archived information

I fervently believe that every child can learn.

---Secretary Rod Paige

Our Mission

![](media/image2.png){width="2.5901574803149607in"
height="2.7700787401574805in"}"Mighty oaks from tiny acorns grow," and
the seal of the Department of Education reflects this belief. We at the
Department are committed to the millions of children, youth, and adults
who depend on education to fulfill their goals. Achieving these goals is
hard work. Becoming a police officer, a teacher, an economist, a
nurse---indeed, any profession requiring years of disciplined
study---means more than a student wanting to be someone special when he
or she grows up. It means a challenging curriculum taught by dedicated
instructors. It means encouragement and assistance when subjects become
difficult. It means having money available to pay for advanced studies.

Education is the bedrock of individual aspiration and achievement; it is
also the bedrock of our economy and our nation's strength. We rely on
education to train our first responders, our health care professionals,
our scientists and engineers---all our citizens. Our democracy depends
on an educated electorate and skilled workers. We at the Department of
Education play an important supporting role by helping America's schools
to strive for greater success.

Our Customers: Students, Parents, Schools, and Postsecondary
Institutions

When the No Child Left Behind Act took effect on January 8, 2002, the
federal government intensified its commitment to more than 50 million
students of America's elementary and secondary schools. The Department
of Education has invested significant resources to further the academic
improvement of America's children between preschool and the
12th^-^grade. In fiscal year (FY) 2004, we channeled \$34 billion in
support of more than 92,000 public schools across the nation.

American student achievement at the elementary and secondary level has,
with few exceptions, shown little improvement since 1970 despite federal
assistance that has supplemented increasing state and local education
revenues. A single year**---**or even three years**---**of No Child Left
Behind's commitment to standards and accountability will not reverse a
generation's lack of academic progress.

But there are signs of improvement throughout American schools as
educators seek to realize each student's potential to meet high academic
standards. A recent three-year trend analysis of student achievement in
the 23 states with comparable reading scores and the 24 states with
comparable math scores found reading achievement up in 65 percent of
those states (15) and math achievement up in 96 percent (23). Reading
scores declined in 5 states (22 percent); math scores declined in 1
(4 percent). More results from this study[^1] are shown in the following
table.

  ----------------------------------- -----------------------------------
  **Results for States That Had at    
  Least Three Years' Data             
  Disaggregated by Race, Ethnicity,   
  and Family Income**                 

  **In Reading**                      **In Mathematics**

  The African American-white gap      The African American-white gap
  narrowed in 16 states and grew      narrowed in 17 states, grew wider
  wider in 3.                         in 2, and remained the same in 1.

  The Latino-white gap narrowed in 14 The Latino-white gap narrowed in 16
  states, grew wider in 3, and        states, grew wider in 3, and
  remained the same in 2.             remained the same in 1.

  The Native American-white gap       The Native American-white gap
  narrowed in 13 states, grew wider   narrowed in 14 states, grew wider
  in 2, and remained the same in 2    in 2, and remained the same in 2.

  The gap between poor and non-poor   The gap between poor and non-poor
  students narrowed in 9 states and   students narrowed in all 10 states
  grew wider in 1.\*                  examined.\*
  ----------------------------------- -----------------------------------

\*Only 10 states provided data for both poor and non-poor students.

Scores on the most recent National Assessment of Educational Progress in
school year (SY) 2002--03 showed significant increases nationally in
mathematics achievement in the fourth and eighth grades that were
replicated among African Americans and Hispanics (both of whom reduced
gaps with white students), and economically disadvantaged students (who
reduced gaps with those from higher-income families). Also, preliminary
student performance data and school accountability indicators on
statewide academic assessments brought encouraging news during
SY 2003--04. Compared to a year ago, the percentage of schools making
adequate yearly progress toward student proficiency has increased
significantly in many states. Increases in the number of schools meeting
state adequate yearly progress targets are partly the result of
increased flexibility allowed to states in defining adequate yearly
progress and partly the result of increases in the number of students
from all subgroups meeting state proficiency standards on state
assessments.

Although federal funds constitute less than 10 percent of all elementary
and secondary school funding, these funds are being directed toward
classroom activities that help all students learn important
fundamentals:

-   Funding increases for Title I grants to high-poverty schools and
    Reading First grants for increasing the focus on beginning readers
    helped disadvantaged children to concentrate on classroom essentials
    and improve literacy skills, from which all other knowledge springs.

-   Similar targeted funding increases for the Individuals with
    Disabilities Education Act extended comparable opportunities to
    students overcoming serious obstacles to living, working, and
    learning.

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-   Federal assistance for teacher professional development helped
    states push toward the goal of having highly qualified teachers in
    core subjects at every public elementary and secondary school by
    2006.

Through these concentrated investments, and guided by the principles of
accountability and research-based instruction, the Department's efforts
help to ensure a quality education for all American children.

We also are committed to continually enriching America's renowned
postsecondary education systems and to lowering barriers to access for
those facing economic obstacles. As with the earlier instructional
years, the Department of Education supplements existing higher education
spending with concentrated funding that improves institutional quality
and opens the postsecondary door to students from disadvantaged
backgrounds. We also play a primary role in financing the education of
millions of students each year by making available student loans at
lower-than-market interest rates and by providing increased funds for
need-based Pell grants. Recent data on graduation rates from
postsecondary degree-granting institutions are showing promising results
for students from traditionally underrepresented subgroups, as African
American and Hispanic students have reduced the graduation gap with
white students since 2000. Although many factors contribute to this
excellent news, the provision of need-based aid by the Department may
play a significant role.

At a time of constrained federal discretionary spending, achieving the
goals of academic excellence and expanded access to quality education
requires that every dollar be spent wisely. As an agency that
supplements far larger sums of state and local money, the Department of
Education faces a further challenge of targeting funds toward their best
use in support of ongoing local academic improvement efforts. To serve
our customers and America's future, we strive to meet this challenge
every day.

Organization and History

With the smallest workforce of the 15 cabinet-level departments (4,400
employees) managing the third-highest annual appropriation of
discretionary funds, we at the Department of Education make a dollar go
a long way. In addition to our appropriations, which are largely used to
provide discretionary and formula grants to educational entities
throughout the nation, our student loan portfolio is exceeded in total
loan volume, education-related or otherwise, by only two American banks.

The Department organization chart is aligned with our *2002--2007
Strategic Plan,* and our functions are neatly divided between program
policy and internal management concerns. The Office of the Deputy
Secretary oversees the Department's principal offices that administer
the policies, regulations, and guidance regarding the numerous federal
education laws. The staff of these offices assist states, school
districts, colleges, students, parents, and the general public in
increasing the awareness and availability of optimal educational
opportunities throughout the United States. The Office of the Under
Secretary directs the internal management of the Department, ensuring
that funds are responsibly accounted for and that program performance is
measured and improved effectively.

Many of our major activities spring from laws first enacted before the
Department was created in 1980. The Elementary and Secondary Education
Act, the Higher Education Act, the Individuals with Disabilities
Education Act, and the Pell Grant Program emerged between 1965 and 1975,
giving the federal government a significant role in education policy,
especially in comparison to its original function of keeping education
statistics in a smaller Office of Education 137 years ago.

Today, the federal role in education is a subject of intense debate, and
some Americans seek a smaller federal role in education matters. The
Department is duly attentive to this concern. We do not supersede the
authority of states and school districts, which spend over \$450 billion
annually on elementary and secondary education to operate schools,
employ teachers and administrators, and establish challenging content
and achievement standards. Our role is to support state and local
efforts with resources that target students in need of economic and
academic assistance, with sponsored research that provides teachers with
effective instructional strategies, and with leadership that encourages
state and local leaders to improve education opportunities for all. We
do more with less; our staffing level is more than 40 percent below the
level at the Department's creation, although program funding has

![](media/image4.wmf)

increased in inflation-adjusted terms by 96 percent. We also use our
resources wisely, with approximately two percent of Department
appropriations funding administrative overhead. In this manner, the task
of making sure that no child is left behind benefits from a targeted and
coordinated federal presence.

Civil Rights Enforcement

In 2004, President Bush delivered remarks honoring the anniversaries of
two watershed events in America's longstanding efforts to bring about
equal educational opportunity. In a speech commemorating the 50th
anniversary of *Brown v. Board of Education*, the landmark Supreme Court
decision that declared separate but equal schools to be
unconstitutional, the President stated, "...while our schools are no
longer segregated by law, they are still not equal in opportunity and
excellence."[^2] On the 40th anniversary of the passage of the Civil
Rights Act of 1964, the landmark statute that prohibited racial
restrictions in the public arena, the President observed, "the evil of
bigotry is not finally defeated. Yet the laws of this nation...are on
the side of equality."[^3]

The Department is responsible for enforcing five federal civil rights
laws prohibiting discrimination by recipients of federal financial
assistance on the basis of race, color, national origin (Title VI of the
Civil Rights Act of 1964), sex (Title IX of the Education Amendments of
1972), disability (Section 504 of the Rehabilitation Act of 1973 and
Title II of the Americans with Disabilities Act of 1990), and age (Age
Discrimination Act of 1975). In addition, we enforce the Boy Scouts of
America Equal Access Act, prohibiting discrimination against any group
officially affiliated with the Boy Scouts of America or any youth group
listed in Title 36 of the United States Code as a patriotic society.
These laws protect more than 54 million students[^4] attending
elementary and secondary schools and more than 16 million students[^5]
attending colleges and universities. The Department's Office for Civil
Rights (OCR) is a law enforcement agency established to support these
civil rights statutes.

In FY 2004, the Department received and resolved nearly 5,000 complaints
of discrimination, thereby positively affecting the lives of the
nation's students. For example, in FY 2004 the Department received a
complaint alleging that the principal of a junior high school was
placing black and white students in segregated classrooms. We initiated
an investigation and determined that classes were segregated by race.
During the investigative process, we learned that the new district
superintendent had also conducted an investigation and determined that
no educational justification existed for the segregated classrooms. The
district entered into a voluntary agreement with the Department to
develop and implement a race-neutral method for assigning students to
classrooms.

![](media/image5.wmf)

Besides investigating complaints, the Department initiated more than 40
compliance reviews on issues including the misidentification of
minorities in special education, the misidentification of English
language learners in special education, and access for physically
disabled students to postsecondary institutions. We also continued 26
compliance reviews of state departments of education to ensure that
Title IX coordinators were designated and trained and that Title IX
nondiscrimination policy and other information were published in
accordance with regulations.

In addition to conducting complaint investigations and compliance
reviews, we continued our nationwide technical assistance initiative to
help students with disabilities make the transition from high school to
college, giving presentations on the subject at conferences and hosting
interactive group discussions for colleges, parents, students, and high
school guidance counselors. In response to Executive Order 13166, which
mandates improved access to federal programs and activities for persons
with limited English proficiency, the Department contracted for
telephonic language assistance services so that those customers can
readily communicate with OCR staff. We also translated several
pamphlets, including our most requested publication, *How to File a
Discrimination Complaint with the Office for Civil Rights*, into Hindi,
Korean, Hmong, Arabic, Vietnamese, Farsi, Chinese, Punjabi, and Urdu.
These publications will soon enrich our electronic civil rights reading
room, which already contains Spanish-language civil rights publications,
including a complaint form written in Spanish.[^6]

The Department's *2002--2007 Strategic Plan*[^7] built upon the
foundation of the No Child Left Behind Act to chart a course for
fundamental improvement in American education and accountability in
managing our own affairs. The six goals of our strategic plan
encapsulate the major tasks that we must accomplish to fulfill our
mission. Every day, we strive to accomplish the following:

-   Create a culture of achievement.

-   Improve student achievement.

-   Develop safe schools and strong character.

-   Transform education into an evidence-based field.

-   Enhance the quality of and access to postsecondary and adult
    education.

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-   Establish management excellence.

Goal Overviews

**Goal 1. Create a Culture of Achievement.** When the Department
embarked on a five-year plan for strengthening schools and accelerating
the pace of student achievement, we identified *creating a culture of
achievement* as the first strategic goal. The characteristics we have
defined for this culture are *accountability for results* measured at
the Department level by program performance measures and at the state
level by state accountability plans and student assessments;
*flexibility and local control* supplied by the No Child Left Behind
provisions that allow states to target federal funds where they are most
needed; *expanded parental options* offered by charter schools, school
transfers, and supplemental services; and *doing what works* by knowing
the results of scientific research in education interventions and using
those interventions in classrooms.

Key results for Goal 1 include the following:

-   Two years ahead of schedule, 23 percent[^8] of states had
    accountability systems in place that included standards-based
    assessments in reading/language arts and mathematics in each of
    grades three through eight and once at the high school level.

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-   The number of state-approved providers offering supplemental
    educational services increased from 1,451 reported by 44 states and
    jurisdictions in October 2003 to 2,535 by the end of September 2004,
    with 51 of 52 states and jurisdictions reporting.

**Goal 2. Improve Student Achievement.** The No Child Left Behind Act of
2001 introduced the essential road map for elementary and secondary
education reform: funds to states for establishing research-based
kindergarten through third-grade reading programs, increased emphasis on
mathematics and science instruction, better performance by high school
students, and a highly qualified teacher in every classroom. To reach
the goal of improved student achievement, the Department worked with our
partners: states, districts, and local schools. We helped states
interpret and meet the requirements of the law by issuing regulations
and guidance. We prepared grant application packages for use by
applicants, funded program activities, and required accountability for
program performance. The Department's practical work is a catalyst for
improving state and district policy-making and for increasing academic
achievement for all students.

Key results for Goal 2 include the following:

-   All states that assessed reading in third grade met their targets
    for achievement of students in the aggregate.

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-   High school students, including students in the aggregate, African
    American students, and Hispanic students, participated in advanced
    placement tests at a higher percentage rate than they did in the
    previous year.

**Goal 3. Develop Safe Schools and Strong Character.** A safe and
orderly learning environment is essential to students' social and
academic development. In underscoring the Department's commitment to
safe and drug-free schools, Secretary Paige stated that "we must ensure
that all students learn about citizenship and character in schools that
are safe and free of alcohol and drugs if we are to meet the lofty goals
of the No Child Left Behind Act." As today's students develop into
tomorrow's citizens, their academic accomplishments, character
development, and civic awareness will have an immense impact on the
nation's economic and social prosperity.

To develop and maintain safe schools, the Department works with grantees
to implement comprehensive programs for reducing and preventing
substance abuse, improving crisis planning and response, and providing
character education. In FY 2004, the Department worked with state and
local educational, law enforcement, and public health agencies to reduce
and prevent violence and substance abuse. To support students' social
and personal development, our character and citizenship education
programs implemented strategies to imbue students with democratic
societal values while creating a solid foundation for a healthy school
climate.

A key result for Goal 3 is the following:

-   Youth victimization and criminal involvement rates for 2003, the
    most recent data available, show a reduction from 2002 rates.

**Goal 4. Transform Education into an Evidence-Based Field.**
Transforming education into an evidence-based field requires high
standards for evaluating education research, which lead to a better
understanding of what works in education. In FY 2004, the Department
demonstrated how we can use rigorous studies to inform the work of
decision-makers at all levels of education. Education improvement goes
hand in hand with valid and reliable evidence of effectiveness. The
Department's Institute of Education Sciences has furthered its research
oversight role to provide educators and decision-makers with the tools
necessary to obtain and understand research in the field.

This year, the Department strengthened the quality of the research and
projects that we fund and conduct. The National Center for Education
Statistics completed reports of national significance, while constantly
improving its reporting and methodological techniques. The National
Institute on Disability and Rehabilitation Research made contributions
to those with disabilities through its support of new technology.

Key results for Goal 4 include the following:

-   Department education research projects met high methodological
    standards in FY 2004. Approximately 90 percent of projects that
    addressed causal questions used rigorous research methods employing
    randomized experimental design.

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-   The Department's What Works Clearinghouse released its first study
    reports; they addressed peer-assisted learning and middle school
    mathematics curricula.

**Goal 5. Enhance the Quality of and Access to Postsecondary and Adult
Education.** Just as elementary and secondary education are enhanced via
No Child Left Behind, postsecondary and adult education benefit from the
Department's efforts to improve educational excellence throughout
America. Pell Grants and federal student loans help millions of
Americans pursue postsecondary degrees and certificates each year.
Approximately \$1 billion in federal TRIO and GEAR UP grant program
funds help underprivileged middle and high school students prepare for
postsecondary education. Funding is targeted to higher education
institutions with historic ties to underserved minority populations so
that they can better provide opportunities for higher education.
Vocational rehabilitation agencies assist individuals with disabilities
to improve employment skills and enhance economic independence. Adult
literacy efforts bring hope to many Americans for a more prosperous
future. International programs offer individuals a chance to interact
with and learn from diverse cultures all over the world.

Department programs enable many Americans to access postsecondary and
adult education. Student loan interest rates are the lowest in 35 years,
providing incentives for postsecondary enrollment and less burdensome
repayment. Wise management of our student loan portfolio provides needed
funds quickly and helps achieve historically low cohort default rates.
Enhancing the excellence of postsecondary and adult education and
enabling affordable access to as many people as possible will help
America maintain its competitive advantage in the global economy. In
FY 2004, the Department made significant progress toward attaining these
goals, as well as identifying areas in need of further improvement.

Key results for Goal 5 include the following:

-   Graduation rates from four-year institutions have increased since
    2000 in the aggregate as well as for white, African American, and
    Hispanic students. Gaps in graduation rates between whites and
    African Americans and between whites and Hispanics have narrowed
    slightly during that time. Graduation rates from two-year
    degree-granting institutions have decreased since 2000, but gaps
    between whites and African Americans and between whites and
    Hispanics have narrowed noticeably.

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-   Ninety-four percent of persons that achieve an employment outcome
    after being served by state vocational rehabilitation agencies
    obtain competitive employment.

**Goal 6. Establish Management Excellence.** The most important asset of
a government agency is the public's respect and confidence. To earn
them, an organization must establish a culture of management excellence.
The first step to achieving management excellence is to articulate
clearly the results to be achieved. The Department has established the
management results it seeks in Goal 6 of the *Strategic Plan* and in the
*Blueprint for Management Excellence*. The *Blueprint for Management
Excellence* is a living plan consisting of a series of actions to focus
all of the Department's employees on the most pressing issues affecting
the management of the Department. Both Goal 6 of the *Strategic Plan*
and the *Blueprint for Management Excellence* directly align with the
*President's Management Agenda*.

Goal 6 of the *Strategic Plan*, the *Blueprint for Management
Excellence*, and the *President's Management Agenda* clearly articulate
goals for ensuring the Department has the right people, in the right
place, at the right time, doing the right work. The plans set up a
framework for how information technology investments can improve the
work processes of the Department and the services for our customers and
partners. The plans also focus the Department's efforts on ensuring that
appropriate internal controls and financial systems are in place to
provide managers with accurate and timely financial and performance
information for managing day-to-day operations. The accurate and timely
financial and performance information allows the Department to tie
performance expectations and funding requirements effectively.

Key results for Goal 6 include the following:

-   The Department dramatically improved internal controls and data
    integrity, as reflected in three sequential clean audit opinions and
    the ability to use financial data on a day-to-day basis to help
    inform management and programmatic decisions Department-wide.

-   The Department improved the way we exchange data and interact with
    customers by enhancing the use, management, and security of
    information technology investments.

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-   The Department identified and refined performance measures for our
    programs, using data and analysis to inform funding recommendations,
    and focusing on the results to be expected from the programs.

Strategic Planning and Reporting

These six goals of the *Strategic Plan 2002--2007*[^9] establish
appropriate priorities for the Department of Education in enabling
greater academic achievement in America's classrooms. The preceding
overviews demonstrate a coordinated set of objectives and actions
flowing from the goals that shape our work into a cohesive whole.

The Government Performance and Results Act requires us to establish
meaningful performance standards for activities for the agency as a
whole and for the 158 statutorily authorized programs that we
administer. Whether a program's budget is \$12 billion (such as Title I)
or \$12 million (such as Client Assistance State Grants), we have
established performance measures and targets for most of our programs so
that we can demonstrate accountability to the public.

Our *FY 2004 Annual Plan*[^10] was the fundamental planning document for
the year just passed. It identified specific strategies and action steps
to carry out our goals and objectives, made necessary adjustments to
agencywide performance measures and targets originally established in
our strategic plan, and established and refined program-level measures
and targets in an online supplement.

At the end of FY 2004, this *Performance and Accountability Report*[^11]
shows the extent to which these actions translated into meaningful
results and successful investment of public funds. We also include in
this document the lessons we learned that will refine our policy and
management activities during FY 2005 to enable us to achieve greater
success.

Integration of Performance with Budget and Finance

Focusing on results and accountability with performance monitoring and
financial reporting is a sound practice for increasing the productivity
of cash. One critical gauge of how well taxpayer dollars are being used
is for an agency to link the performance of its programs to subsequent
budget determinations. Not long ago, few federal programs could discern
such a linkage, but the absence of performance metrics at the program
level is now clearly the exception rather than the rule. Furthermore, if
the conventional wisdom that one gets what one measures is proven true,
the increasing use of rigorous performance measurement will help to
bring about the positive results we seek.

The Department constantly seeks to strengthen the linkage between
financial investments and program quality. We do this not only through
the development of program measures, but also through various reporting
mechanisms and effective budget management. This report is one example
of how we provide comprehensive, accurate information to the American
public in a timely manner. The following are some other major activities
related to budget and performance integration.

**Program Assessment Rating Tool.** The President's Office of Management
and Budget (OMB) has systematically assessed the quality of government
programs over the past three years. Through the Program Assessment
Rating Tool (PART), OMB works with federal agencies to judge the
effectiveness of programs with regard to their stated purpose, strategic
planning, internal management, and results and accountability. Although
primarily a diagnostic tool for programs, PART reviews provide critical
information that can be used to establish funding priorities for the
subsequent budget cycle.

By September 2004, 60 Department programs had been evaluated by OMB and
the Department in this manner. Programs receiving ratings lower than
*effective* are required to implement a plan of action to upgrade their
demonstrated level of quality. By 2006, most Department programs will
have undergone a PART evaluation.

This *Performance and Accountability Report* includes detailed
information on the first 18 programs evaluated through PART in
preparation for the Department's FY 2004 budget submission. The
Performance Details section will show how these programs have
implemented changes to improve their effectiveness during FY 2004.

**Crosswalk of Appropriations and Net Cost to Strategic Plan Goals.**
This *Performance and Accountability Report* strengthens the alignment
of financial data and performance priorities by again identifying
appropriations and net costs for the goals of the *Strategic Plan*. Each
Department program is aligned with the same strategic goal as a year
ago, enabling both our appropriations and our estimated net costs to
clearly reflect the discrete priorities of the *Strategic Plan*.

**Integrating Performance Plan into Budget.** During the past year, the
Department incorporated our FY 2005 annual performance plan into our
submission of the Department's budget to OMB. For the FY 2006 budget
cycle, the budget and annual plan are again being formulated
concurrently and are increasingly integrated. Of particular note, many
Department-wide performance measures and targets are consolidated with
existing program-level measures that accurately reflect departmental
objectives for the specified activity.

**Funding Challenges.** The Department's challenges of linking
performance results to the budget are complicated by the fact that we
accomplish our objectives indirectly, with nearly 98 percent of our
funding going out in grants and loans, and further complicated by the
schedule of funding for these programs.

In the Department, only a portion of a given fiscal year's
appropriations are actually available to state, school, organization,
and student recipients during the fiscal year they are appropriated; the
remainder become available at or near the end of the appropriation year
or in the subsequent year and remain available to recipients for varying
lengths of time, as long as 27 months or more. Thus, linking
appropriated funds and program results for a particular fiscal year is
not only complex, but also different for different programs.

For example, large formula programs, such as Title I and IDEA State
Grants, may receive both "forward-funded" and "advance" appropriations.
Forward-funded amounts of FY 2004 funds for these programs were not
available for award until July 2004, nine months after the beginning of
FY 2004. Advance amounts were not available until October 2004 (at the
beginning of FY 2005). Both forward-funded and advance amounts in
FY 2004 are intended for use primarily during SY 2004--05, and these
funds can be carried over for obligation at the state and local levels
through the end of September 2006.

Funds for competitive grant programs are generally available when
appropriations are passed by the Congress. However, the processes
required for conducting the grant competitions often result in awarding
grants near the end of the fiscal year, with funding available to
grantees for additional years.

Thus, the results we see during FY 2004, which are to be measured for
this report, are not solely the results of actions taken with FY 2004
funds, but rather the combination of funds from FY 2002, FY 2003, and
FY 2004. Furthermore, the actual results of education programs are often
not apparent until long after the funds are expended. For example, a
program to nurture middle school students in ways that will increase the
likelihood they go to college has approximately a six-year lag time for
measuring initial results.

Although we cannot isolate program results and link them directly to a
fiscal year's funding, performance during a single program year serves
as a proxy, because most of our programs are ongoing. Therefore, in the
spirit of budget and performance integration, this report shows the
approximate proportion of both funds appropriated for FY 2004 and funds
expended in FY 2004 that support each of the Department's programs and
strategic goals.

Overview

Fiscal operations in FY 2004 achieved marked progress as required by the
Secretary and the President. We continue to execute our annual plans and
our *Blueprint* *for Management Excellence*, which provide the
foundation for our progress toward management excellence.

Goal 6 of the Department's strategic plan commits us to management
excellence, and overall financial performance is improving in concert
with our increased focus on academic performance. As the No Child Left
Behind Act approaches its third anniversary, the Department earned our
third consecutive unqualified independent audit opinion. This indicates
that the taxpayers and other readers of our financial statements can
rely on the information presented and are accurately informed of the
status of the Department's financial position and the stewardship of our
assets.

Solid management controls ensure that an unqualified audit opinion is
sustained and that effective stewardship of assets is maintained. The
Department recognizes the need for accountability, and management
supports the culture change necessary to derive results from all levels.

In addition to effectively maintaining management controls, many of the
processes that previously required herculean efforts are now routine for
fiscal managers, a direct result of strategic system investments. The
Department derives the maximum benefit from this investment by
redeploying resources to create effective financial management tools
that enhance and drive improvements. Some of these fiscal management
tools include improved reconciliation processes, executive management
reports, and other reports necessary to monitor the progress of our
programs.

The Department's fiscal management continues to improve. In the first
quarter of FY 2004, the Department achieved "green" on the *President's
Management Scorecard* for financial management. This achievement is a
direct result of continued improvements in effective systems
utilization, meeting and exceeding quarterly reporting deadlines, and
developing and using new management reports.

Departmental Management

The Department continues to use the *Blueprint for Management
Excellence* to establish priorities for management improvement;
facilitate effective monitoring of Department programs; eliminate
financial management deficiencies; and prevent fraud, waste, and abuse
of taxpayer dollars. These priorities include the following:

-   Improving financial integrity through reporting transparency,
    monitoring, and effective internal controls.

-   Managing information technology to meet internal requirements and
    customer needs.

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-   Improving management of human capital.

Improved management reporting enables managers to be accountable and
supports the concepts of the Government Performance and Results Act
(GPRA) and the principles of the *President's Management Agenda*. Both
GPRA and the *President's Management Agenda* require the Department to
(1) establish a strategic plan with programmatic goals and objectives,
(2) develop appropriate measurement indicators, and (3) measure
performance in achieving those goals.

During FY 2004, we improved our management reporting to include monthly
fiscal reporting for program managers. Improved reporting capabilities
enable the Department to integrate program results with fiscal costs
that assist us to measure program results against performance. Our
financial reporting capabilities have become routine. This enables us to
extend our financial analysis for both program management and fiscal
reporting in less time, thereby utilizing Department resources more
efficiently and effectively.

Lines of Business

The Department managed a budget of \$67 billion in FY 2004, of which
59 percent went toward elementary and secondary programs and grants.
Postsecondary grants and loans accounted for 33 percent. The remaining
eight percent went toward other programs and grants including research,
development, and dissemination, as well as rehabilitation services.

As noted earlier, the Department receives through appropriation
approximately two percent of our total budget for administrative
expenditures. Therefore, management must be diligent in its allocation
and administration of resources. The remaining 98 percent of our
appropriations is spent on three primary lines of business---Grants,
Guaranteed Loans, and Direct Loans.

**Grants.** A significant part of the Department's budget is used to
support ongoing programs that were reauthorized or created by the
implementation of the No Child Left Behind Act. This support is provided
to state and local governments, schools, individuals, and others that
have an interest in educating the American public.

The Department's two largest programs, Title I grants for elementary and
secondary education, and Pell grants for postsecondary financial aid,
each exceeded \$12 billion in awards made to the public for FY 2004.
Special Education Grants to States under the Individuals with
Disabilities Education Act (IDEA), our next largest program, awarded
more than \$11 billion.

**Guaranteed Loans.** The Federal Family Education Loans Program makes
loan capital available to students and their families through more than
3,400 private lenders. Through 36 active state and private nonprofit
Guaranty Agencies, the Department administers the federal loan guarantee
protecting lenders against losses related to borrower default. The
program accounts for about 75 percent of student loan volume. As of the
end of September, the total principal balance of outstanding guaranteed
loans held by lenders was approximately \$245 billion, with the
government's estimated maximum exposure being \$240 billion.

**Direct Loans.** Student Financial Assistance programs assist nearly
9.6 million students and their parents by making higher education more
affordable each year. The Federal Direct Student Loan Program provides
an alternative method for delivering assistance to students of our
nation. The Student Loan Reform Act of 1993 created this program, which
uses Treasury funds to provide loan capital directly to schools. The
schools then disburse loan funds to students. The Direct Loan Program
accounts for approximately 25 percent of the new student loan volume. In
FY 2004, the Department disbursed approximately \$20 billion in direct
loans to eligible borrowers. As of September 30, 2004, the value of the
Department's direct loan portfolio is \$93.7 billion.

Financial Position

The Department's financial statements, which appear on pp. 115--119,
received an unqualified audit opinion issued by the independent
accounting firm of Ernst & Young LLP for the third consecutive year.
Preparing these statements is part of the Department's continuing
efforts to achieve financial management excellence and to provide
accurate and reliable information that is useful for assessing
performance and allocating resources. Department management is
responsible for the integrity and objectivity of the financial
information presented in the financial statements.

The financial statements presented in this report have been prepared
from the accounting records of the Department of Education in conformity
with generally accepted accounting principles (GAAP) in the United
States. GAAP for federal entities are the standards prescribed by the
Federal Accounting Standards Advisory Board (FASAB).

**Balance Sheet.** The Balance Sheet presents, as of a specific point in
time, the economic value of assets and liabilities retained or managed
by the Department. The difference between assets and liabilities
represents the net position of the Department.

The Balance Sheet displayed on p. 115 reflects total assets of \$172.6
billion, a 10 percent increase over FY 2003. This increase is
attributable to the increased funding related to implementation of the
No Child Left Behind Act and the anticipated steady growth of the
Student Financial Assistance programs.

The majority of our liabilities, 80 percent, consist of
intragovernmental liabilities. The Department's intragovernmental
liabilities consist mainly of Treasury debt, which is directly related
to the Department's focus on ensuring that funds are available for any
student desiring a postsecondary education.

Several factors influenced the change in the Department's Net Position
during FY 2004. This includes the timing of the execution of prior year
subsidy re-estimates and the overall management of Department capital
structure. Net Position increased by 12 percent over FY 2003.

**Statement of Net Cost.** The Statement of Net Cost is designed to
present the components of the net cost of the Department. Net cost is
the gross cost incurred less any revenues earned from Department
activities. The Statement of Net Cost is presented to be consistent with
the Department's strategic goals, as directed by the *President's
Management Agenda*. The Department experienced an eight percent increase
in total net costs during FY 2004.

The Enhancement of Postsecondary and Adult Education (Program A), which
tracks with the Department's funding for Strategic Goal 5, experienced a
six percent increase in costs over FY 2003. Programs B and C are
representative of creating a culture of achievement, safe schools, and
the transformation of education, and combined they track with Goals 2
and 3. These programs experienced a 10 percent cost increase in FY 2004.

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height="1.988888888888889in"}

**Statement of Budgetary Resources.** This statement provides
information about the provision of budgetary resources and their status
as of the end of the reporting period. Information in this statement is
consistent with budget execution information and the information
reported in the *Budget of the United States Government.*

The statement displayed on p. 118 shows that the Department had
\$131.8 billion in budgetary resources, \$17.4 billion of which remained
unobligated with \$15.8 billion not available at year-end. The amounts
not available at year-end represent funding that is provided in advance
for activities in future periods. The Department had \$61.7 billion in
Net Outlays for FY 2004.

**Statement of Financing.** This statement demonstrates the relationship
between an entity's proprietary and budgetary accounting information. It
links the net cost of operations (proprietary) with net obligations
(budgetary) by identifying key differences between the two statements.
This statement is structured to identify total resources used during the
fiscal year, and then makes adjustments based on whether the resource
was used to finance the net obligations or net cost.

This statement, displayed on p. 119, identifies \$66.9 billion of
resources used to finance activities, \$402 million of resources not
part of the net cost of operations, and \$2.9 billion of components of
net cost of operations that will not require or generate resources in
the current period.

Future Trends

From a financial management perspective, the Department of Education is
unique among federal government agencies. The Department has a high
number of appropriations, over 200, which we must manage, consolidate,
and for which we must account. We maintain the smallest number of
employees while managing the third largest discretionary budget of
cabinet-level agencies.

A continuation of the current trends in full-time equivalents (FTEs)
will result in a critical reliance on a sound departmental intellectual
capital plan. It will become increasingly important for the Department
to coordinate strategic technology investments with human capital
management.

**Technology Transformation.** Technology improvements will continue to
empower organizations in the future by increasing the availability of a
critical resource: time. Through these improvements, executive
management can spend additional time on policy analysis and
decision-making rather than on the processing and compiling of key data.
This trend at the Department will continue to accelerate at an
increasing rate as many of our investments in systems and e‑government
continue to mature.

Major Department investments currently include a re‑implementation of
the existing financial accounting system and full participation in the
ongoing e‑government initiative. The chart on this page depicts our
vision of the e‑government operational model that highlights electronic
information-sharing capabilities via data networks.

![](media/image8.wmf){width="3.198611111111111in"
height="2.7180555555555554in"}

This model will create public value by optimizing government operations
and providing effective oversight in a most efficient manner through a
unified data network. To ensure success, the strategic technology
investment plan will be coordinated with human resource management and
planning governmentwide.

**Human Capital Transformation.** A results-oriented enterprise requires
that an organization clearly identify and achieve valuable results. The
Department of Education's *Results Agenda* clearly articulates the
expectations for this organization. As a result, Department personnel
have the information available to understand what is expected of them
and for what they will be held accountable.

The Under Secretary has articulated the following five human capital
expectations:

-   Effective and efficient hiring processes.

-   Performance standards that clearly articulate expected results.

-   Performance evaluations that differentiate among performance levels.

-   Pay for performance.

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-   Customized development and succession plans.

The Department is focusing significant resources on a consistent
approach for the development and implementation of a human capital
management plan. The plan integrates human capital management with
competitive sourcing and restructuring requirements. As noted in the
Technology Transformation section, this plan will be coordinated with
other departmental strategic infrastructure investments.

The Department's continued commitment to strategic investments in both
systems and human capital will result in a robust, cost-effective
environment. This, in turn, provides taxpayers with an improved return
on their investment in the Department.

**Economic Transformation.** Two external factors, tuition costs and
interest rates, are expected to have significant impact on the
Department.

First, increasing tuition costs for postsecondary education should
compel a greater number of individuals to seek tuition assistance. This
assistance could be in the form either of loans or grants. To the extent
that postsecondary institutions can control tuition increases, demand
for tuition assistance should slow accordingly.

Second, significant portions of the Department's budget relate to
external economic conditions. Prevailing low interest rates will drive a
surge in the refinancing and consolidation of student loans. If interest
rates remain stable, this trend can be expected to continue, albeit at a
decreasing rate.

As transactional volumes vary, in the future, the utilization of
technology will stabilize the resulting fluctuations in Department
activity. Technology will enable existing Department personnel to more
effectively process changing volume levels.

**Regulatory Transformation.** Activities and processes centering on
governance, risk management, and compliance are converging.
Organizations that want to create positive headlines must excel in all
three areas. These long-term management issues require continued focus
and sustained management commitment to ensure future success. The
Department's future success is highly dependent on our ability to merge
and execute all of these activities and processes into a coherent
strategic operating model.

Focus on the regulatory environment requires the Department to
concentrate on the costs of identifying and controlling compliance risk.
Compliance risk includes systemic, non-systemic and residual risk. It is
defined as the risk of impairment to the organization's operations
model, reputation, and financial condition from failure to fully comply
with laws and regulations, internal controls, and taxpayer expectations.

The Department must take a holistic approach to total risk management.
The value of adopting such an approach far outweighs the costs of
implementation. Senior management must build long-term value by making
investments to comply with relevant regulations, embed compliance within
the organization, manage the costs associated with compliance, and
identify and address regulatory change. Our progressive focus on
compliance will ensure that fewer resources are necessary for
remediation activity.

Management Challenges

The major challenges facing the Department include the following.

**Financial Management.** Two challenges in this area include the
implementation of the Improper Payments Information Act of 2002, and the
re-implementation of the Department's financial accounting system to
Oracle version 11*i*.

With respect to improper payments, the Department has engaged a
contractor to design an erroneous payment and risk management system. A
second contractor is performing recovery audit services on contracts and
purchase orders. These two projects will develop and refine a
comprehensive risk assessment and mitigation strategy.

With respect to the Oracle 11*i* re-implementation, the Department has
developed a four-tiered systems approach. Tiers 1 and 2 of the plan have
been completed, and the entire plan will be completed by October 2006.

**Student Financial Assistance Programs.** The Department has several
challenges related to reducing the risk of fraud and error in the
student aid programs while maintaining appropriate end-user access. To
address these challenges, the Department has undertaken a multiphased
approach.

The Department has begun work to enhance and improve oversight and
program reviews of schools, Guaranty Agencies, lenders, and third-party
contractors. The Department has developed and trained staff, related
technical assistance guidelines, and formed a workgroup to study data
collection issues. In addition, the Department will be enhancing,
improving, and implementing policies and procedures related to
management controls, supervisory review, documentation, and record
retention affecting program review. Planned improvements include
corrective action plans related to Guaranty Agency oversight and an
improved electronic management system.

The Department has developed strategies to reduce improper payments in
the Pell Grant Program. Working jointly with the Treasury Department and
the Office of Management and Budget, the Department has submitted a
legislative proposal to amend the Internal Revenue Code that would
permit income data verification.

**Information Technology.** The challenges that face the Department
relating to information technology include investment management,
security, critical infrastructure protection, and contingency planning.
The Department has made significant strides relating to our information
technology challenges. The Department will certify our mission-critical
general support systems and major applications by December 31, 2004,
with the remaining systems certified by the end of the second quarter of
FY 2005. In addition, we have completed a management study on
mission-essential infrastructure protection that will be used to test
critical infrastructure interdependencies within the Department. The
Department has also initiated several modernization efforts to increase
business efficiency and improve customer service in e‑government
systems.

**Program Performance and Accountability.** The Department has several
challenges involving data reliability, program and contract monitoring,
and program accountability and compliance. As indicated in this report,
the Department addressed this issue in the *Strategic Plan*, and the
Secretary has made accountability a key priority. As an example, the
Department established an Insular Affairs Committee to address
accountability and compliance issues in the Virgin Islands, Puerto Rico,
and the Pacific Outlying Areas.

**Human Capital.** The Department encounters the same challenge that
faces the rest of the federal government: a long-standing lack of a
consistent strategic approach to managing and maintaining an
appropriately skilled workforce. To address this challenge, the
Department has undertaken a comprehensive human capital management
initiative. This initiative includes effective planning for future
needs, recruitment, hiring, and the development of the current
workforce. The plan includes the five human capital expectations stated
in the Human Capital Transformation section on pp. 17--18.

We have implemented a new performance appraisal system and identified
and addressed training gaps and mission-critical leadership positions.
We are aware that we still have much to do and are diligently working to
improve our overall situation.

Improper Payments Information Act of 2002: Narrative Summary\
of Implementation Efforts for FY 2004 and Agency Plans for
FY 2005--FY 2007

The Department has undertaken the following initiatives relating to the
implementation of the Improper Payments Information Act of 2002.

**Student Financial Assistance Programs.** The Department has completed
the following required steps related to these programs:

-   Identified those programs and activities that are susceptible to
    significant erroneous payments.

-   Implemented a plan to reduce improper payments.

-   Reported estimates of the annual amount of improper payments in
    programs and activities that demonstrate continual progress by the
    Department.

The Department, Office of Management and Budget, and the Treasury
Department have developed and submitted to the Congress proposed
legislation to authorize the matching of Title IV Student Financial
Assistance applicant data. Passage of this legislation will enable the
Department to further reduce the risk of improper payments. In FY 2005,
the Department will be assessing ways to improve the measure of the
risks associated with all Title IV programs.

**Title I Programs.** The Department performed a risk assessment of the
Title I Program during FY 2004. This assessment documented that the risk
of improper payments under the current statutory requirements is
minimal. However, one area that the Department is closely monitoring, in
conjunction with the U.S. Department of Agriculture (USDA), is the wide
use by local educational agencies of the number of children who qualify
for free and reduced-price meals to determine an individual school's
Title I eligibility and allocation. The Title I statute authorizes a
local educational agency to use these data, provided under USDA's
National School Lunch Program, for this purpose. In many districts,
these data are the only indicator of poverty available at the individual
school level.

USDA has raised concerns about the reliability of these data, and it is
working with states and localities to improve program integrity, within
the existing statutory and regulatory framework, through enhanced
monitoring and auditing. USDA is also working with the Department and
other federal agencies that have programs that make use of these data to
explore longer-term policy options.

**Remaining Grant Programs.** The Department continues to refine our
methods for assessing the potential risk of improper payments in our
remaining grant programs. The Department performed a preliminary risk
assessment of these programs during FY 2004 using data extracted from
our Grant Administration and Payments System (GAPS) and the last two
semiannual reports by the Office of Inspector General (periods ending
September 30, 2003, and March 31, 2004). This initial assessment
indicates that the potential for improper payments in these programs is
minimal.

**Verification Plan.** The Department realizes that the implementation
of this initial risk assessment process draws on a limited data set, and
we have put in place a vehicle to complete a more detailed risk
assessment of these grant programs. We have established a memorandum of
understanding with the Department of Energy's Oak Ridge National
Laboratory to utilize data-mining techniques on information available
from multiple sources including the Federal Audit Clearinghouse's Single
Audit Database, the Department's GAPS database, and possibly other
sources of grant data. The relevant data from these sources will be run
through an algorithm to assign a relative level of risk to the
Department's grant programs and recipients. This effort is to be
completed by January 2005. Any programs shown to have an unacceptable
level of risk will be targeted for additional sampling and verification
efforts.

**Recovery Auditing Progress.** To effectively address the risk of
improper administrative payments, the Department executed a formal
agreement for recovery auditing work on contract payments. All vendor
payment transactions made from FY 1998 through FY 2003 were reviewed.
Potential recoveries are minimal. FY 2004 payments will be reviewed
during FY 2005. Our purchase and travel card programs remain subject to
monthly data-mining to identify potential misuse or abuse.

The Department plans to develop a manager's internal control training
program that will focus on controls to eliminate improper payments. This
training will focus on the utilization of the risk assessment criteria
to properly assess the risk of improper payments in the Department's
programs.

The Department will record and maintain corrective action plans as
required. We will configure corrective action plans based on the results
of the initiatives outlined above. These plans will include due dates,
process owners, and task completion dates.

In summary, the Department is accelerating efforts to comply with the
Improper Payments Information Act of 2002. We are focused on identifying
and managing the risks of improper payments and mitigating risk in this
area with adequate control activities. The implementation of our current
and anticipated actions ensures that we will maintain an effective
program for reducing improper payments throughout the Department.

The Department of Education is committed to management excellence and
recognizes the importance of strong financial systems and internal
controls to ensure accountability, integrity, and reliability. The
Department has made significant progress and continues to work toward
achieving a culture of accountability. Management, administrative, and
financial system controls have been developed to ensure the following:

-   All programs and operations achieve their intended results
    efficiently and effectively.

-   Resources are used in accordance with the Department's mission.

-   All programs and resources are protected from waste, fraud, and
    mismanagement.

-   Laws and regulations are followed.

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-   Reliable, complete, and timely data are maintained and used for
    decision-making at all levels.

We believe that the rapid implementation of audit recommendations is
essential to improving the efficiency and effectiveness of our programs
and operations and to achieving our integrity and accountability goals.

Federal Managers' Financial Integrity Act

During FY 2004, in accordance with the requirements of the Federal
Managers' Financial Integrity Act (FMFIA) and using the guidelines of
the Department and Office of Management and Budget, we reviewed our
management control system. The objectives of our management control
system are to provide reasonable assurance that the following occur:

-   Our obligations and costs are in compliance with applicable laws.

-   Our assets are safeguarded against waste, loss, unauthorized use, or
    misappropriation.

-   The revenues and expenditures applicable to agency operations are
    properly recorded and accounted for to permit the preparation of
    accounts and reliable financial reports and to maintain
    accountability over assets.

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-   All programs are efficiently and effectively carried out in
    accordance with applicable laws and management policy.

The efficiency of the Department's operations is continually evaluated
using information obtained from reviews conducted by the Government
Accountability Office and the Office of Inspector General (OIG),
specifically requested studies, or observations of daily operations.
These reviews ensure that our systems and controls comply with the
standards established by FMFIA. Managers throughout the Department are
responsible for ensuring that effective controls are implemented in
their areas of responsibility. Individual assurance statements from
assistant secretaries serve as a primary basis for the Department's
assurance that management controls are adequate. The assurance
statements are based upon each principal office's evaluation of progress
made in correcting any previously reported problems; new problems
identified by the OIG, the Government Accountability Office, and other
management reports; and the management environment within each principal
office. Department organizations that have material weaknesses
identified are required to submit plans for correcting those weaknesses.
The plans, combined with the individual assurance statements, provide
the framework for continually monitoring and improving the Department's
management controls.

**FMFIA Section 2, Management Control.** All of the 80 internal control
material weaknesses identified since the inception of FMFIA, have been
corrected and closed. Last year, the Department removed information
technology (IT) security as an FMFIA material weakness.

**FMFIA Section 4, Financial Management Systems.** All of the 95
financial management systems nonconformances that have been identified
prior to FY 2003 have been corrected and closed. The Department did not
declare any new material nonconformances under FMFIA during FY 2003 or
during FY 2004.

**Federal Financial Management Improvement Act.** The Secretary has
determined that the Department is in compliance with the Federal
Financial Management Improvement Act (FFMIA).

Under FFMIA, the Department has continued to take significant actions on
IT security. The 2004 Federal Information Security Management Act
(FISMA) Report issued by the OIG on October 6, 2004, indicates that
additional efforts are necessary to correct remaining reportable
conditions.

The Department has ensured that all major applications and general
support systems have developed security system plans, configuration
management plans, and contingency/disaster recovery plans in accordance
with applicable guidance from the National Institute of Standards and
Technology (NIST), and that those plans are consistent across the
enterprise. The Department has also taken corrective actions and closed
more than 600 weaknesses previously identified and has created a
Web‑based portal that provides greater access to performance data
related to IT corrective actions. We have also completed a Critical
Infrastructure Protection Plan interdependence study that assessed the
viability of our continuity of operations plans. In addition, several of
our principal offices have implemented effective procedures for periodic
test and evaluation of the network level security controls that protect
the Department's major applications and general support systems.

The Department is currently in the process of revalidating the
certification and accreditation (C&A) of our mission-critical systems.
This action is being taken because the 2004 FISMA report issued by the
OIG states that there was a significant deficiency in the C&A process.
While the Department generally concurs with the OIG findings, it does
not concur with the OIG conclusion that significant weaknesses in the
processes supporting the system certification and accreditations
constitute a significant deficiency in the Department's C&A program.

There are marked differences in the evaluation methods used by the
Department and the OIG to determine the adequacy of system certification
and accreditations. Those differences have resulted in the inability of
both parties to reach consensus on C&A report conclusions. Department
management also believes that the guidance used by the OIG in conducting
the FISMA evaluation may overly emphasize system scan "hits" while
underemphasizing the more crucial assessment of context risk and
countermeasures. The Department expects to complete the revalidation of
mission-critical systems by December 31, 2004, and the remaining systems
by March 31, 2005.

Under the *President's Management Agenda*, the Executive Branch
Management Scorecard tracks how well the departments and major agencies
are executing the five governmentwide initiatives and other
program-specific initiatives. The scorecard employs a simple grading
system common today in well-run businesses: green for success, yellow
for mixed results, and red for unsatisfactory.

**Status.** Scores for "status" are based on standards for success
published in the President's FY 2003 budget. The standards for success
were defined by the President's Management Council and discussed with
experts throughout government and academe, including individual fellows
from the National Academy of Public Administration. Under each of these
standards, an agency is green if it meets all of the standards for
success, yellow if it has achieved some but not all of the criteria, and
red if it has one or more serious flaws.

**Progress.** The Office of Management and Budget assesses agency
"progress" on a case-by-case basis against the deliverables and time
lines established for the five initiatives that are agreed upon with
each agency.

The assessments are based on the following criteria: green,
implementation proceeding according to plans agreed upon with the
agencies; yellow, some slippage or other issues requiring adjustment by
the agency in order to achieve the initiative objectives on a timely
basis; and red, initiative is in serious jeopardy and unlikely to
realize objectives without significant management intervention.

**Department of Education Results.** During FY 2004, the Department made
two significant gains in status scores:

-   From red to green in Financial Performance during the first quarter.

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-   From red to yellow in Budget and Performance Integration during the
    third quarter.

Although our progress scores in Competitive Sourcing and E-government
fell during the year, they returned to green by the end of the fiscal
year as a result of our increased attention to these areas.

The scorecard is available at
<http://www.results.gov/agenda/scorecard.html>.

+------+-------------------------------+----------+----+----+----+-----+
| #    |                               |          |    |    |    |     |
|  *Pr |                               |          |    |    |    |     |
| esid |                               |          |    |    |    |     |
| ent' |                               |          |    |    |    |     |
| s Ma |                               |          |    |    |    |     |
| nage |                               |          |    |    |    |     |
| ment |                               |          |    |    |    |     |
|  Age |                               |          |    |    |    |     |
| nda* |                               |          |    |    |    |     |
|  FY  |                               |          |    |    |    |     |
| 2004 |                               |          |    |    |    |     |
|  Sco |                               |          |    |    |    |     |
| reca |                               |          |    |    |    |     |
| rd { |                               |          |    |    |    |     |
| #pre |                               |          |    |    |    |     |
| side |                               |          |    |    |    |     |
| nts- |                               |          |    |    |    |     |
| mana |                               |          |    |    |    |     |
| geme |                               |          |    |    |    |     |
| nt-a |                               |          |    |    |    |     |
| gend |                               |          |    |    |    |     |
| a-fy |                               |          |    |    |    |     |
| -200 |                               |          |    |    |    |     |
| 4-sc |                               |          |    |    |    |     |
| orec |                               |          |    |    |    |     |
| ard  |                               |          |    |    |    |     |
| .unn |                               |          |    |    |    |     |
| umbe |                               |          |    |    |    |     |
| red} |                               |          |    |    |    |     |
+------+-------------------------------+----------+----+----+----+-----+
| #    |                               |          | #  | #  | #  | #   |
|   Ta |                               |          | Q1 | Q2 | Q3 |  Q4 |
| rget |                               |          |  { |  { |  { |  {# |
|  Are |                               |          | #q | #q | #q | q4  |
| a {# |                               |          | 1  | 2  | 3  | .un |
| targ |                               |          | .u | .u | .u | num |
| et-a |                               |          | nn | nn | nn | ber |
| rea  |                               |          | um | um | um | ed} |
| .unn |                               |          | be | be | be |     |
| umbe |                               |          | re | re | re |     |
| red} |                               |          | d} | d} | d} |     |
+------+-------------------------------+----------+----+----+----+-----+
| #    | # Human Capital               | # *Statu | #  | #  | #  | #   |
| Gove |  {#human-capital .unnumbered} | s* {#sta | Y  | Y  | Y  |  Y  |
| rnme |                               | tus .unn | {# | {# | {# | {#y |
| ntwi |                               | umbered} | y  | y- | y- | -3  |
| de I |                               |          | .u | 1  | 2  | .un |
| niti |                               | # *P     | nn | .u | .u | num |
| ativ |                               | rogress* | um | nn | nn | ber |
| es { |                               |  {#progr | be | um | um | ed} |
| #gov |                               | ess .unn | re | be | be |     |
| ernm |                               | umbered} | d} | re | re | #   |
| entw |                               |          |    | d} | d} |  G  |
| ide- |                               |          | #  |    |    | {#g |
| init |                               |          | G  | #  | #  | -3  |
| iati |                               |          | {# | G  | G  | .un |
| ves  |                               |          | g  | {# | {# | num |
| .unn |                               |          | .u | g- | g- | ber |
| umbe |                               |          | nn | 1  | 2  | ed} |
| red} |                               |          | um | .u | .u |     |
|      |                               |          | be | nn | nn |     |
|      |                               |          | re | um | um |     |
|      |                               |          | d} | be | be |     |
|      |                               |          |    | re | re |     |
|      |                               |          |    | d} | d} |     |
+------+-------------------------------+----------+----+----+----+-----+
|      | # Competitive Sourcing {#comp | #        | #  | #  | #  | #   |
|      | etitive-sourcing .unnumbered} | *Status* | Y  | Y  | Y  |  Y  |
|      |                               |  {#statu | {# | {# | {# | {#y |
|      |                               | s-1 .unn | y- | y- | y- | -8  |
|      |                               | umbered} | 4  | 5  | 7  | .un |
|      |                               |          | .u | .u | .u | num |
|      |                               | # *Pro   | nn | nn | nn | ber |
|      |                               | gress* { | um | um | um | ed} |
|      |                               | #progres | be | be | be |     |
|      |                               | s-1 .unn | re | re | re | #   |
|      |                               | umbered} | d} | d} | d} |  G  |
|      |                               |          |    |    |    | {#g |
|      |                               |          | #  | #  | #  | -5  |
|      |                               |          | G  | Y  | R  | .un |
|      |                               |          | {# | {# | {# | num |
|      |                               |          | g- | y- | r  | ber |
|      |                               |          | 4  | 6  | .u | ed} |
|      |                               |          | .u | .u | nn |     |
|      |                               |          | nn | nn | um |     |
|      |                               |          | um | um | be |     |
|      |                               |          | be | be | re |     |
|      |                               |          | re | re | d} |     |
|      |                               |          | d} | d} |    |     |
+------+-------------------------------+----------+----+----+----+-----+
|      | #                             | #        | #  | #  | #  | #   |
|      | Financial Performance {#finan | *Status* | G  | G  |  G | G { |
|      | cial-performance .unnumbered} |  {#statu | {# | {# |  { | #g- |
|      |                               | s-2 .unn | g- | g- | #g | 12  |
|      |                               | umbered} | 6  | 8  | -1 | .un |
|      |                               |          | .u | .u | 0  | num |
|      |                               | # *Pro   | nn | nn | .u | ber |
|      |                               | gress* { | um | um | nn | ed} |
|      |                               | #progres | be | be | um |     |
|      |                               | s-2 .unn | re | re | be | #   |
|      |                               | umbered} | d} | d} | re | G { |
|      |                               |          |    |    | d} | #g- |
|      |                               |          | #  | #  |    | 13  |
|      |                               |          | G  | G  | #  | .un |
|      |                               |          | {# | {# |  G | num |
|      |                               |          | g- | g- |  { | ber |
|      |                               |          | 7  | 9  | #g | ed} |
|      |                               |          | .u | .u | -1 |     |
|      |                               |          | nn | nn | 1  |     |
|      |                               |          | um | um | .u |     |
|      |                               |          | be | be | nn |     |
|      |                               |          | re | re | um |     |
|      |                               |          | d} | d} | be |     |
|      |                               |          |    |    | re |     |
|      |                               |          |    |    | d} |     |
+------+-------------------------------+----------+----+----+----+-----+
|      | # E-governmen                 | #        | #  | #  | #  | #   |
|      | t {#e-government .unnumbered} | *Status* | Y  |  Y |  Y | Y { |
|      |                               |  {#statu | {# |  { |  { | #y- |
|      |                               | s-3 .unn | y- | #y | #y | 13  |
|      |                               | umbered} | 9  | -1 | -1 | .un |
|      |                               |          | .u | 0  | 1  | num |
|      |                               | # *Pro   | nn | .u | .u | ber |
|      |                               | gress* { | um | nn | nn | ed} |
|      |                               | #progres | be | um | um |     |
|      |                               | s-3 .unn | re | be | be | #   |
|      |                               | umbered} | d} | re | re | G { |
|      |                               |          |    | d} | d} | #g- |
|      |                               |          | #  |    |    | 16  |
|      |                               |          |  G | #  | #  | .un |
|      |                               |          |  { |  G |  Y | num |
|      |                               |          | #g |  { |  { | ber |
|      |                               |          | -1 | #g | #y | ed} |
|      |                               |          | 4  | -1 | -1 |     |
|      |                               |          | .u | 5  | 2  |     |
|      |                               |          | nn | .u | .u |     |
|      |                               |          | um | nn | nn |     |
|      |                               |          | be | um | um |     |
|      |                               |          | re | be | be |     |
|      |                               |          | d} | re | re |     |
|      |                               |          |    | d} | d} |     |
+------+-------------------------------+----------+----+----+----+-----+
|      | # Budget-Performance          | #        | #  | #  | #  | #   |
|      |  Integration {#budget-perform | *Status* | R  | R  |  Y | Y { |
|      | ance-integration .unnumbered} |  {#statu | {# | {# |  { | #y- |
|      |                               | s-4 .unn | r- | r- | #y | 15  |
|      |                               | umbered} | 1  | 2  | -1 | .un |
|      |                               |          | .u | .u | 4  | num |
|      |                               | # *Pro   | nn | nn | .u | ber |
|      |                               | gress* { | um | um | nn | ed} |
|      |                               | #progres | be | be | um |     |
|      |                               | s-4 .unn | re | re | be | #   |
|      |                               | umbered} | d} | d} | re | G { |
|      |                               |          |    |    | d} | #g- |
|      |                               |          | #  | #  |    | 20  |
|      |                               |          |  G |  G | #  | .un |
|      |                               |          |  { |  { |  G | num |
|      |                               |          | #g | #g |  { | ber |
|      |                               |          | -1 | -1 | #g | ed} |
|      |                               |          | 7  | 8  | -1 |     |
|      |                               |          | .u | .u | 9  |     |
|      |                               |          | nn | nn | .u |     |
|      |                               |          | um | um | nn |     |
|      |                               |          | be | be | um |     |
|      |                               |          | re | re | be |     |
|      |                               |          | d} | d} | re |     |
|      |                               |          |    |    | d} |     |
+------+-------------------------------+----------+----+----+----+-----+
| # Pr | #                             | #        | #  | #  | #  | #   |
| ogra |  Elimination of Fraud and Err | *Status* |  Y |  Y |  Y | Y { |
| m {# | or in Student Financial Aid P |  {#statu |  { |  { |  { | #y- |
| prog | rograms {#elimination-of-frau | s-5 .unn | #y | #y | #y | 19  |
| ram  | d-and-error-in-student-financ | umbered} | -1 | -1 | -1 | .un |
| .unn | ial-aid-programs .unnumbered} |          | 6  | 7  | 8  | num |
| umbe |                               | # *Pro   | .u | .u | .u | ber |
| red} |                               | gress* { | nn | nn | nn | ed} |
|      |                               | #progres | um | um | um |     |
| # In |                               | s-5 .unn | be | be | be | #   |
| itia |                               | umbered} | re | re | re | G { |
| tive |                               |          | d} | d} | d} | #g- |
| s {# |                               |          |    |    |    | 24  |
| init |                               |          | #  | #  | #  | .un |
| iati |                               |          |  G |  G |  G | num |
| ves  |                               |          |  { |  { |  { | ber |
| .unn |                               |          | #g | #g | #g | ed} |
| umbe |                               |          | -2 | -2 | -2 |     |
| red} |                               |          | 1  | 2  | 3  |     |
|      |                               |          | .u | .u | .u |     |
|      |                               |          | nn | nn | nn |     |
|      |                               |          | um | um | um |     |
|      |                               |          | be | be | be |     |
|      |                               |          | re | re | re |     |
|      |                               |          | d} | d} | d} |     |
+------+-------------------------------+----------+----+----+----+-----+
|      | # F                           | #        | #  | #  | #  | #   |
|      | aith-Based and Community Init | *Status* |  Y |  Y |  Y | Y { |
|      | iative {#faith-based-and-comm |  {#statu |  { |  { |  { | #y- |
|      | unity-initiative .unnumbered} | s-6 .unn | #y | #y | #y | 23  |
|      |                               | umbered} | -2 | -2 | -2 | .un |
|      |                               |          | 0  | 1  | 2  | num |
|      |                               | # *Pro   | .u | .u | .u | ber |
|      |                               | gress* { | nn | nn | nn | ed} |
|      |                               | #progres | um | um | um |     |
|      |                               | s-6 .unn | be | be | be | #   |
|      |                               | umbered} | re | re | re | G { |
|      |                               |          | d} | d} | d} | #g- |
|      |                               |          |    |    |    | 28  |
|      |                               |          | #  | #  | #  | .un |
|      |                               |          |  G |  G |  G | num |
|      |                               |          |  { |  { |  { | ber |
|      |                               |          | #g | #g | #g | ed} |
|      |                               |          | -2 | -2 | -2 |     |
|      |                               |          | 5  | 6  | 7  |     |
|      |                               |          | .u | .u | .u |     |
|      |                               |          | nn | nn | nn |     |
|      |                               |          | um | um | um |     |
|      |                               |          | be | be | be |     |
|      |                               |          | re | re | re |     |
|      |                               |          | d} | d} | d} |     |
+------+-------------------------------+----------+----+----+----+-----+

Status: G = green = meets all standards Progress: G = green =
implementation proceeding according to plan

######## Y = yellow = meets some standards Y = yellow = some slippage in implementing plan or other issues

######### R = red = has one or more serious flaws R = red = unlikely to reach objectives without intervention 

[^1]: Education Trust, *Measured Progress: Achievement Rises and Gaps
    Narrow, But Too Slowly,* October 2004.

[^2]: President George W. Bush, May 17, 2004, at the grand opening of
    the *Brown v. Board of Education* National Historic Site.

[^3]: President George W. Bush, July 1, 2004, at a White House ceremony
    commemorating the 40th anniversary of the Civil Rights Act of 1964.

[^4]: U.S. Department of Education, National Center for Education
    Statistics, *Projections of Education Statistics to 2013* (NCES
    2004--013), table 1, p. 45. Available at
    <http://nces.ed.gov/pubs2004/2004013b.pdf>.

[^5]: Ibid, table 10, p. 57.

[^6]: Available at
    <http://www.ed.gov/about/offices/list/ocr/docs/list-sp.html>.

[^7]: Available at
    <http://www.ed.gov/about/reports/strat/plan2002-07/index.html>.

[^8]: This is a preliminary estimate; the Department has not yet
    reviewed these state systems to determine whether they meet No Child
    Left Behind requirements.

[^9]: Available at
    <http://www.ed.gov/about/reports/strat/plan2002-07/index.html>.

[^10]: Available at [http://www.ed.gov/about/reports/annual/\
    2004plan/index.html](http://www.ed.gov/about/reports/annual/%0B2004plan/index.html).

[^11]: Available at [http://www.ed.gov/about/reports/annual\
    /2004report/index.html](http://www.ed.gov/about/reports/annual%0B/2004report/index.html).