	Student Aid Programs

Ensuring access to postsecondary education while reducing vulnerability  of aid programs to fraud, waste, abuse, and mismanagement is one of the  key management challenges Education faces. Both Education and Congress have made changes to address management  challenges in the student financial aid programs. In 2001,  Education established a Management Improvement Team (MIT) of senior  managers to formulate strategies to address key management problems  throughout the department. These are (1) financial aid system integration issues, (2) fraud  and error in student aid application and disbursement processes,   (3) defaulted student loans, and (4) human capital management. Significant progress  towards this goal was made recently when Education received an  unqualified—or “clean”—opinion on its financial statements. While this is an important  milestone for the department, significant management weaknesses remain  that must be addressed for Education to meet its goal in this area. These  weaknesses included (1) the absence of a fully integrated financial  management system, (2) deficiencies in financial management practices  that require extensive analysis of accounts to resolve errors through  manual adjustments, (3) the lack of a rigorous review of interim financial  data for timely identification and correction of errors, (4) the inability to  accumulate, analyze, and present reliable financial information in the form  of financial statements, (5) the dependence on a variety of stopgap  measures to prepare financial statements, (6) the insufficiency of  compensating controls, such as top-level reviews to address and to seek to  compensate for systemic control weaknesses, and (7) the lack of a review  to identify and quantify improper payments. Education has taken actions over the last several years to improve its  financial management and to address the weaknesses identified. While Education has made progress in addressing many of its weaknesses,  in fiscal year 2002, the auditors again reported that significant financial  management issues continued to impair the department’s ability to  accumulate, analyze, and present reliable financial information. Until  these issues are fully resolved, Education’s ability to produce timely,  accurate, and useful financial information for its managers and  stakeholders will be greatly impeded. Finally, Education will need to continue its actions in addressing  weaknesses in its financial management information systems.
Why GAO Did This Study

In its 2003 performance and accountability report on the Department of Education, GAO identified challenges in, among other areas, student financial aid programs and financial management. The information GAO presents in this testimony is intended to assist Congress in assessing Education's progress in addressing and overcoming these challenges.

What GAO Found

Education has taken steps to address its continuing challenges of reducing vulnerabilities in its student aid programs and improving its financial management, such as establishing a senior management team to address management problems, including financial management, throughout the agency. And, while Education has made significant progress, weaknesses remain that will require the continued commitment and vigilance of Education's management to resolve. Reduce vulnerability of student aid programs to fraud, waste, abuse, and mismanagement: Education has made considerable changes to address the ongoing challenges in administering its student aid programs. However, Education needs to continue to address systems integration issues, reduce fraud and error in student aid application and disbursement processes, collect on student loan defaults, and improve its human capital management. Improve financial management: Education has implemented many actions to address its financial management weaknesses. Significant progress was made recently when Education received an unqualified--or "clean"--opinion on its financial statements for fiscal year 2002. While this is an important milestone for the department, internal control and systems weaknesses remain that impede Education's ability to produce timely, accurate, and useful financial information for its managers and stakeholders.