Department of Education: Multiple, Nonintegrated Systems Hamper
Management of Student Financial Aid Programs (Testimony, 05/15/97,
GAO/T-HEHS/AIMD-97-132).

GAO discussed the Department of Education information management systems
that support the financial aid programs authorized by title IV of the
Higher Education Act of 1965, as amended (HEA).

GAO noted that: (1) while the Department has taken actions to comply
with HEA requirements for the National Student Loan Data System (NSLDS),
it still does not yet have an accurate, efficient, and integrated system
for national student financial aid data; (2) over the past 30 years,
separate information systems, including the Federal Family Education
Loan Program System for the guaranteed loan program, the Pell Grant
Recipient and Financial Management System, the Ford Direct Loan Program
systems, and NSLDS have been developed to support student financial aid
programs; (3) these multiple systems contain incompatible data in
nonstandard formats, a situation that has led to inaccurate information,
inefficient systems, and high costs; (4) the fiscal year (FY) 1997
budget for contracts to maintain 11 separate, nonintegrated systems was
$281.9 million and is expected to climb to $320.5 million in FY 1998, an
increase of $38.6 million, or 14 percent; (5) federal student financial
aid programs remain vulnerable to losses as a result of fraud, waste,
abuse, and mismanagement due to a large extent because the Department,
guaranty agencies, schools, and lenders often do not have the accurate,
complete, and timely information they need to effectively and
efficiently operate and manage the programs; (6) one of the causes of
the current information systems' difficulties appears to be the lack of
a sound, integrated information technology or systems architecture for
managing the Department's portfolio of information systems that support
student financial aid programs; (7) the lack of a sound information
systems architecture seems to have contributed, in part, to the
development of a multitude of nonintegrated systems across the
Department; (8) this, in turn, has led to problems in systems interface
and data exchange, confusion for users, and delays in program
operations; (9) another related cause of the current information
problems is a lack of common identifiers for students and institutions,
making it difficult to track students and institutions across systems;
and (10) full implementation of the Clinger-Cohen Act would provide
another opportunity to correct many of the Department's student
financial aid system weaknesses; however, because the law is in the
early stages of implementation, it is too early to predict how well the
Department will implement the law.

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

 REPORTNUM:  T-HEHS/AIMD-97-132
     TITLE:  Department of Education: Multiple, Nonintegrated Systems 
             Hamper Management of Student Financial Aid Programs
      DATE:  05/15/97
   SUBJECT:  Strategic information systems planning
             Information resources management
             Student financial aid
             Student loans
             Data integrity
             Data bases
             Higher education
             Management information systems
             Systems design
             Systems compatibility
IDENTIFIER:  Dept. of Education National Student Loan Data System
             Federal Family Education Loan Program
             Federal Family Education Loan Program Information System
             William D. Ford Federal Direct Loan Program
             Dept. of Education Pell Grant Recipient and Financial 
             Management System
             Pell Grant
             
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Cover
================================================================ COVER


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

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

DEPARTMENT OF EDUCATION -
MULTIPLE, NONINTEGRATED SYSTEMS
HAMPER MANAGEMENT OF STUDENT
FINANCIAL AID PROGRAMS

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

GAO/T-HEHS/AIMD-97-132

GAO/HEHS/AIMD-97-132T


(104892)


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

  CIO - Cheif Information Officer
  FDLP - Ford Direct Loan Program
  FFELP - Federal Family Education Loan Program
  HEA - hIGHER eDUCATION aCT OF 1965
  NSLDS - National Student Loan Data System

DEPARTMENT OF EDUCATION: 
MULTIPLE, NONINTEGRATED SYSTEMS
HAMPER MANAGEMENT OF STUDENT
FINANCIAL AID PROGRAMS
============================================================ Chapter 0

Mr.  Chairman and Members of the Committee: 

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

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

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

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


--------------------
\1 The campus-based programs include the (1) Federal Work-Study
Program, (2) Federal Perkins Loan Program, and (3) Federal
Supplemental Educational Opportunity Grant Program. 

\2 High-Risk Series:  Student Financial Aid (GAO/HR-97-11, Feb. 
1997). 


   MANAGEMENT OF TITLE IV PROGRAMS
   IS HAMPERED BY MULTIPLE,
   NONINTEGRATED INFORMATION
   SYSTEMS
---------------------------------------------------------- Chapter 0:1

While the Department has taken actions to comply with HEA
requirements for the National Student Loan Data System (NSLDS),\3 it
still does not yet have an accurate, efficient, and integrated system
for national student financial aid data.  The Department continues to
operate separate "stove pipe" systems and lacks a strategy to
integrate the systems supporting the title IV programs. 

The Department relies on data in its student financial aid
information systems to support a variety of student aid programs and
financial operations.  The 1986 HEA amendments required the Secretary
of Education to develop NSLDS to ensure (1) the collection of
accurate information on student loan indebtedness and institutional
lending practices and (2) improved compliance with repayment and loan
limitation provisions.  The 1992 HEA amendments expanded the scope of
NSLDS by requiring the Department to integrate NSLDS with the Pell
grant applicant and recipient databases by January 1, 1994, and with
any other databases containing information on student financial aid
program participation.  In response to these legislative mandates, in
January 1993, the Department awarded a 5-year contract to develop and
maintain NSLDS.  Loan information is now transmitted to NSLDS on a
regular basis by schools, guaranty agencies, and the FDLP servicer. 

Over the past 30 years, separate information systems--including the
FFELP System\4

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

Federal student financial aid programs remain vulnerable to losses as
a result of fraud, waste, abuse, and mismanagement due to a large
extent because the Department, guaranty agencies, schools, and
lenders often do not have the accurate, complete, and timely
information they need to effectively and efficiently operate and
manage the programs.  The resultant program operation and monitoring
difficulties stem from the lack of a fully functional integrated
database covering all title IV financial aid programs that can
integrate recipient information from all available sources.  NSLDS is
not such a database, but a repository for data from multiple data
providers.  Furthermore, as we reported in 1996, the Department's
Office of Inspector General and we believe that the Department has
not adequately tested the accuracy and validity of loan data
submitted to NSLDS.\6

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

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

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


--------------------
\3 NSLDS is the first national source of current student loan and
grant data on student financial aid participants. 

\4 The FFELP System has a number of subsystems--a debt collection
system, guaranty agency system, lender and school system, and support
system. 

\5 The FDLP system includes an origination system, a central
database, and four servicing systems. 

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


   IMPROVEMENTS COULD RESULT FROM
   THE PROPER IMPLEMENTATION OF
   THE CLINGER-COHEN ACT
---------------------------------------------------------- Chapter 0:2

The Clinger-Cohen Act of 1996 makes agency heads directly responsible
for effective information technology.  Among their key duties, agency
heads are to

  establish goals to improve the efficiency and effectiveness of
     agency operations and, as appropriate, the delivery of services
     to the public through the effective use of information
     technology;

  prepare an annual report as part of the agency's budget submission
     to the Congress on the progress in achieving the agency's
     information technology goals; and

  ensure that performance measurements are prescribed for information
     technology used or acquired by the agency and that they measure
     how well the information technology supports the agency's
     programs. 

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

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


-------------------------------------------------------- Chapter 0:2.1

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


   CONTRIBUTORS
---------------------------------------------------------- Chapter 0:3

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


DEPARTMENT OF EDUCATION STUDENT
FINANCIAL AID SYSTEMS
=========================================================== Appendix I



   (See figure in printed
   edition.)


STUDENT FINANCIAL AID SYSTEMS'
CONTRACT COSTS OVER 5 YEARS
========================================================== Appendix II



   (See figure in printed
   edition.)


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

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

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

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

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

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

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

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

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

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

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

*** End of document. ***