ED’s Office of Inspector General Finds FSA Missing Key Steps in Next Gen Initiative

By Hugh T. Ferguson, NASFAA Senior Staff Reporter

A review of Federal Student Aid’s (FSA) transition to the Next Generation Loan Servicing Environment, has found that the agency is not performing key steps or following best practices in implementing the transition.

The Department of Education (ED) Office of Inspector General (OIG) last week released an audit of the Next Gen Loan Servicing environment, finding that while FSA did have processes in place for planning and managing the transition, the agency should have followed key steps that would have better ensured the proper planning and managing of the transition.

The audit comes just a few months after the Government Accountability Office also took issue with the delayed implementation of the Next Gen initiative, and issued 14 recommendations for FSA to consider moving forward.

Specifically, the audit found that FSA did not perform required reviews that would enable appropriate officials to “agree on the project’s objectives, requirements, and funding; steps to ensure the establishment of an information technology project’s purpose, scope, and lifecycle costs; as well as steps to help with implementation efforts.”

The lack of documentation for an initiative of the scale of Next Gen is also cited as a contributing factor of continual budget shortfalls that Next Gen has faced and was documented as a part of “Next Gen Program Office’s Risk Summary” in April 2020.

“The lack of planning for FSA’s overall Next Gen initiative increases the risks for potential pre-planning and planning flaws and increases the cost of system development and implementation when systems are put into production without providing full functionality,” OIG wrote. “Because FSA did not complete required project management activities or follow best practices for acquisition planning for the Next Gen projects we reviewed, FSA did not execute the projects efficiently or effectively.”

OIG recommended that FSA’s Chief Operating Officer puts controls in place to ensure there is documentation of completed steps in documented projects and to “develop and implement a policy that requires an investment request or budget initiative request for a project to be completed and approved prior to the issuance of bid solicitations for the project.”

FSA agreed with both recommendations.

Richard Cordray, FSA’s chief operating officer, did not however explicitly agree or disagree with the audit as a whole, arguing that best practices were not based on a standard of legal compliance and instead were based on best practices identified by OIG.

“The government's cost estimates and other foundational work on Next Gen were based on the known requirements and information available at the time when Next Gen was first developed,” Cordray wrote in response to the report. “As implementation has proceeded, various strategies, requirements, and timelines were adjusted, causing the government to realize additional costs. While FSA appreciates and benefits from OIG identifying best practices in implementing Next Gen, FSA nonetheless operates under real time constraints and must consider how to optimize the terms of existing contracts, current staffing levels, contractor capabilities, and other available resources, including the funding levels provided by Congress.”

The OIG audit required FSA to develop and submit a corrective action plan within 30 days of the audit.

FSA has said it plans to implement the transition to its unified servicing landscape by the end of 2023.


Publication Date: 1/20/2023

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