Guaranteed Student Loans

Many GAO audit reports have spotlighted the effect of management failures in the federal government--waste, inefficiency, and even scandal. Political leaders have been forced to spend too much time reacting to surprises like the Department of Housing and Urban Development debacle rather than doing the work the agencies were created to do. GAO began its high-risk program to identify those high-dollar government programs most vulnerable to fraud, waste, abuse, and mismanagement. This report is part of the program's high-risk series of reports, which examine the federal government's efforts to identify and correct problems in 17 especially vulnerable areas, fall into three main categories: lending and insuring, contracting, and accountability. Many of the root causes of the problems afflicting these government programs are traceable to the absence of fundamental processes and systems. GAO urges that future congressional oversight focus on the agency reports and audited financial statements required by the Chief Financial Officers Act, agency management's progress in correcting material weaknesses in program internal control and accounting systems, and federal agency efforts to develop and implement performance standards. The Comptroller General summarized the high-risk series in testimony before Congress; see: Government Management--Report on 17 High-Risk Areas, by Charles A. Bowsher, Comptroller General of the United States, before the Senate Committee on Governmental Affairs. GAO/T-OCG-93-2, Jan. 8, 1993 (22 pages).

GAO found that: (1) the federal government's risk of loan losses has increased greatly as the program has evolved; (2) the government has increased its financial exposure, since it provided interest subsidies to lenders as well as full reimbursement to lenders and guaranty agencies for any loan defaults; (3) incentives do not adequately encourage participants to do more to prevent defaults; (4) Education has a history of mismanagement and poor oversight of the program's activities; and (5) Education has inadequate financial and management information systems that contain inaccurate and incomplete data, conducted little oversight of the lenders and guaranty agencies, experienced high turnover in key management positions and has not hired staff with adequate skills, and a management structure that inhibited effective program improvement.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Linda G. Morra Team: Government Accountability Office: Office of the Comptroller General Phone: (202) 512-7009