Report 95021 Summary - December 1995
Student Aid Commission:
Problems Continue With Its Automated Financial Aid Processing System
Student Aid Commission's (commission) automated system, FAPS:
The California Student Aid Commission (commission) helps students achieve their postsecondary educational goals by providing financial aid services. These services include administering state and federal authorized grant and loan programs.
In 1986, an outside consultant suggested that considerable cost savings and improved service could be achieved through the commission's increased use of automation. In 1987, the commission began its procurement of the automated system, known as the Financial Aid Processing System (FAPS). After several years of development, the commission declared FAPS operational in January 1993. However, FAPS has been plagued with problems since its inception, and the continuation of system problems led to the assessment of FAPS by Deloitte & Touche (Deloitte) in November 1993.
In September 1994, Deloitte reported that the FAPS database is poorly designed; the FAPS application is complex, cumbersome, and unable to function adequately; and the operation of FAPS is inefficient. Deloitte recommended the commission document the current system, perform only mandatory system changes, correct the problems with the accounting functions, add systems that are external to FAPS to expand services, and develop alternatives to FAPS.
Chapter 303, Statutes of 1995, required the Bureau of State Audits to determine the extent to which the commission has addressed the concerns and implemented the recommendations Deloitte reported in September 1994. During our review, we found the commission has neither fully addressed the concerns nor fully implemented the recommendations. Although the commission has made some improvements to FAPS, it has not corrected the fundamental design deficiencies of FAPS. According to the chief information officer, the commission has not corrected the design deficiencies because it would require a complete revision and rewrite of the FAPS database and application. As a result, the following conditions continue to exist:
- The FAPS accounting application still does not allow for the proper reconciliation of cash deposits and FAPS cash transactions. In addition, FAPS cannot function adequately as the subsidiary ledger to the general ledger accounting system; therefore, accounting staff must continue to maintain subsidiary ledgers on personal computers.
- FAPS processing of loan payments has improved; however, erroneous transactions still exist. Specifically, from January 1993 through December 1994, faulty FAPS processing caused inaccurate loan balances and some improper refunds. Although it corrected the faulty processing in December 1994, the commission has not identified and corrected all the erroneous loan balances caused by the faulty FAPS processing.
- Despite some improvements in FAPS operations, system flaws continue to cause system interruptions and inefficiencies. In addition, poor system design make system documentation, corrections, and improvements costly and slow.
Additionally, the commission has implemented some, but not all of the recommendations cited in the Deloitte report. The commission completed three of the five recommended types of documentation, but believes it is imprudent to continue with the documentation project because it is limited in its use and is not cost-effective. Also, as recommended by Deloitte, the commission is making only mandatory changes to FAPS. Specifically, the commission only makes changes to correct or modify FAPS when the system stops working, to comply with legal requirements, to make changes promised to outside parties, or to meet financial or legal liability to its clients.
To correct problems with the system's accounting functions, the commission is studying the feasibility of splicing an existing accounting system to FAPS. If the study indicates that adding an accounting package is not feasible, the commission plans to research other alternatives to FAPS. In the meantime, the commission has not completed its analysis of alternatives to FAPS, such as redesigning FAPS or entering into a joint venture with another guarantee agency that has an efficient system.
Finally, a new management team has revised the commission's strategy for addressing the problems with FAPS. The team has developed a comprehensive strategy that includes both short- and long-term plans. The commission is implementing its short-term plan, which is premised on the outcome of the accounting system study; however, the direction of the long-term plan depends on the results of the short-term plan. Therefore, the commission's direction in regards to FAPS will not be known until May 1996. Because the commission is still determining its approach to address the problems outlined in the Deloitte report, we could not fully assess the commission's actions to correct the problems with FAPS.
In addition to implementing its comprehensive strategy, the commission should do the following:
- Correct the financial and accounting problems with FAPS so that accounting staff can perform basic accounting functions, such as reconciling cash deposits to FAPS cash transactions; and
- Identify and correct those incorrect loan balances that occurred from January 1993 through December 1994 because of FAPS processing errors.
The Bureau of State Audits should conduct a follow-up review of the commission's actions after the commission has determined its approach to address the problems with FAPS.
The commission agreed with our report and recommendations. To address our recommendations, the commission states that it recognizes the need to correct the FAPS financial and accounting problems and will continue to make this a high priority issue. The commission also states that it anticipates correcting the loan balances affected by the FAPS programming error by June 1996.