A r c h i v e d  I n f o r m a t i o n

Speeches and Testimony

DEPARTMENT OF EDUCATION

Statement by
Marshall S. Smith
Acting Deputy Secretary

Before the
Subcommittee on Oversight and Investigations
of the
House Committee on Education and the Workforce

September 17, 1998

Mr. Chairman and Members of the Committee:

Thank you for this opportunity to discuss the Department of Education's efforts to address the Year 2000 problem. I want to begin by emphasizing that we take very seriously the Year 2000 problem and the disruption it could create for the Department, for our many partners, and more importantly, for the millions of students throughout our education system. Achieving Year 2000 compliance is a big challenge for the Department, but we have put in place a comprehensive and very conservative plan to meet this challenge. I am confident that we will get the job done.

The Department's plan is closely monitored by a high-level Year 2000 Steering Committee, that I chair, and that includes the Chief Financial and Chief Information Officer, a representative from the Inspector General's office, the Year 2000 Project Director, the Acting Deputy Assistant Secretary for Student Financial Assistance, and other key managers. We also have established a Department-wide Year 2000 work group that brings together Principal Office Coordinators and is supported by the outside management consulting firm Booz-Allen & Hamilton. In addition, we regularly seek the advice of the Department's Inspector General on our Year 2000 strategy, particularly in the area of ensuring a sufficiently independent validation and verification process.

Of our 14 mission-critical systems, 11 are involved in the administration of the student financial assistance and student loan programs. The other three are our financial management system, the Impact Aid payment system, and the Department's intranet and e-mail operations. The financial aid systems fully reflect the size and complexity of the Federal student aid enterprise, which involves 6,000 postsecondary institutions, 4,800 lenders, 36 guaranty agencies, and State higher education agencies to deliver $46 billion each year in financial assistance to 8.5 million postsecondary students. We operate each of these systems through contracts with major companies in the electronic data processing field, such as Electronic Data Systems Incorporated, Computer Data Systems Incorporated, and Raytheon. With such a large number of players and so much at stake for millions of students and their families, this is clearly a high-risk area. We are taking great care to prevent any disruption to these essential systems and the programs they support.

SOLID PROGRESS

We are well aware of the poor grade the Department's Year 2000 efforts have received from Congressman Horn's Subcommittee, but we believe the Subcommittee's grading system does not reflect the Department's significant progress over the past year. We have rigorously implemented the five-phase strategy recommended by the General Accounting Office -- awareness, assessment, renovation, validation, and implementation.

This past quarter we fully implemented four of our 14 mission-critical systems. By the end of this month -- as shown on our status chart -- a fifth system will be implemented and we will have completed code renovation for all but two of our systems. With six months to go before the March 1999 OMB deadline, I am confident that we are on course for full compliance in all of our mission-critical systems.

Renovation of the two remaining systems -- the Pell Recipients Financial Management System and the Department's internal local area network -- also will be largely completed by the end of this September, with the exception of a single subsystem in each. I have spoken personally to the CEO of the company renovating the Pell system. He is committed to completing the renovation by early December and to validating and implementing the system by the end of 1998. I will be monitoring progress weekly to hold him to that commitment.

As for the Department's local area network, I made a business decision in the spring to replace and upgrade most components rather than fix old components. This decision added four months of work but will dramatically simplify and strengthen our overall system. The system will be fully Year 2000 compliant when a new mail messenger subsystem completes validation and implementation in January, 1999.

We expect to complete validation and implementation for 13 of the 14 mission-critical systems by January 1999, ahead of the March 1999 OMB milestone and allowing nearly a full year to ensure that all renovated systems are running smoothly prior to January 1, 2000. The last critical system to be completed will be the Federal Family Education Loan (FFEL) System. The Department has been reporting since February 1998 that full renovation of this system, including unit testing, would be completed by the end of September 1998. I am pleased to report that we are still on schedule, that all planned code renovations have been made, and unit testing of the new code has begun. The bulk of this large legacy system supports the Department's collection of defaulted student loans. Smaller subsystems make monthly payments to guaranty agencies and lenders. Renovation work has required changes to 93,000 lines of code.

We have made good progress on ensuring Year 2000 compliance for our many non-critical systems. At the present time, we have fully implemented the Year 2000-compliant versions of 128 of our 167 non-critical systems, and this number will rise to 162 of 167 by the end of this month. Of the remaining five systems, two involve minor systems that will be replaced or retired by the end of the year and three are managed by other agencies (phone systems and buildings by the General Services Administration (GSA) and payroll systems by the Department of the Interior). The Department is tracking progress at GSA and Interior.

The Department has limited dependence on embedded technology, principally in the form of chips in its personal computers and other office equipment. None of this equipment is critical to our business processes, but we have nevertheless performed a detailed inventory that includes, for example, personal computers, telephones, and fax machines. We discovered that our telephones (the equipment on our desks, not the system) are Year 2000 compliant, but that many of our personal computers are not. We are replacing about half of our PCs, and that job will be done by the end of the month. We are also replacing a few other small components, such as special door locks in a few offices.

A THOROUGH VALIDATION PROCESS

From the beginning, I have been committed to extensive validation testing of all systems, even those originally certified compliant. This process extends the schedule but reduces the risk of failure. For example, our validation strategy led to the discovery that four mission-critical systems that had originally been certified compliant in fact contained errors that would have stopped production on January 1, 2000. We have moved quickly to renovate and re-validate these four systems, but the experience vindicates a validation process that involves several layers of testing.

First, we require the contractors who perform the renovation work to certify in writing that the renovated systems are Year 2000 compliant. Second, the Department has hired Intermetrics and Booz-Allen & Hamilton to perform independent verification and validation (IV&V) for all systems, even those built to be compliant. Third, the Inspector General is providing oversight of the IV&V process, and the General Accounting Office (GAO) also is reviewing the two IV&V contractors. Finally, we will revalidate systems that require annual functional changes after such changes are made. I should add here that we have taken great pains to minimize these annual functional changes while we and our partners work to ensure Year 2000 compliance.

Testing separate systems, however, is really just the first step toward compliance. One of our greatest challenges is determining whether the many systems that we rely on in our increasingly interconnected, networked world will continue to work together after January 1, 2000. For this reason, once we know that our individual systems are Year 2000 compliant, we follow up with testing across systems. We also are negotiating test plans with our various Federal partners who provide matching data for student aid applicants. For example, next week we will begin testing Year 2000-compliant data formats with the Social Security Administration, which is now ready to change data formats to the full four-digit year. We will conduct Year 2000 testing with the Immigration and Naturalization Service, the Internal Revenue Service, the Department of Veterans Affairs, and the Department of Justice in late December and early January.

In addition, we will make every effort to ensure that our thousands of partners in the student aid community -- postsecondary institutions, lenders, guaranty agencies, and State higher education agencies -- are prepared for Year 2000. Fortunately, most of these partners use financial aid software provided by the Department -- software that is designed to be Year 2000 compliant and is undergoing final validation -- while others use third-party servicers which are accustomed to working closely with the Department. There are about 140 large institutions, however, that use their own mainframe-based systems to process student financial aid information. We will be working closely with these institutions to make sure their systems can talk to ours after January 1, 2000. We also are holding discussions with guaranty agencies about Year 2000 testing of the National Student Loan Data System (NSLDS), which tracks individual loans, screens student aid applicants, and provides student loan default data. These discussions are important because the quality of data in NSLDS is the joint responsibility of the Department and its partners in the student aid community.

Our plans for the next year build on our inventory of data exchanges, which include 16 categories involving external partners. In early 1999, the Department will conduct inter-system testing of mission critical business processes with external partners. Between April and September 1999, the Department will make available additional testing opportunities for external partners as they complete work on their own system renovations.

One final testing issue that I want to address is related to concerns raised by GAO and Congressional staff about the impact of system upgrades on Year 2000 compliance. It is likely that some systems will require changes in the coming year, both to improve their functionality and to accommodate changes in the laws and regulations governing our programs. These changes will include thorough Year 2000 compliance testing and validation before they become operational. The prior, compliant version of each system will continue to be available in the event an upgrade does not perform satisfactorily in the Year 2000 environment.

CONTINGENCY PLANNING

The Department is developing contingency plans for all systems as a precaution against system failures that may occur despite our best efforts. Preliminary plans for individual systems are in place, and we recently launched a major effort in the student aid area -- which accounts for 11 of the 14 mission-critical systems -- to develop final plans that take into account how the student aid systems work together to support business processes.

This project will involve extensive consultation and coordination with our partners in the student aid community. We have created seven Department-wide Student Aid Contingency Planning Teams headed by managers of the student aid programs, who will be supported by an experienced consulting contractor. These seven teams are focused on the core business processes of the Federal student aid programs, and will develop alternative methods of delivering postsecondary student aid in the event of a system failure. We expect that these teams will closely follow the Year 2000 Business Continuity Planning guidance developed by the General Accounting Office. Our overall goal is to have a final contingency plan in place for every critical and noncritical system by March 1999.

REACHING OUT TO OUR PARTNERS AND CUSTOMERS

The Department has worked hard to raise awareness of Year 2000 issues among its many partners -- including 6,000 postsecondary institutions and 4,800 lenders that provide student loans, 15,000 local educational agencies, and State education agencies. This effort has included joint letters with the National School Boards Association, the Chief State School Officers, the State Higher Education Executive Officers, and others. The Department has distributed over 30,000 copies of a brochure on the Year 2000 problem, established a Year 2000 web site (that receives 6,000 hits a month), and opened Year 2000 mailboxes to answer questions.

We established and sent out Year 2000 compliant data standards and technical specifications to all postsecondary institutions in November 1997. We also plan to issue a strong assurance by January 1999 that the student financial assistance software we provide to all postsecondary institutions is Year 2000 compliant. In addition, Department training sessions for student financial aid professionals -- that will reach up to 6,000 participants -- now include a Year 2000 module. Department officials also are raising Year 2000 compliance issues at regional and national conferences of the National Association of Student Financial Aid Administrators, that includes representatives from about 3,300 postsecondary institutions.

As part of the President's Council on Year 2000 Conversion, we have joined with a number of other Federal agencies to coordinate outreach to key sectors of the Nation. The Department is chairing a work group of Federal agencies that are targeting the education sector. We also are involved in two other White House work groups: one focused on Year 2000 preparations in the financial sector, and another looking at ways to meet the demand for skilled professionals to work on the Year 2000 problem.

Despite these efforts, our own surveys show that many of our partners have a long way to go. Over the next year, we will continue to increase efforts to raise awareness, provide guidance, and develop alternative methods for maintaining services for those institutions and organizations that fail to achieve Year 2000 compliance in a timely fashion.

CONCLUSION

Much work remains, but I believe the Department is on track. We are executing a comprehensive plan for ensuring that our systems are Year 2000 compliant within the milestones established by OMB, we are developing contingency plans on the outside chance that something goes wrong despite our best efforts, and we are working to make sure our partners and customers are as prepared as we are for the arrival of the next century.

Thank you and I will be happy to answer any questions you may have.

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