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Financial Highlights |
Management Challenges Overview

The Office of Inspector General has identified the Department's major challenges [PDF, 212K]. Following is management's discussion and analysis of those challenges.

I. Program Accountability

Student Financial Assistance. Continued developments in the modes of education delivery (e.g., nontraditional terms, distance education) and virtual paperless electronic delivery of program funds brings new challenges to ensure adequate oversight to identify and manage risks. The Office of Federal Student Aid must provide adequate program monitoring to reduce fraud and abuse in these programs.

In December 2004, OIG and FSA representatives initiated the OIG/FSA Joint Fraud Initiative-a proactive approach to identify and reduce fraud and abuse in federal student financial assistance programs.

Risk Management of Elementary and Secondary Education Programs. Identifying and taking corrective action to detect and prevent fraudulent activities in these programs, as well as addressing accountability and compliance issues by program participants, remains a challenge for the Department.

The Department has made risk assessment a priority. Its interoffice Risk Management Team, under the leadership of the Under Secretary, is undertaking projects to address accountability and compliance issues, as identified by Office of Inspector General audits, referrals, and single audits conducted by nonfederal auditors. It works with program offices to designate grantees as "high risk" when the situation warrants and has dedicated a weekly meeting to risk management issues. In addition, the Department has sent multidisciplinary teams into key locations, as identified through Office of Inspector General audits, to review and assess the progress the "high-risk" entity is making in addressing its weaknesses.

Unsolicited Grants

Unsolicited grants are awards made by the Department, in most cases, as a result of grantee initiative. Such awards do not result from formal Department solicitations for applications. Complications can arise with unsolicited grants, as many recipients of these funds tend to be first-time participants in federal education programs. They are often unfamiliar with applicable regulations and require additional direction, guidance and support with the compliance processes.

Like unsolicited grants, Congressional earmarks do not result from formal solicitations for applications. The Department is required to ensure that recipients of its funds use them in accordance with applicable laws and regulations. However, the Department has stated it does not have enough staff to administer and properly monitor the recipients of Congressional earmarks. It should be noted that some grant projects that begin as unsolicited grants receive Congressional earmarks in subsequent years.

The Department plans to develop a toolkit to help new grantees properly administer their grant programs and to continue to re-engineer its grants monitoring process.

Data Reliability. Data reliability is both a compliance issue and a performance issue. The Office of Inspector General has performed a number of audits of Title I, Part A, and the Carl D. Perkins Vocational and Technical Education Act education programs and concluded that management controls must be strengthened to ensure that data submitted to the Department are complete, accurate, and reliable.

Recognizing the need to improve data quality and data reliability, the Department in FY 2003 launched the Performance-Based Data Management Initiative to streamline existing data collection efforts and information management processes. The resulting Education Data Exchange Network database, anticipated for launch in fiscal year (FY) 2006, will provide state educational agencies and the federal government the capacity to transfer and analyze information about education programs. The new database should generate a more reliable, timely, and uniform set of state and local data elements to help the Department make better-informed program decisions.

II. Operations Accountability

Information Technology (IT) Capital Investment. The Department faces challenges in improving its capital planning and investment control oversight, and in using software designed to help agencies manage and control their initiatives.

Many critical IT projects are pending, such as the Oracle 11i project.  In 2004, the Office of the Chief Financial Officer and the Office of Federal Student Aid announced plans to consolidate their separate platforms into one functional financial management system, using version 11i of Oracle Federal Financials, by October 2006. However, in February 2005, they decided to forego this consolidation.  Although this decision is bound to mitigate significant risks associated with the consolidation and changes in interfacing systems, the initiative is still quite complex and high risk.

For its more complex and costly IT projects, the Department has contracted to have independent, professional consultants provide an assessment as a part of the capital investment process. The Department has made an effort to better articulate the relationship between IT projects and its line of business.

IT Systems. The Department needs to adequately manage and safeguard IT assets and meet e-government requirements. Its 60 IT systems comprise a number of complex and costly investments that are essential to conducting ongoing business and meeting the agency's core mission. The Department needs to complete the development of well-defined enterprise architecture, practice sound system analysis and design concepts, and ensure that a robust system acquisition and development life cycle methodologies are in place.

The Department has embarked on several modernization efforts that have the potential to increase business efficiency and improve customer service. It is moving forward with its ongoing system development and consolidation efforts planned for FY 2006. It has also devoted time and resources to enhance security for its systems, including formally certifying all of its general support systems and major applications.

Procurement. The Department must improve its procurement process to ensure that it is receiving quality goods and services in accordance with the contract terms. The Department needs to use pre-award audits, strengthen its ability to clearly and completely define contract requirements thereby ensuring effective communication between relevant contracting and program office personnel, and ensure that contractors are performing in accordance with contract terms and conditions to meet this challenge.

In 2005, the Secretary directed the Chief Acquisition Officer and Contracts and Acquisition Management Director to develop a training program reinforcing the Department's contracting processes and applicable laws and regulations. Senior managers, contracting personnel, and relevant program office personnel will be required to attend this training. The Secretary has also directed each principal officer leading a program office to take immediate steps and personal responsibility for ensuring contracts are awarded properly and effectively monitored, and has designated a senior advisor reporting directly to her to oversee transformation activities to ensure effective investing and risk management of contracts.

Human Capital Management. Like most federal agencies, the Department will see a significant percentage of its work force eligible for retirement in 2006. The Department is also continuing to see a significant change in critical skill requirements for many of its staff. Identification of needed action steps and their prompt implementation to adequately address work force and succession planning issues are critically important.

The Department has begun implementation of a new Human Capital plan that was released in 2004. This fiscal year the Office of Federal Student Aid (FSA), with the aid of a consultant, also developed its own Human Capital plan. The FSA plan specifically focuses on the needs of FSA and is intended to help FSA attract and retain a highly skilled and motivated workforce.