GAO says Federal Student Aid office fails to meet requirements

The Education Department's Office of Federal Student Aid has not made enough progress in reforming its system of granting student loans, according to a new Government Accountability Office report.

Among auditors' criticisms of the agency are failing to give its performance review teams consistent guidelines when they evaluate the integrity of student aid programs, not identifying cost reductions, not fully reporting on its 5-year performance plan, and failure to submit useful and timely reports. Because past audits found waste and fraud in the agency totaling billions of dollars, GAO added the agency to its "high-risk" list in 1990. The list includes federal agencies and programs vulnerable to fraud, waste, abuse and mismanagement.

The report (GAO-05-31) applauded the agency for improving its financial management controls--it did not have any internal control weaknesses in a 2003 audit and improvements have been made to keep Pell Grants from being issued to ineligible students--but the aid office has not fully addressed the requirements established by Congress in 1998 when OFSA was designated as a performance-based organization.

The report, conducted by the GAO with Education's Office of the Inspector General, said the 1,100-plus-employee agency has made progress in integrating the many systems that distribute $60 billion in student financial aid, and the concept of seamless information exchange between students, educational institutions and lenders should make the process more consistent and accurate. A high priority for OFSA is integrating the systems that issued financial aid to nine million students in 2003, but the project won't be compete until 2008.

GAO criticized OFSA's five-year performance plan, describing it as a general discussion rather than a list of specific objectives. The plan does not meet the requirements of the Higher Education Act or the 1993 Government Performance and Results Act, GAO said.

While the office has worked toward increasing the accountability of senior officials, GAO found that OFSA's plan to award bonuses to senior officials was not clear and could undermine efforts to increase accountability. Also, the plan to replace retiring workers lacked guidelines for how new workers should be trained.

The GAO made five recommendations for improving the agency's strategic planning, reducing fraud and fulfilling its responsibilities under the Higher Education Act:

• Give compliance review teams clear directions.
• Add action steps with specific performance measures to the five-year performance plan.
• Train staff to help them prepare for new duties as older workers retire.
• Improve human capital initiative evaluations.
• Clarify the criteria for senior staff awarding bonuses.

Listing a series of OFSA managerial accomplishments and touting contributions to the Education Department's "green" status on the President's Management Agenda, Shaw said federal student aid programs should be removed from the GAO's high-risk list because of the office's improving financial integrity.