or to accurately estimate the government's liabilities. 

In an effort to prepare auditable fiscal year 1996 financial
statements, the Department's CFO has requested data from the top 10
guaranty agencies to be used as a basis for computing the liability
for loan guarantees.  In addition, the Department's independent
auditor has developed agreed upon procedures to be applied by these
agencies' independent auditors to test the reliability of the
requested data.  Uncertainty still exists as to whether this new
methodology will work; decisions on the effectiveness of the approach
will be made later this year once all the data are collected. 


--------------------
\17 Department of Education:  Long-Standing Management Problems
Hamper Reforms (GAO/HRD-93-47, May 28, 1993). 

\18 Department of Education:  Information on Consolidation
Opportunities and Student Aid (GAO/T-HEHS-95-130, Apr.  6, 1995). 

\19 At-Risk and Delinquent Youth:  Multiple Federal Programs Raise
Efficiency Questions (GAO/HEHS-96-34, Mar.  6, 1996). 


      IMPROVING INFORMATION
      RESOURCES MANAGEMENT
      CRITICAL TO DATA QUALITY AND
      SYSTEMS INTEGRATION
-------------------------------------------------------- Chapter 0:4.2

Our work has shown that the Department does not have a sound,
integrated information technology strategy to manage its portfolio of
information systems.  It faces a particularly difficult challenge in
improving its information systems for the student aid programs.  The
Department's National Student Loan Data System (NSLDS), which became
partially operational in November 1994, enables schools, lenders, and
guaranty agencies to transmit updated loan status data to the
Department.  However, the Department has not yet integrated the
numerous separate data systems used to support individual student aid
programs, often because the various "stovepipe" systems have
incompatible data in nonstandard formats.  As a result, program
managers often lack accurate, complete, and timely data to manage and
oversee the student aid program. 

The lack of an integrated system also results in unnecessary manual
effort on the part of users and redundant data being submitted and
stored in numerous databases, resulting in additional costs to the
Department as well as the chance for errors in the data.  For
example, a Department consultant showed that a simple address change
for a college financial aid administrator would require a minimum of
19 manual and automated steps performed by a series of Department
contractors who would have to enter the change in their respective
systems from printed reports generated by another system.  Another
problem with this multiple-system environment is a lack of common
identifiers for schools.  Without these, tracking students and
institutions across systems is difficult.  The 1992 HEA amendments
required the Department to establish common identifiers for students
and schools not later than July 1, 1993.  The Department's current
plans, however, do not call for developing and implementing common
identifiers for schools until academic year 1999. 

Data integrity problems also exist.  The lack of a fully functional
and integrated title IV-wide recipient database hinders program
monitoring and data quality assurance.  For example, the current
system cannot always identify where a student is enrolled, even after
an award is made and thousands of dollars in student aid are
disbursed. 

Although the Department has improved its student aid data systems
somewhat, major improvements are still needed.  Both we and OIG
reported in 1996\20 that the Department had not adequately tested the
accuracy and validity of the loan data in NSLDS.  During the past
year, the Department has been developing a major reengineering
project, Easy Access for Students and Institutions, to redesign the
entire title IV student aid program delivery system to integrate the
management and control functions for the title IV programs.  Although
activity on this project, which had waned in previous months, has
recently been renewed, carrying out the project is expected to be a
long-term undertaking. 

The Department also faces a challenge in improving its agencywide
information resources management, not just that related to the
student aid programs.  The legislative framework, especially that
provided by the Clinger-Cohen Act, offers guidance for achieving
goals in this area.  The Clinger-Cohen Act requires, among other
things, that federal agencies improve the efficiency and
effectiveness of operations through the use of information technology
by (1) establishing goals to improve the delivery of services to the
public through the effective use of information technology; (2)
preparing an annual report on the progress in achieving goals as part
of its budget submission to the Congress; and (3) ensuring that
performance measures are prescribed for any information technology
that agencies use or acquire and that they measure how well the
information technology supports Department programs.  The Department
could benefit greatly from fully implementing the law.  Full
implementation of the Clinger-Cohen Act would provide another
opportunity to correct many of the Department's student financial aid
system weaknesses as well as to improve other information systems
that support the Department's mission. 

The Clinger-Cohen Act also requires that a qualified senior-level
chief information officer be appointed to guide all major information
resource management activities.  The Department has recently
appointed an Acting Chief Information Officer and, according to OMB,
is to be actively recruiting an individual to fill this position on a
permanent basis.  This individual is responsible for developing an
information resources management plan and overseeing information
technology investments. 

In addition, the Department has highlighted the use of information
technology for improved dissemination and customer service in its
fiscal year 1998 budget summary.  New initiatives include (1) a data
warehousing effort that would simplify the internal use of databases,
(2) a data conversion effort needed to comply with year 2000
requirements,\21 and (3) a modeling project to develop an
architectural framework and uniform operating standards for all
Department data systems to eliminate duplication in collection and
storage of data. 


--------------------
\20 Department of Education:  Status of Actions to Improve the
Management of Student Financial Aid (GAO/HEHS-96-143, July 12, 1996). 

\21 This year GAO added the "year 2000" problem as a high-risk issue
because of the complexities involved in changing computer systems to
accommodate dates beyond the year 1999. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 0:5

In carrying out its mission, the Department has a careful balancing
act to perform.  Education is a function reserved to the states, yet
this federal department is expected to provide leadership on national
education issues.  For example, in fostering higher quality
elementary and secondary education, the Department can promote
national standards for educational performance and teacher
training--but not impose them.  It is expected to provide state and
local education agencies flexibility in using federal funds and
freedom from unnecessary regulatory burden, yet it must have enough
information about programs and how money is spent to be accountable
to American taxpayers for the federal funds administered at the state
and local levels.  It is expected to monitor programs and provide
technical assistance, but its resources may not be sufficient to
provide reasonable coverage. 

Although the Department has made progress in improving many
management functions, it still has a long way to go.  Over the years,
our work has shown that the Department has not done a good job of
minimizing risks and managing the federal investment, especially in
postsecondary student aid programs.  We also have concerns about
whether the Department knows how well new or newly modified programs,
like title 1, are being implemented; to what extent established
programs are working; or whether it has the resources to effectively
and efficiently provide needed information and technical assistance. 
Like other departments, the Department of Education needs to focus
more on the results of its activities and on obtaining the
information it needs for a more focused, results-oriented management
decision-making process.  GPRA, the CFO Act, and the Paperwork
Reduction and Clinger-Cohen Acts give the Department the statutory
framework it needs to manage for results. 


-------------------------------------------------------- Chapter 0:5.1

Mr.  Chairman, this concludes my prepared statement.  I will be happy
to answer any questions that you or members of the Subcommittee might
have. 


   CONTRIBUTORS
---------------------------------------------------------- Chapter 0:6

For more information on this testimony, call Harriet Ganson,
Assistant Director, at (202) 512-9045; Jay Eglin, Assistant Director,
at (202) 512-7009; or Eleanor Johnson, Assistant Director, at (202)
512-7209.  Joan Denomme and Joel Marus also contributed to this
statement. 



RELATED GAO PRODUCTS
=========================================================== Appendix 1

Managing for Results:  Using GPRA to Assist Congressional and
Executive Branch Decisionmaking (GAO/T-GGD-97-43, Feb.  12, 1997). 

School Finance:  State Efforts to Reduce Funding Gaps Between Poor
and Wealthy Districts (GAO/HEHS-97-31, Feb.  5, 1997). 

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

Information Technology Investment:  Agencies Can Improve Performance,
Reduce Costs, and Minimize Risks (GAO/AIMD-96-64, Sept.  30, 1996). 

Higher Education:  Tuition Increasing Faster Than Household Income
and Public Colleges' Costs (GAO/HEHS-96-154, Aug.  15, 1996). 

Information Management Reform:  Effective Implementation Is Essential
for Improving Federal Performance (GAO/T-AIMD-96-132, July 17, 1996). 

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

School Facilities:  America's Schools Report Differing Conditions
(GAO/HEHS-96-103, June 14, 1996). 

Financial Audit:  Federal Family Education Loan Program's Financial
Statements for Fiscal Years 1994 and 1996 (GAO/AIMD-96-22, Feb.  26,
1996). 

School Finance:  Trends in U.S.  Education Spending (GAO/HEHS-95-235,
Sept.  15, 1995). 

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

School Facilities:  America's Schools Not Designed or Equipped for
21st Century (GAO/HEHS-95-95, Apr.  4, 1995). 

Higher Education:  Restructuring Student Aid Could Reduce Low-Income
Student Dropout Rate (GAO/HEHS-95-48, Mar.  23, 1995). 

Department of Education:  Long-Standing Management Problems Hamper
Reforms (GAO/HRD-93-47, May 28, 1993). 


*** End of document. ***