Student aid drops off risk list

But the IRS modernization effort remains a high-risk program, in the eyes of the Government Accountability Office.

"GAO High-risk Series: An Update"

A few success stories stood out in an otherwise gloomy report this week on high-risk government programs that merit close monitoring in 2005. For the first time since 1990, for example, the Education Department's Student Financial Aid programs did not appear on the Government Accountability Office's high-risk list.

Government auditors credited FSA officials with making significant progress on integrating the agency's information systems, reducing student loan default rates and improving employee management policies and practices.

The education agency, which distributes $68 billion a year in financial assistance, received a clean financial audit for the past three years, after years of poor financial management and weak internal controls. FSA's student loan default rate has dropped to 5.2 percent, and the agency has a new financial management system.

Departing Education Secretary Rod Paige had announced in 2002 that getting the FSA programs removed from GAO's high-risk list would be a top priority of his administration.

The report contained less favorable news about other federal operations and programs. GAO's biannual lists of high-risk programs "have a depressing similarity and consistency," said Rep. Henry Waxman (D-Calif.), who spoke earlier this week at a Capitol Hill briefing on GAO's findings. Some programs on the list have been designated as high risk for years, he said.

Auditors said the Internal Revenue Service's modernization effort remains a high-risk program, despite progress in 2004. "There clearly were some successes," said David Powner, director of information technology management issues at GAO. "But when you look at the full functionality that needs to be delivered to truly modernize the IRS, that is some time down the road."

GAO's auditors combined the tax agency's internal accounting modernization and its tax processing projects into a single risk item this year. IRS modernization first appeared on the risk list in 1995.

IRS officials must replace outdated financial management systems to remove the agency from the risk list, according to the report. The task includes completing work on the Custodial Account Project, a data repository of taxpayer accounts, Powner said.

Work on that project was stopped after lawmakers appropriated $80 million less than IRS officials had requested for fiscal 2005. Agency officials requested $285 million for fiscal 2005 but lawmakers approved $205 million.

The $80 million shortfall halted work on further releases of the IRS' Integrated Financial System, an internal financial accounting system. However, IFS is functioning and replaced the agency's previous accounting system, said W. Todd Grams, the IRS' chief information officer.

Powner said GAO officials will review the tax agency's fiscal 2005 spending plans before issuing judgment on IRS officials' decision to halt further work on internal financial management projects. "We need to find out exactly what they plan to propose and the reasons why," Powner said.

An IRS spokesman said agency officials have had to make tough decisions. "We have budget realities that we have to live within," he said.

For the past decade, GAO officials have deemed the Federal Aviation Administration's air traffic control modernization program to be a high-risk area, and this year was no exception. The project, expected to cost an additional $7.6 billion by 2007, has drained $41 billion from the FAA during the past 25 years. The agency continues to face cost overruns and schedule slippages.

Money for modernization is being spent on global positioning systems for improving approaches and landings, better radar for terminals and new color displays and data processing systems for air traffic controllers.

GAO's report says that FAA officials need to improve their processes for acquiring software-intensive systems, for cost accounting and estimating and for managing spending on information technology. Powner, GAO's director of IT management issues, said all three improvements "could help them deliver on schedule and within budget."

NASA's contract management also made the high-risk list. NASA spends almost 85 percent of its annual budget on contract management, according to GAO's audit. To get off the high-risk list, NASA officials need to install an integrated financial management system, improve cost estimates and ensure that officials have enough information to evaluate contract progress, auditors said.

NASA officials have made some progress towards this goal. The report notes that NASA's managers have made inventories of "ongoing programs and projects-categorized by product line, size, and risk-and defined specific management and information requirements for each category."

Florence Olsen, David Perera and Aliya Sternstein contributed to this article.

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