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Mr. Chairman and Members of the Subcommittee:
Thank you for this opportunity to share with the Subcommittee our continued progress in making the Department of Education a high-performance organization dedicated to improving the quality of America's education system. In particular, I want to update the Subcommittee on Year 2000 computer issues, the modernization of our student aid delivery systems, the implementation of the Government Performance and Results Act, and the dramatic improvement in customer service that has been made possible through expanded use of the Internet. In describing our progress in these areas, I will also address the issues that have been raised by the General Accounting Office (GAO) and the Department's Inspector General.
Our success in each of these areas was made possible in part by the support provided by this Subcommittee. I want to thank you, Mr. Chairman, as well as other Members of the Subcommittee, for recognizing the importance of investing in sound financial and administrative management to reach our common goal of improving educational opportunities in America. For fiscal year 2000, we are asking for $552 million in discretionary management funds, which includes funds for the Offices of Civil Rights and the Inspector General. This is an increase of $33 million over the 1999 level, mostly for pay raises, other built-in costs, and investments in technology. I hope you will give careful consideration to this request, which remains less than two percent of the Department's total discretionary budget.
I am pleased with our progress in bringing all 175 of the Department's data systems -- including our 14 mission-critical systems -- into Year 2000 compliance. Each of the 14 mission-critical systems, including the 11 student aid systems, has undergone independent verification and validation (IV&V) by a third party contractor and is in production. We are pursuing our IV&V contractor's recommendations for continued documentation and monitoring procedures and for testing with external customers and partners. In addition, all 161 non-critical systems have completed renovation, validation and implementation and have been put into production.
The Department's Year 2000 progress has been confirmed by Congressman Steven Horn's Subcommittee on Government Management, Information, and Technology, which on February 22 gave the Department a grade of "A minus," and by the Office of Management and Budget, which has placed the Department in its highest Y2K readiness tier. The GAO and Inspector General are also reviewing our systems to help us ensure that they are Y2K compliant.
We are proud of this achievement, but we are taking nothing for granted when it comes to Year 2000 readiness. With the renovation of our systems now complete, we are focusing on contingency planning and continued testing.
The Department has undertaken a thorough business continuity and contingency planning effort based on guidelines provided by the GAO. Contingency planning teams representing key offices and functions across the Department began work in September 1998. We drafted our initial contingency plans for individual systems in early 1998, and have posted these plans on the Department's web site for comment by the education community. We expect to complete detailed contingency plans for all core business processes by the end of March; these plans will also be posted to our web site for further comment.
Our contingency planning effort has included extensive consultation with the education community. In addition to soliciting the community's comments on our initial contingency plans, last month our student aid team met with a focus group of college student aid administrators, business officers, and student loan industry leaders to obtain reactions to a draft report on our business impact analyses and preliminary risk mitigation and contingency plans.
We are continuing to test data exchanges with other Federal agencies and with our many non-Federal partners, such as postsecondary institutions. The Department is well into a series of tests with our sister Federal agencies, and we have developed a plan for extensive testing with postsecondary institutions and other external data exchange partners during 1999. This testing has been scheduled for the spring and summer of this year to coincide with completion of Year 2000 renovations by both the Department and its partners. The testing schedule has been posted to the Department's Year 2000 web site, and we will work closely with the education community to provide as many testing opportunities as necessary.
The Department also is continuing outreach efforts to encourage and help our partners throughout the education community to address the Year 2000 issue. In December, for example, the Department held a live, interactive video teleconference on Year 2000 that was co-hosted by Secretary Riley and John Koskinen, the Chairman of the President's Council on Year 2000 Conversion. The teleconference was broadcast to over 1,400 registered sites across the country, and the Department has made videos of the teleconference available to the education community.
Our outreach efforts include ongoing assessments of the Year 2000 readiness of school districts, the higher education community, and key service providers. For example, the Department has worked with the Council of Great City Schools to assess the readiness of the Nation's 50 largest school districts. The Department and the National School Boards Association are preparing to launch a similar survey of all school districts nationwide.
Year 2000 readiness assessments of the higher education community have included surveys of the 1,300 members of the American Association of Community Colleges, 1,474 direct loan schools, the 36 guaranty agencies, and the Department's 18 debt collection contractors. We plan to continue our assessment efforts by surveying all 7,000 postsecondary institutions at the end of March.
Our data exchange testing and outreach efforts reflect our ongoing commitment to do everything we can to keep Federal assistance to States, schools, and students flowing without a hitch when the year 2000 arrives.
We have stabilized the student aid programs and are ready to move forward with a comprehensive strategy to modernize and integrate our systems. Last fall, Congress helped catalyze this change by establishing a performance-based organization (PBO) to administer the student aid programs. The PBO is designed with greater flexibility in managing its personnel and procuring goods and services, new incentives for high performance, and accountability for results.
Secretary Riley and I were very pleased that Greg Woods agreed to become the first Chief Operating Officer of the PBO. We believe Mr. Woods has the right mix of experience, including eight years as CEO of a software company and five years at the Reinventing Government initiative, to make the PBO a success.
The PBO has been working to develop an interim performance plan and management priorities for the rest of this fiscal year. These priorities will include (1) promoting customer service, (2) integrating the student aid delivery systems, and (3) strengthening our financial management system. I would like to say a word about each of these areas.
First, the PBO is making great strides in improving customer service. For example, applications for student aid submitted via the Internet are not only quicker and easier for students to file and the Department to process, but are also less than one-tenth as likely to be returned to the student due to an error. We also use the Internet to accept applications for loan consolidations and to distribute information to financial aid professionals.
The PBO recently formed a Customer Service Task Force -- comprised of senior managers, key staff, and front-line employees -- to identify opportunities to enhance customer satisfaction. The Task Force plans to make recommendations in July on ways we can work more effectively with our partners -- including schools, lenders, guaranty agencies, and others-to meet student needs and improve operations.
Second, the statute requires the PBO to implement an open, common, and integrated system for delivering student aid. A recent GAO report on the Department's management challenges focused our need for us to integrate our systems, as well as strengthen financial management. In my view, this report was generally fair but did not reflect the quantifiable progress we have made in these two areas.
In the area of systems integration, we have laid the groundwork over the past several years. We have consolidated operations for four data systems into one data center with common hardware and software, improving service while saving more than $30 million over five years. We have also established a single electronic identifier for each organization involved in student aid delivery to reduce administrative burdens and improve data quality. And through Project EASI (Easy Access for Students and Institutions), we have collaborated with our customers and partners to document current processes and determine how they could be reengineered to take advantage of new technologies.
We are now ready to pursue the next stage in this effort. Mr. Woods is overseeing the design of a single systems architecture for all the Title IV systems, building upon the work of Project EASI and our other modernization efforts. By early April, the PBO will develop a modernization budget and share it with Congress. By the end of this fiscal year, we will have a clear picture of where our systems are today, where they should be within five years, and the sequence of steps needed to get there. The PBO will seek the support of the financial aid community for this modernization blueprint, which will rely on a modular approach and use existing commercial systems whenever appropriate.
Finally, we are also making progress improving the financial management of the student aid programs. Our efforts to strengthen the student loan programs are paying dividends, as evidenced by the clean opinion on the Department's fiscal year 1997 financial statement. We have also aggressively worked to reduce student loan defaults, with the help of a strong economy and tools provided by Congress in 1992. The fiscal year 1996 default rate -- the latest available -- is a record-low 9.6 percent, less than half the 22.4 percent rate when President Clinton took office. At the same time, collections on defaulted loans have more than doubled, from $1 billion in fiscal year 1993 to $2.2 billion in fiscal year 1998. And by improving the quality of data in the National Student Loan Data System, we have prevented the disbursement of as much as $1 billion in grants and loans to ineligible students.
To build on our progress in this area, the PBO will invest in high-end financial management software and systems now in use in the private sector, move from manual systems to more automated ones, and reduce errors and administrative costs for both the Department and our partners.
For example, States engaged in successful education reform have set clear goals in the form of high standards for all students. The obvious parallel to that process at the Department of Education is the development and implementation of our Strategic Plan, which sets forth our goals and objectives.
Second, States and districts have pursued their achievement goals by aligning their resources to support those high standards and by empowering educators through intense professional development to lead reform at the local and school level. Similarly, we are pursuing our Strategic Plan objectives by empowering Department employees through a combination of training and technology to make the changes in how we do business that are required to reach our Strategic Plan goals. We are investing in human capital, and we are encouraging all Department employees to take advantage of computer and Internet-based technologies to better meet the needs of our customers.
Third, States are holding schools and principals and teachers accountable for improving student achievement. The blend of greater local empowerment with accountability for results is the driving concept behind the popular "Ed-Flex" legislation, as well as a centerpiece of President Clinton's proposal to reauthorize the Elementary and Secondary Education Act. Greater accountability for results is also a critical part of our management improvement efforts within the Department of Education, including the development of annual performance plans, individual and organizational assessments, and a variety of other means.
I would like to briefly describe our work in each of these areas: defining our management objectives, aligning our resources and empowering employees to support reform, and holding ourselves accountable for results.
Our Fiscal Year 1999 Annual Performance Plan received high marks from Congress. This year we worked to build on that success by providing strengthened performance indicators and expanded baseline data. The Fiscal Year 2000 Annual Plan includes 98 indicators for our 22 performance objectives, as well as baseline performance data for 90 percent of those indicators, or about twice as much baseline data as last year. Most of the cases where baseline data is unavailable involve new programs or activities. The 2000 Annual Plan also includes baseline data for about 85 percent of the 94 performance plans for individual or closely-related programs. Much of this information has been integrated into our Congressional budget justifications.
We have also developed better links between strategic plan objectives and program performance plans to address a key concern raised by Congressional reviewers last year. Each program performance plan now states the program's relationship to our overall strategic goals. We have established incentives to incorporate the strategic plan objectives into program management by including the objectives in the individual performance plans of our senior officers.
To further improve our plan and guide indicator development, we have added a section on limitations of data, as well as draft standards on data quality. We are working with State agencies to pursue a two-pronged strategy to improve data quality: (1) ensuring that current GPRA data collection systems meet data quality standards, and (2) developing a new electronic, integrated performance and benchmarking system to bring Federal education data systems into the 21st century.
We recognize that the development and collection of reliable performance data on Department programs is taking longer than some would like. In particular, I know that Members of this Subcommittee are eager for information to help them make difficult decisions about the allocation of scarce Federal resources. We share this desire, but I can tell you after spending 30 years working with education research that bad data are worse than no data. The undertaking mandated by GPRA is a complex one that cannot be achieved overnight. We are working very hard to set up systems for collecting reliable and valid data on Department and program performance as soon as possible, and our Annual Plan provides a sound blueprint toward that goal.
In the meantime, I believe there is considerable information available to help the Subcommittee assess the Department's performance. We are pleased at the clear successes in meeting goals, including internal management goals such as year 2000 compliance; program goals, such as the recent released assessment of Title I; and macro goals, like the latest reading scores on the National Assessment of Educational Progress.
We are rethinking the way we provide professional development to our employees to encompass a wide range of opportunities in addition to traditional training. For example, a recently launched mobility assignment program is designed to encourage staff, who often work for many years on the same assignment in the same office, to seek out and accept new challenges in other areas of the Department. This new program not only helps satisfy individual career goals but also brings new perspectives to our day-to-day work. The Department also has launched a mentoring program and is experimenting with a wide range of technology-assisted learning techniques.
Our performance assessment system is based on a 360-degree feedback model widely used in the private sector to encourage useful input to employees about their performance, strengths, and weaknesses. We are also encouraging staff to collaborate and cooperate across offices and functions. To expand effective application of technology across the Department, for example, we have created an IT investment review group for technology governance issues, an Internet working group for building our web presence, and a technology review group for day-to-day technology implementation. We also are bringing members of the Senior Executive Service together more often to talk about the management challenges facing the Department. And we recently launched an annual skill-building program for senior Department leaders and managers.
Building a first-class workforce goes beyond professional development and networks. It also includes continuing the progress of the President's Initiative on Race, strengthening our labor-management partnership, emphasizing the importance of diversity in our decision-making processes, and enhancing our workplace to provide the best possible environment for our employees. In all of these areas, I believe we have made substantial progress in the last year.
Effective educators realize that technology should not be used for its own sake, but should be focused on improving student achievement. Likewise, the Department has marshaled its investments in technology to support its strategic goals, particularly in the area of improving customer service.
There was a dramatic increase in customer contact with the Department through our web site and major call centers in 1998. The ED Home Page was viewed an average of 5 million times each month in 1998 -- twice as often as in 1997 -- and reached 9 million page views in January 1999. Total call volume on our postsecondary student financial aid information line (1-800-4FED-AID) grew by more than 50 percent in 1998, to over two million. And we are receiving about 1,000 requests a day -- both by phone and on-line -- through the ED Pubs system.
ED Pubs is a terrific example of how the Department is using technology to improve customer access to the information they need, when they need it. The Education Publications Center, or ED Pubs, is a consolidated product distribution center that began providing one-stop shopping services to Department customers in May of 1998. The center disseminates the Department's information products -- including publications, videos, CD-ROMs, posters, bookmarks and other products -- free of charge to teachers, parents, students, librarians, administrators, policymakers, researchers, and anyone else with an interest in education.
ED Pubs also provides an accurate inventory of all its products on-line, and even more important, helps us determine the kinds of information our customers value most. The ED Pubs on-line ordering system includes extensive search capabilities as well as links to full-text electronic copies of most publications.
One measure of our initial success in using the Internet to provide useful information to our customers is a 1998 survey by Quality Education Data. In this survey, teachers named the ED web site and the ED-sponsored Educational Resources Information Center (ERIC) web site as their first and second most frequently visited sites, respectively.
In addition to increasing direct contacts between the Department and its customers, we continually look for ways to improve customer service and implement programs in flexible, customer-friendly ways. One recent example of this ongoing effort is an accelerated discretionary grant award schedule that promises to deliver awards much earlier in fiscal year 1999 than in previous years. The accelerated schedule will give schools and districts more time to carefully allocate their resources for the coming school year. In fiscal year 1998, the Department awarded 90 percent of all discretionary grants by August 31. The goal in fiscal year 1999 is to award a majority of new grants by May 31 and continuations by July 31. In addition, the Department developed and implemented new "expanded authorities" regulations intended to increase flexibility for grantees and improve customer service by streamlining administrative requirements.
In May 1998, the Department implemented the final phase of the Grants Administration and Payments System (GAPS), a key component of EDCAPS. GAPS supports grants management through the entire life-cycle of each grant by simplifying reporting, providing Internet access to the system, allowing modifications to payment requests prior to receipt of funds, and ensuring access to more timely and accurate financial information.
Also during 1998, the Department established policies and procedures that provided for the monthly reconciliation and reporting of financial data. This data was made available through EDCAPS for program and other managers to use in their day-to-day operations for decision-making and funds control.
The Department is committed to improving performance and accountability through performance-based contracting. We are now reviewing every contract for the maximum use of effective performance objectives, ensuring that each contract is stated in terms of results that support the Department's Strategic Plan. In 1996, the Department identified 66 contracts for conversion to performance-based service contracts. To date, the Department has converted 45 of those existing contracts. In addition, 16 new performance-based contracts were awarded. The average annual cost of these performance-based contracts combined is over $200 million.
Our emphasis on accountability extends to all senior Department officials and staff. We are the ones, after all, who are charged with implementing our Strategic and Annual Performance Plans. This is why, as Acting Deputy Secretary, I have insisted on annual performance agreements linked to measurable objectives for all senior officers. This is also why we have implemented a new performance assessment system for all employees that uses 360-degree review to assess performance against standards and goals that are revised annually.
We are using technology to serve customers today in ways that were barely imaginable 10 years ago. Thousands of publications and research reports from the Department are now available on the desktop of anyone with access to the Internet, and we are adding new publications every week. Online forums allow thousands of teachers and others to share ideas on key education challenges.
A growing number of our programs are using technology to strengthen their work. For example, a web site maintained by the 21st Century Community Learning Centers program features examples of winning proposals from last year's competition. The Comprehensive School Reform Demonstration program provides grantees with regular email updates and also a searchable database of award recipients, so that schools adopting a particular reform model may contact each other.
These are glimpses of where we are going, what we are becoming. We are becoming a learning organization. We are using technology to create a constant and nearly instantaneous feedback loop that teaches us how to serve our customers better, faster, and more directly. As a result, our customers spend less time looking for information and more time using it to improve the performance of their schools and students.
With your help, we will continue this learning process and create a high-performance agency that successfully blends flexibility and accountability to meet the needs of all its customers.
I will be happy to take any questions you may have.
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