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Federal Student Aid Overview of Risk Management


Federal Student Aid Overview of Risk Management David Revill and Cynthia Vitter * Agenda Changing business model Enterprise Risk Management Defined FSA s Key ... – PowerPoint PPT presentation

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Title: Federal Student Aid Overview of Risk Management

Federal Student Aid Overview of Risk Management
  • David Revill and Cynthia Vitter

  • Changing business model
  • Enterprise Risk Management Defined
  • FSAs Key Strategic Drivers
  • Authorization of the Risk Management Committee
  • Risk Management Group Functional Alignments
  • Key Tools Used to Communicate Significant Risks
  • How the Risk Management Group Identifies Risks /
  • Risk Management Organization Key Functions
  • Risk Management Group Overview
  • Audit Liaison Overview
  • Internal Review Overview
  • Risk Analysis Reporting Overview
  • Portfolio Analytics Overview
  • Acquisition Risk Management Overview
  • Summary

Things that impacted FSAs business model
  • FSAs business model changed from Direct Lending
    and Bank Lending (FFEL) to 100 Direct Lending,
    effective 7/1/2010
  • Driven by and against the back drop of a global
    financial crisis
  • Rising cost of education AND expanded for- profit

What do we mean by Enterprise Risk Management?
  • A successful ERM program can assist an
    organization to
  • Work toward a more integrated and comprehensive
    assessment of risks, and an objective, consistent
    approach to managing them
  • Through a consistent risk governance framework,
    help establish enhanced clarity around risk
    management roles and responsibilities
  • Help create a more common language and improved
    customized view of risk across the agency
  • Monitor more completely an organizations risk
    level as compared to its risk appetite, to
    include correlations and dependencies across
    products and risk types
  • Increase focus on both traditional and emerging
    risk types

FSAs Key Strategic Drivers
  • Goal A Improve Customer Experience Increase
    Program Completions Supports Operational
    Delivery of Title IV Aid
  • Goal B Enhance Postsecondary Financial
    Institution Support
  • Goal C Build Stronger Business Management
    Capabilities Supporting Processes
  • Goal E Enhance Employee Experience

Goal D Reduce Mismanagement by Postsecondary
Financial Institutions Understand and Manage
Loan Portfolio Risk
Authorization of the Risk Management Committee
  • In January 2010, former Chief Operating Officer
    (COO), William Taggart officially authorized the
    RMC and announced the new Risk Management
  • The RMC is chaired by Fred Anderson, Senior
    Advisor to the COO and includes certain members
    of the Operating Committee
  • Risk Management Committee Members include

Chief Risk Officer (CRO) Chief Business Operations Officer
Chief Operating Officer (COO) Chief of Staff
Chief Program Compliance Officer Chief Customer Experience Officer
Chief Performance Officer Chief Financial Officer (CFO)
Chief Information Officer Head of Acquisitions
Group Functional Alignments
Key Tools Used to Communicate Significant Risks
  • FSA Enterprise Level Risk Diagnostic Summary, a
    one pager that is used to identify, track and
    communicate key risks
  • FSA Significant Operational Issues Dashboard, is
    the documentation that used to support the rating
    of the risk type in the risk summary
  • Risk Management Significant Risk Database, an
    aggregation of potential risk issues

Risk Types
  • At Federal Student Aid, Enterprise Risk
    Management is divided to identify,
    assess, manage, and report risk management
    activities amongst the following five categories
  • Operational
  • Student Aid Administration Risks
  • Portfolio Analytics and Forecasting
  • Reputational
  • Marketing 
  • These risks are identified by the work done by
    individuals in five Risk Management Groups
  • - Internal Review - Portfolio Analytics
  • Risk Analysis Reporting - Acquisitions Risk

Internal Review Overview
  • INTERNAL REVIEW GROUP has two functions Internal
    Reviews and Audit Liaisons.
  • Internal Reviews focus reviews of FSA Operations.
    They are responsive to business units requests to
    review specific processes that require a
    confirmation of functionality
  • They also focus on Special Initiatives that are
    projects that address validating CAP controls,
    OIG responses, process improvement and other
    unique requirements
  • Audit Liaisons is the connection between FSA and
    the various entities that seek to examine FSAs
    processes of operations. Audit Liaison has taken
    a more prominent role as the number of
    examinations have increased.

Audit Liaison Overview
  • Who Audits Federal Student Aid?
  • The Government Accountability Office (GAO), is
    an independent, nonpartisan agency that works for
    Congress. The head of GAO is the Comptroller
    General, who is appointed to a 15-year term by
    the President.
  • The Department of Educations Office of
    Inspector General (OIG), is an independent office
    within the Department of Education established by
    the Inspector General Act of 1978. The Inspector
    General is appointed by the President and submits
    semiannual reports to Congress. The Inspector
    General reports to and is under the direct
    supervision of the Secretary of Education.
    However, the Secretary cannot prevent or prohibit
    OIG from initiating or carrying out any audit or
  • What Do They Audit?
  • Auditors study, evaluate, and determine if the
    Federal Student Aid programs internal accounting
    and administrative controls, policies, and
    procedures are in compliance with applicable
    laws, regulations and Department directives.
  • Why Do They Audit Federal Student Aid?
  • Auditors follow money because fraud, risk and
    abuse are associated with large government
    programs. FSA delivers roughly 150 billion
    annually in student aid.
  • The GAOs mission is to support congressional
    oversight of an agencys operations to determine
    whether funds are being spent efficiently and
    effectively and to report on how well government
    operations and policies are meeting their
    objectives. GAOs work is frequently conducted at
    the request of congressional committees or
    subcommittees or is mandated by law.
  • The OIGs mission is to keep the Secretary and
    Congress informed about problems and deficiencies
    related to the administration of programs. Each
    year, the OIG circulates its work plan for
    comment by Department officials. The OIGs work
    plan details the areas it intends to focus on in
    its future work. Some audits are mandated to be
    conducted annually, such as the annual financial
    statement audit and the Federal Information
    Security Management Act (FISMA) audit.

Risk Analysis Reporting Overview
  • Some of the key activities of Risk Analysis
    Reporting are
  • Coordinate technical aspects of FSAs risk
  • Prioritize risk through control environment
    assessment, heat map, and other activities based
    on event probability and inherent impact
  • Enhance enterprise risk management framework to
    include the following
  • Risk taxonomy across 5 broad areas of risk
    (operational, student aid administration,
    portfolio analytics forecasting, market, and
  • Completion of FSA enterprise-level control
    assessment for Risk Management Committee and
    other key oversight stakeholders
  • Coordinate business unit risk oversight and
    program compliance activities across the
  • Conduct targeted risk assessments including
    mitigation status based upon risk diagnostic
  • Continuously perform data analysis to provide
    clear visibility into key risk and mitigation

Portfolio Analytics Overview
  • Portfolio Performance Management Services (PPMS),
    is a centralized enterprise student loan and
    grant portfolio analytics resource supporting FSA
    Stakeholders, Leaders and Functional Groups.
    PPMS has created an End-to-End portfolio
    analytics framework with a focus on defined,
    repeatable portfolio metrics.
  • The summary statistics, updated monthly for FSA
    leadership, aligned historical data (Fall 2014)
    to cover total portfolio outstanding's,
    originations, repayment, entitlements,
    delinquency and defaults.
  • PPMS analytics defines key borrower behavior
    characteristics, and performs defined work and
    flexible ad hoc analysis to meet changing
    organizational needs.
  • Core group objectives are to move loan portfolio
    insight and understanding from static views to
    actionable findings for use throughout the FSA
    organization in support of FSA functional groups
    efficient achievement of its strategic

Federal Student AidAcquisition Risk Management
  • FSA operates as a public-private partnership
    staffed by 1,168 full-time employees and is
    augmented by contractors who provide outsourced
    business operations.
  • A major role of FSA is to coordinate and monitor
    the activity of the large number of federal,
    state, non-profit, and private entities involved
    in federal student aid delivery, within a
    statutory framework established by Congress and a
    regulatory framework established by the
    Department of Education.
  • Vendors and contractors represent over 80 of
    FSAs annual budget.

Acquisition Risk Management
  • Acquisition Risk Management
  • A method of indentifying and mitigating the risks
    associated in acquiring assets and outsourcing of
    key processes. It addresses the End-to-End Key
    Risk Points of the acquisition process. It is
    fundamentally connected to FSAs ability to
  • Develop comprehensive business case analyses
  • Deliver on project management plans
  • Facilitate contract solicitations and awards
  • Understand assets and labor interdependencies
  • Manage vendor relationships
  • Acquisition Risk Management Framework
  • An organized and disciplined approach to
    implement Acquisition Risk Management at FSA. It
    is the first ever initiative to look at the
    acquisition process in FSA. It is based on a
    three prong approach
  • Risk Governance management practices
  • Risk Evaluation risk identification and
  • Risk Response risk mitigation

  • FSAs business model changed in 2010 with
    transition to 100 Direct Lending.
  • FSAs strategic business drivers led to the
    elevation and expansion of FSAs Risk Management
    Office. It also formalized the RMC
  • RMO communicates risks to the RMC through the
    Significant Risk Diagnostic Summary which is
    supported by the Significant Operational Risk
    Issues Dashboard.
  • RMO tracks the following types of risk
    Operational, Student Aid Administration,
    Portfolio Analytics and Forecasting,
    Reputational, and Marketing.
  • RMO is made up of four groups
  • Internal Review
  • Risk Analysis and Reporting
  • Portfolio Analytics
  • Acquisition Risk Management

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