Federal Student Aid:

Timely Performance Plans and Reports Would Help Guide and Assess Achievement of Default Management Goals

GAO-03-348: Published: Feb 14, 2003. Publicly Released: Feb 14, 2003.

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During fiscal year 2002, an estimated 5.8 million people borrowed about $38 billion in federal student loans. Despite a dramatic reduction in annual default rates on those loans since fiscal year 1990 (from 22.4 to 5.9 percent), the total volume of dollars in default doubled to nearly $22 billion by fiscal year 2001 from about $11 billion in fiscal year 1990. During that same period, the total student loans outstanding grew from $54.1 billion to $233.2 billion. The Department of Education's Office of Federal Student Aid (FSA) manages the nation's student financial assistance programs authorized under title IV of the Higher Education Act (HEA). In 1998, Congress amended the HEA and established FSA as a performance-based organization. Among other requirements, the HEA called for FSA to annually develop 5-year plans, issue annual reports, and consult with stakeholders regarding their delivery system. GAO initiated a review to assess FSA's default management efforts and results.

FSA's default management goals were mostly to prevent defaults, increase collections, and verify student eligibility, but the agency lacked a plan to guide its efforts. FSA had 39 default management goals for fiscal years 2000 through 2002. However, the goals changed significantly during this period and FSA did not annually prepare 5-year performance plans as required by the HEA. FSA met or exceeded most goals, but did not prepare timely performance reports. According to our analysis, FSA met or exceeded performance targets for 36 of its 39 default management goals during fiscal years 2000 through 2002. However, FSA did not issue performance reports for fiscal years 2000 and 2001, as required by the HEA. Instead, in December 2002, FSA issued one report for both fiscal years that lists accomplishments, but does not clearly indicate the extent to which goals were or were not met. Suggestions from survey respondents did not indicate the need for additional goals. While about one-third of the 23 school officials who responded to our survey made suggestions about ways that FSA could better assist them, none of the suggestions indicated the need for additional default management goals. FSA assisted all schools by sharing default management information through symposiums and other media, and provided individual assistance to some schools through visits and telephone calls. Most of the responding officials were generally pleased with FSA's assistance. The suggestions that officials made did not indicate a need for additional goals because they either related to existing goals or addressed operational issues.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To ensure the public that FSA has established and sustained default management and other program goals that support long term objectives, the Secretary of Education and FSA's Chief Operating Officer (COO) should produce a 5-year performance plan annually as required by HEA.

    Agency Affected: Department of Education

    Status: Closed - Not Implemented

    Comments: The Office of Federal Student Aid (FSA) issued its first 5-year annual performance plan in June 2004--the fiscal year 2004 plan--to cover its strategic goals for fiscal years 2004-08, but the plan did not meet all of the requirements of the Higher Education Act (HEA). Specifically, the plan lacked measures to assist in later determining if strategic objectives were met. Also, the action steps identified in the plan were not always linked to specific strategic objectives and in some instances lacked specific performance measures to assess FSA's progress in completing them. FSA stated that it was developing appropriate measures or trend data for each objective in its 2004 5-year annual plan and would include such measures in its fiscal year plan. Also, FSA stated that its fiscal year 2005 plan would more clearly indicate how achievement of an annual goal results in progress toward a strategic objective. As of August 2005, FSA had not issued its fiscal year 2005 5-year performance plan for the period 2005-2009, which placed the agency in noncompliance with the HEA requirement for annually issuing this report. In August 2005, an FSA official stated that a draft of the fiscal year 2005 5-year performance plan had been prepared, and the agency expected to issue the document by October or November of 2005. However, in July 2007, an FSA official confirmed that the fiscal year 2005 5-year plan was never issued, and because the agency had fallen so far behind in preparing the document,it chose to focus its efforts on preparing the fiscal year 2006 5-year plan for the period 2006-2010, which was issued June 29, 2006. Because FSA has not consistently issued its 5-year performance plan annually as required by the HEA and as recommended in our report, we find that the agency has not adequately addressed our recommendation.

    Recommendation: To provide essential information to the Congress about its progress toward achieving default management and other agency goals during a given year, that the Secretary of Education and FSA's COO should prepare and issue reports to the Congress on FSA's performance that are timely and clearly identify whether performance goals were met.

    Agency Affected: Department of Education

    Status: Closed - Not Implemented

    Comments: The Office of Federal Student Aid's (FSA) annual performance report for fiscal year 2003 did not include an evaluation of the extent to which the agency met fiscal year 2003 strategic objectives, as required by the Higher Education Act (HEA) and the Government Performance and Results Act (GPRA)of 1993. Specifically, the report lacked measures or trend data by which the Congress could clearly see the extent of FSA's progress, because the agency's annual plan did not provide a means for assessing performance toward achieving strategic objectives. In addition, the report did not include all required information for bonus decisions for the Chief Operating Officer (COO) and senior officers. The report summarized the bonus amounts paid to these officials, but did not include performance rating information as required. In response to a draft of another GAO report addressing these issues, FSA stated that its annual performance report would include data to plainly demonstrate its progress toward achieving each strategic objective. Also, the agency stated that it would revise individual performance plans for members of FSA's Management Council--the Chief Operating Officer (COO) and other senior agency officials are part of this council--to include an explanation of the awarding of any performance bonus. FSA's fiscal year 2004 performance report did include an evaluation of how the agency had progressed in meeting actions under certain strategic objectives, but did not provide specific measures for some actions to assess the agency's progress. For example, under its strategic objective to improve products and services to provide better customer service, it stated that in FY 2003, FSA established baseline measures for customer service levels to assist the agency in meeting this objective. However, the 2004 performance report did not provide a comparison of the 2004 customer service levels to the baseline measures to enable reviewers to assess whether the goals were met. Also, as with the 2003 performance report, FSA summarized bonus amounts paid to the COO and senior officers, but did not include performance rating information for the bonus decisions as required. FSA provided annual performance reports for fiscal years 2005-2007, but did not provide documentation to assist us in determining whether the reports were issued in a timely manner. Also, while FSA established success measures for each of its performance goals, it did not provide a status on the agency's progress in accomplishing the goal. As a result of these deficiencies, we found that the agency had not fully addressed our recommendation.

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