United States General Accounting Office
Testimony
GAO
Before the Subcommittee on Government Management, Information
and Technology, Committee on Government Reform, House of
Representatives
GAO/TOCG0010
Evolution of GAO
Mr. Chairman, Congressman Turner, and Members of the
Subcommittee:
I am pleased to appear before you today to discuss the work of
the General Accounting Office (GAO). We welcome this opportunity to
highlight the important role that GAO plays to support the Congress
for the benefit of the American people.
In my testimony today, I will discuss the many national and
international concerns that confront our nation and the Congress,
the ways in which GAO can support the Congress now and in the
future, and GAO's performance in accomplishing its mission. While
GAO has evolved over the years, its current mission is
straightforward: GAO exists to support the Congress in meeting its
constitutional responsibilities and to help improve the performance
and accountability of the federal government for the benefit of the
American people.
GAO was created in 1921 as a result of the Budget and Accounting
Act, a law designed to improve government financial controls and
management in the aftermath of World War I. Wartime spending had
increased the national debt, escalated costs for many government
purchases, and created substantial disarray in the financial
operations of the War Department and other agencies. The Congress
also recognized a need for better financial information and
controls over costs. As a result, the new law required the
President to prepare an annual budget, and it transferred from the
Department of the Treasury to GAO the government's auditing,
accounting, and claims functions.
During the 1920s and 1930s, GAO focused on preaudit payment work
and whether government spending had been handled legally. The bulk
of GAO's work centered on the auditing of agency vouchers; GAO
clerks checked vouchers and settled the accounts of executive
branch disbursing officers. Departments and agencies sent their
vouchers to GAO, which checked the legality, propriety, and
accuracy of expenditures.
GAO's workload increased in the 1930s as federal money poured
into New Deal recovery and relief efforts to combat the Great
Depression during President Franklin D. Roosevelt's administration.
GAO, which started out with about 1,700 employees, had a workforce
that numbered nearly 5,000 by 1939. Although Washington remained
the center of GAO's activities, the agency's auditors first began
doing fieldwork in the mid1930s. For one early fieldwork
assignment, GAO looked at the operation of government agriculture
programs in Kentucky and several southern states.
With the U.S. entry into World War II, GAO faced enormous
challenges. The agency continued to do the same type of work it had
done before the war but with vastly increased volume. Defense
production soared after 1941 as the nation's factories geared up to
meet the demands of war. Government offices expanded, churning out
mountains of expenditure forms for GAO to examine. GAO reviewed
defense contracts and audited the accounts of Army and Navy
disbursing officers. The war effort created a blizzard of
transportation vouchers for GAO to review as the government used
the nation's rails and roads to carry freight and troops. GAO hired
additional audit clerks and freight examiners, nearly tripling the
size of the agency to nearly 15,000 by 1946. The paperwork was so
intense that GAO faced a backlog of 35 million unaudited vouchers
in 1945 and had to spend several years catching up on work.
Overall, GAO handled a staggering backlog of paperwork as a result
of the war: in 1947, GAO reconciled 490 million checks and audited
92,000 accountable officers' accounts, 5 million transportation
vouchers, 1.5 million contracts, and 260 million postal money
orders.
GAO's wartime experiences spelled the end of the voucherchecking
era. The increase in paperwork showed how difficult it was for a
single agency to keep up with examining every government
disbursement. The war also highlighted a number of accountability
issues. In the 1940s, then Comptroller General Warren repeatedly
pointed to the lack of accountability of government corporations
and problems with contract fraud. Warren applauded the passage in
1945 of the Government Corporation Control Act, which authorized
the auditing of wholly owned government corporations and mixed
ownership corporations. Responding to the requirements of the act,
Warren created a Corporation Audits Division in 1945. He began
hiring accountants to perform annual audits of government
corporations.
With passage of the Budget and Accounting Procedures Act of
1950, GAO as a whole shifted to comprehensive auditing of
government agencies. Instead of concentrating on individual fiscal
transactions, GAO began reviewing financial management and internal
controls at government agencies. Responsibility for checking
vouchers shifted to the various executive agencies, as GAO focused
on prescribing accounting principles, performing audits on agency
sites, and checking financial controls and procedures.
The move to comprehensive auditing represented a major turning
point for GAO. At the same time, GAO returned to its prewar size.
The agency reduced the number of voucher clerks in its employ and
began hiring accountants. Indeed, the modern GAO began to emerge in
the 1950s and 1960s.
GAO responded to its new mission by recruiting and training a
broader array of staff, and working to set standards that
professionalized the workforce. To keep a watchful eye on spending
at home and abroad, GAO formally established a network of field
offices throughout the United States in the early 1950s and opened
a European office in 1952. The scope of GAO's work expanded again
during the 1960s as President Johnson initiated the Great Society's
War on Poverty. The number of federal grantsinaid rose sharply and
the rapid growth in federally assisted programs placed enormous
administrative control burdens on government at all levels.
Let me note at this point that all the Comptrollers General made
substantial contributions to GAO, and I am particularly pleased to
be here with my immediate predecessors, Elmer Staats and Charles
Bowsher- both made enormous contributions to the agency. First came
Comptroller General Staats, who took office in 1966, and was a
driving force behind GAO's emphasis on program evaluation and
making the agency's work more useful to the Congress.
The growth in congressionally based work, combined with the
expansion of government programs, was responsible for a significant
change in the makeup of GAO's employees. GAO's staff, mostly
accountants, began to change to fit these new assignments. In the
1970s, GAO started recruiting social scientists, computer
professionals, and experts in such fields as health care, science,
public policy, and information management. In 1980, most of the
agency's auditors and management analysts were reclassified as
evaluators to reflect GAO's varied work. During Staats' tenure, GAO
relied on new technological tools as well as employees with diverse
academic degrees. In the 1970s and 1980s, the agency made
increasing use of computers in its audit and administrative
operations.
Staats was also a leader in recognizing the importance of
international interaction in the accountability field. He made
major contributions to the development of the International
Organization of Supreme Audit Institutions (INTOSAI), which
includes 179 countries, and he also created an international
fellows program at GAO to provide support, training, and guidance
to a cadre of key individuals from accountability organizations
worldwide. Eightynine countries have participated in the
International Auditor Fellowship Program and 279 individuals have
graduated from the program since 1979. Indeed, 12 former fellows
have since become the
Auditors General in their countries, and many more have served
as Deputies or in other highlevel posts.
Comptroller General Bowsher also made major contributions to GAO
and to the improvement of financial management and government
operations. Bowsher continued the emphasis on personnel
improvement, strengthening the recruitment of people with diverse
professional backgrounds and providing them with improved tools and
work incentives. He expanded GAO's training curriculum and
strengthened the Training Institute.
Bowsher also helped to lead the government's growing emphasis on
management reform and performance and accountability issues. During
his tenure, Bowsher paid close attention to budget issues, warned
about the dangers of the increasing deficit, and worked to improve
federal financial management. In part due to GAO's work and
leadership, the Congress passed a series of laws designed to
improve the management and performance of government,
including:
•
the Chief Financial Officers Act-which created CFOs in
all major agencies;
•
the Government Performance and Results Act-which created
a requirement for measuring and reporting on agencies'
performance;
•
the Paperwork Reduction Act of 1995-which streamlined
government paperwork and reporting requirements;
•
the Government Management Reform Act-which requires the
government to prepare an annual consolidated financial statement
audited by GAO;
•
the Federal Acquisition Streamlining Act-which is helping
to make government acquisition more efficient and effective;
and
•
theSingleAudit Act.
During Bowsher's tenure, GAO first began doing general
management reviews, which looked at broad organizational and
management issues at government agencies. GAO also initiated a
series of highrisk reports, now issued every 2 years, to provide
information on federal activities susceptible to waste, fraud,
abuse, and mismanagement.
When I became Comptroller General in November 1998, I committed
GAO to helping the Congress address issues that will define the
21st century.
GAO's Accomplishments
Today, GAO conducts a wide range of financial and performance
audits and program evaluations and reviews the business and mission
of government. GAO's work covers everything from the challenges of
an aging population and the demands of the information age to
emerging national security threats and the complexities of
globalization. GAO is also committed to management reform-to
helping government agencies become organizations that are
resultsoriented and accountable to the public.
Ultimately, we may find that GAO needs a new name-the words
"general accounting office" do not really capture our more complex
role anymore. It might be more appropriate to consider something
closer to "government accountability office." It more clearly
conveys our role and the expectations of our clients in the
Congress, the press, and the public. It might also help us in our
recruiting efforts in the increasingly competitive marketplace.
GAO's core values of accountability, integrity, and reliability
reflect its dedication to good government and professional
standards. Accountability describes the nature of GAO's work in
helping Congress oversee federal programs and operations to ensure
effective and efficient government for the American people. The
agency's work reflects integrity because it is professional,
objective, factbased, nonpartisan, nonideological, fair and
balanced. GAO strives also for reliability by providing highquality
information that is timely, accurate, useful, clear, and
candid.
GAO relies on a workforce of highly trained professionals who
hold degrees in many academic disciplines, such as accounting, law,
engineering, public and business administration, economics, and the
social and physical sciences. I am extremely proud of GAO's
workforce, of its dedication and excellence, and of its service to
the betterment of government and the country. One of my principal
goals for GAO is that we not only work to improve government, but
that we also work to improve ourselves. I look for GAO to become a
model organization in the federal government and I am convinced
that, because of our employees, we will achieve that goal.
Mr. Chairman, I am also proud of GAO's accomplishments in
supporting the Congress and helping improve the performance and
accountability of government for the benefit of the American
people.
During fiscal year 1999, GAO made substantial contributions to
help the Congress and the executive branch agencies improve
government programs and services. It provided more than $20 billion
in direct financial
Page 5 GAO/TOCG0010
benefits, recommended over 600 actions that have led to
improvements in government operations, and provided 229 testimonies
requested by congressional committees. While many of GAO's
contributions cannot be quantified in dollar terms, those that can
be quantified show that GAO returned over $57 for every $1
appropriated to the agency in fiscal year 1999.
Figure 1: Financial Benefits
GAO succeeds in its mission when its findings and
recommendations lead to improvements wherever federal dollars are
spent. The following examples illustrate some of the financial
benefits that GAO has helped the Congress and the executive branch
achieve:
•
To help the government better realize the value of its
assets, GAO suggested ways the Congress and the Department of
Energy (DOE) could increase the profitability of oil sold from the
federally owned Naval Petroleum Reserve at Elk Hills, California.
GAO testified before the Congress that the government would see a
greater return from the sale of Elk Hills than from retaining
ownership. GAO's suggestions for changes to the sale process were
adopted by DOE, resulting in proceeds of over $1.5 billion above
the original sale price.
•
GAO has helped agencies to achieve greater savings from
more efficient operations. The Congress recently enacted
legislation based in part on GAO's recommendations to strengthen
Medicare's safeguards against fraud and abuse. These improvements
saved the Medicare program approximately $2.2 billion over fiscal
years 1998 and 1999. Similarly, GAO recommendations included in
Medicare program legislation will produce a gradual reduction,
through fiscal year 2001, in the overly generous "adjustment
factor" designed to compensate teaching hospitals for higher
Medicare costs. This legislative change is estimated to produce
$1.5 billion in savings for the program in fiscal years 1999 and
2000.
•
GAO has made recommendations to streamline the tax system
and help support the Congress in its longterm fiscal decisions.
Based on GAO's evaluations, for instance, the Congress changed the
tax laws pertaining to the Earned Income Tax Credit. Specifically,
the government avoided an estimated $1.3 billion in payments for
the 5year period ending in fiscal year 2000 through changes to the
wealth, capital gains, and passive income tests for the Earned
Income Tax Credit eligibility criteria. Similarly, as part of the
Small Business Job Protection Act, the Congress phased out tax
credits to corporations for certain income earned in Puerto Rico
and U.S. possessions. GAO's work on this issue contributed to an
estimated $1.3 billion in financial benefits for fiscal years 1996
through 2000.
•
GAO also helped the Congress and agencies identify and
reduce unnecessary spending. As part of its ongoing work in housing
issues, GAO has provided assistance to improve the accuracy of the
Department of Housing and Urban Development's (HUD) budget and
resource estimates. GAO reported that HUD's method for estimating
funding for its Section 8 housing assistance resulted in requests
that exceeded the agency's needs. The Congress directed HUD to
submit revised estimates, after which HUD's fiscal year 1998 budget
was reduced by about $1.3 billion in light of the streamlined
projections. As a result, the Congress also rescinded $2.4 billion
from HUD's fiscal year 1998 supplemental request. GAO's
recommendations helped HUD avoid additional costs of about $1.1
billion in fiscal year 1999. Based in part on these examples, GAO
audits and recommendations helped the Department save an estimated
$5.3 billion in fiscal years 1998 and 1999.
•
Similarly, as part of its assistance to the Congress in
reviewing the fiscal year 1999 Department of Defense (DOD) budget
request for military personnel, GAO identified areas where the
budget could be reduced. These included excess manpower costs due
to over estimated military personnel levels, unnecessary advance
pay, and funds not needed due to gains from changes in foreign
currency exchange rates. As a result of
Public Health and Safety
GAO's work, the Congress reduced the fiscal year 1999 military
personnel budget for active and reserve forces by about $609
million without compromising overall readiness.
In addition to the financial benefits resulting from GAO's work,
the agency's efforts also contribute to numerous qualitative
improvements in government operations and services. During fiscal
year 1999, GAO contributed to 607 such benefits achieved by the
government, a 13percent increase over fiscal year 1998. Benefits
resulting from GAO's recommendations included better public safety
and consumer protection, more efficient and effective government
operations and services, help in ensuring Year 2000 readiness, and
improvements to computer security.
Figure 2: Improved Government Operations Resulting From GAO
Recommendations
Some examples of GAO's contributions to improved government
operations follow:
• GAO has assisted the Congress and the agencies in efforts to
improve public health. For example, since 1998 GAO has issued a
series of reports on Medicaid highlighting widespread inadequate
health care quality in some of the nation's nursing homes. As part
of its evaluation, GAO made a series of recommendations to the
Health Care Financing Administration (HCFA) for improvements to its
nursing home survey process and for stronger enforcement in
instances when nursing homes repeatedly violate regulations and do
not correct deficiencies. As a result, HCFA developed a
More Efficient Government
set of initiatives designed to improve patient care and
eliminate deficiencies. Based on GAO's work, HCFA now requires
states to investigate serious complaints alleging harm to residents
within 10 days, has proposed an expansion of its enforcement
programs by subjecting homes with repeated serious deficiencies to
immediate sanctions, and has revised the protocols that state
surveyors use to inspect nursing homes to better focus the
reviews.
GAO's reports have also convinced some states to improve their
oversight of nursing homes. In response to GAO's finding that
serious complaints of poor nursing home care frequently are not
investigated for months, Maryland's legislature approved funding
for a 57 percent increase in its surveyor staff, and the state
agency revamped its processes to emphasize a faster review of
serious complaints.
•
GAO has also made significant contributions to improving
criminal justice. For instance, GAO has reported on the prevalence
and costs of identity fraud involving the illegal use of another
person's identifying information (such as name, date of birth, or
Social Security number) to commit financial crimes. Illegal
activities range from the unauthorized use of a credit card to a
comprehensive takeover of financial accounts. Largely in response
to GAO's work, the Congress enacted legislation that criminalized
the theft and misuse of personal identifying information and
provided legal recognition for the victims of fraud.
•
Transportation safety is another important area in which
GAO has helped to improve government operations and the public's
quality of life. In one instance, GAO reported that the Federal
Railroad Administration (FRA) had few regulations involving
passenger car safety for Amtrak or commuter rail operations. As a
result, inspectors provided little oversight of passenger car
safety. GAO recommended that the agency establish appropriate
criteria for the condition of safety control components on
passenger cars. Addressing GAO's recommendation, FRA established
comprehensive structural safety standards for passenger equipment
and created more stringent safety standards for highspeed passenger
rail service.
•
Many of the government's large entitlement programs are
susceptible to fraud, waste, and mismanagement. One example of
GAO's contribution to improving government performance and
preventing fraud and waste is in the Supplemental Security Income
(SSI) program-the nation's largest cash assistance program for the
poor. GAO reported that the program's financial integrity was
ineffective because the program has overpaid
Page 9 GAO/TOCG0010
beneficiaries by more than $3.3 billion. The magnitude of
overpayments, and the Social Security Administration's (SSA)
inability to recover outstanding SSI debt, led to the program's
inclusion on GAO's highrisk list. Based on GAO's work, SSA is
expanding its use of online data to better verify financial
information about recipients and prevent future overpayments. SSA
is also seeking statutory authority for additional tools to recover
current overpayments.
• GAO has played an important role in helping the Congress and
the agencies improve the government's computer security and make
more effective use of technology in the delivery of federal
services. The Congress has been extremely concerned about the
government's ability to prevent intruders from accessing
government's extensive computer and information systems. As a
result, over the past several years, GAO has issued more than 80
reports on data and systems security including hundreds of
recommendations for correcting both individual weaknesses and the
systemic causes of security problems. GAO's work has led to
improvements in many agencies, including the development of
entitywide security management practices. It has also led to
computer security and other information technologyrelated
legislation.
In addition to its reviews of individual agencies, GAO has
developed techniques and practices that can be applied across the
government. This work has made significant contributions to
agencies' abilities to develop and implement sound security
policies. The information security management practices identified
in GAO's executive guides have been incorporated into policy
guidance at many federal agencies. Additionally, GAO's
FederalInformationSystemControlsAuditManualis now used by most
major federal audit entities to evaluate computerrelated
controls.
In discussing GAO's contributions and accomplishments, it is
important that we engage in a select amount of research and
development work to ensure that GAO can meet the institutional
needs of the Congress over the long term. This investment has made
major contributions to the performance, stability, and
accountability of the government and the protection of tax dollars.
As I will discuss later in this testimony, GAO's flexibility to
engage in this important component of our work has been
increasingly constrained by other demands on our resources.
Among the most important work that GAO has done are reviews
related to the Year 2000 (Y2K) computing challenge. GAO's work on
Y2K began through its research and development program, but the
vital importance of this issue has manifested itself in many
congressional requests for work that the agency received in fiscal
years 1998 and 1999. In early 1997, GAO designated Y2K as a
highrisk area to highlight the government's exposure. Throughout
1997, 1998, and 1999, GAO worked closely with the Congress on Y2K
issues-including this subcommittee. The Senate created the Special
Committee on Year 2000 Technology Problem and the House called on
this Subcommittee and the Subcommittee on Technology of the
Committee on Science to lead its Y2K monitoring. With leadership
from you, Mr. Chairman, and your colleagues, congressional
committees examined the implications of Y2K on various government
operations and in key economic sectors.
GAO produced a set of four guides to help organizations confront
the problem. GAO also issued over 160 reports detailing specific
findings and made over 100 recommendations to agencies and to the
President's Council on Year 2000 Conversion for improving the
government's readiness. For example, GAO recommended that the
President's Council on Year 2000 Conversion require agencies to
develop contingency plans for all critical core business processes.
Accordingly, the Office of Management and Budget clarified its
contingency plan instructions and, along with the Chief Information
Officers Council, adopted GAO's business continuity and contingency
planning guide for federal use, thus reducing the risks of
disruption to major programs and services.
Finally, let me note that GAO is proud of its record in
providing timely service to the Congress. As figure 3 indicates,
GAO has consistently improved its ability to promptly meet
congressional requests. In 1999, GAO provided the Congress 96
percent of its products on time.
Complex Issues and Governance Challenges
Figure 3: Product Timeliness
Percent 100 9193 96
80
67 60 40 20 0
FISCAL YEARS
Mr. Chairman, as I am sure you appreciate, the issues
confronting the Congress and the American people have grown more
complex in recent years. The pace of change has accelerated for
government and for the country as a whole. The increasing
challenges facing the country over the long term have had a
longlasting impact on the nature of GAO as an organization and on
how it supports the Congress. Where, in the early years of GAO's
existence, changes to its roles and responsibilities and to the
demands placed on it occurred more slowly, there is no question
that the environmental changes affecting its mission in recent
years have been more persistent and have occurred more rapidly. In
fact, the timeline of major events in GAO's existence (see figure
4) reveals the increasing development, complexity and influence of
difficult public policy issues related to government activity and
our accountability mission:
Figure 4: GAO History: 1921 to the Present
Major
Renewed government
focus on management First financial laws created: Workload
Yellowbook_ management,
CFO Act GAO's mission again due auditing
expands government deficit,
GPRA
and budget
Paperwork
Workload expands-to Vietnam standards issues
Reduction Act Begins field
exploads
shifts from War and established
broadens
Clinger-Cohen
GAO's work
Budget and work during
Act Accounting the Great Management Reform Act
Act establishes Depression GAO Acquisition
Streamlining
Act
all add to GAO workload while workforce contracts
Likewise, it comes as no surprise that as a result of the
increasing complexity and breadth of issues facing the Congress,
the legislature is availing itself of GAO's services and support on
an unprecedented and accelerating basis. While 70 percent of GAO's
work was done as a result of congressional requests in 1996, it was
95 percent in 1999. Overall, congressional requests for GAO work
have increased from 10 percent in 1966, at the start of the Staats
era, to 95 percent, at the beginning of my term. Part of the reason
for the Congress's increased reliance on GAO in recent years is the
result of our ability to add unique value to the products and
service we provide. With the advent of agency inspectors general
and other similar organizations, GAO is no longer the only federal
entity charged with improving the accountability of government.
Nevertheless, GAO is the only agency that can consistently provide
the Congress and the executive branch with analysis, options, and
recommendations that are long range, broad, in coverage, and
integrated in the development and presentation of critical
information. GAO's efforts are multilateral and cognizant of the
international implications of issues ranging from security to the
environment. And they also reflect the nuances of American
federalism, ensuring that implications of service delivery and
devolution on state and local governments and on the private and
nonprofit sectors are factored into all of its work. In the end,
there is no question that effective stewardship must consider how
increasingly diverse approaches to public sector responsibilities
are leading to diffuse accountability.
I am convinced that GAO is now entering another significant era
that will take its place on the timeline of the agency's historic
key events. GAO has worked hard to make the transition from an
accounting and preaudit environment to become a diversified,
multidisciplinary accountability and professional services
organization. As I have discussed, my predecessors did a tremendous
amount to ensure that GAO had the capacity and capabilities to
serve the Congress and prepare for the future during their tenure.
And I,atthe startofthe 21st century, have begun to do the same
thing.
Clearly, much has already changed as GAO has grappled with this
critical transition. As the following graphs show, GAO has over the
years seen considerable changes in its staffing and budget
allocations-levels that, unfortunately, did not generally reflect
its workload and the growing demands placed on it by the Congress.
Reductions in its resource levels, combined with increases and
shifts in its workload have in recent years prompted GAO to take
strong measures to more efficiently accomplish its mission. For
example, GAO has taken significant steps to consolidate its field
office structure. GAO has been able to close field offices both in
the United States and overseas-much of it through attrition-and
achieve gains in productivity and collaborative work environments.
At the same time, GAO's flexibility has been reduced by extensive
changes to the mix of its products-as mentioned, virtually all of
its work is done at the request of the Congress, and an increasing
amount of that stems from mandates.
The following charts highlights the changes I am discussing:
Figure 5: GAO Staff Levels
Number of FTE staff
6000
1966 1981 1999 Fiscal Year
Figure 6: History of Field Office Structure
Number of Offices
50
46
40
30
20
10 11
0
1984
1986
1988 1990 1992 1994
1996 1998 2000
Figure 7: Work Conducted for the Congress
In a nutshell, GAO currently stands at an important crossroads
in its history and in its ability to provide the unique support the
Congress and the American people expect from it. Many of the
activities GAO has undertaken are designed to ensure that the
agency is properly positioned to fully support the Congress as it
faces the future.
Since I became Comptroller General, one of the most important
activities in which GAO has been engaged is the development of its
first strategic plan for the 21st century. This document is a
blueprint for how GAO will support the Congress as it continues to
face complex issues and challenges. Building on global changes that
are impacting society on a variety of levels, GAO's strategic plan
develops a comprehensive and focused structure of longterm goals
and objectives to support the Congress in its legislative,
oversight, and investigative roles. GAO worked closely with
legislative and committee leadership, individual members, and staff
in the development of this strategic plan. Thus, this plan not only
incorporates congressional views about what it believes to be
important and emerging issues, it also establishes a framework for
seeing fundamental constitutional responsibilities in the context
of current challenges and emerging changes in the coming years.
GAO has developed a set of strategic goals and objectives that
will help to support the Congress in its decisionmaking and improve
the performance and accountability of the executive branch. GAO's
plan presents four strategic goals that will help the Congress
perform its constitutional responsibilities and ensure GAO's
ability to continue providing effective, quality support to its
clients.
The due diligence that GAO has expended to develop its strategic
plan in concert with the Congress has identified a number of
complex issues that are not easily solved. These issues are
reflected in the goals and objectives of the plan and will serve as
the guide for GAO's work priorities in the coming years. Many of
these issues will take years to resolve satisfactorily, but by
focusing on these issues now, the Congress will be much better
positioned to meet its responsibilities for governing as it begins
to confront these current and emerging challenges.
There is no question that the cold war has ended, and we won. In
addition, after nearly 30 years of budget deficits, the combination
of hard choices and remarkable economic growth has led to budget
surpluses. As a result, we transition into this new century with
different security concerns and an improved financial position
relatively free of the deficit constraints of the recent past. In
order to prepare effectively for the future, however, we must fully
explore the major dynamic that will shape the United States and its
place in the world and adequately prepare the federal government to
meet the challenges that lie ahead. This subcommittee is uniquely
positioned to consider these broadbased and crosscutting challenges
and what needs to be done to address them.
Three of GAO's strategic plan goals focus on how GAO can help
support the Congress in dealing with many complex issues and the
challenges of government. These goals, the strategic objectives,
and the major thematic issues that influence them are as
follows:
Provide Timely, Quality GAO's first strategic goal focuses on
several of the aspirations of the American people defined by the
Founders: "toestablishjustice,insure
Service to the Congress
domestictranquility…promotethegeneralwelfare,andsecurethe and
the Federal blessingoflibertytoourselvesandourposterity…"The
country's aging Government to Address and increasingly diverse
population, rapid technological change, and Current and Emerging
Americans' desire to improve the quality of life all have major
policy and Challenges to the Wellbudgetary implications for the
federal government. In particular, growing
commitments to the elderly will make it difficult for a smaller
generation
Being and Financial
Security of the American of workers to finance competing claims
on the nation's future.
People To support the Congress in its decisionmaking in this
area, GAO will focus significant resources on the following
important strategic objectives:
•
researching possible options to meet the health care
needs of an aging and diverse population;
•
examining ways to ensure a secure retirement for older
Americans;
•
reviewing the social safety net for Americans in
need;
•
supporting efforts to provide for an educated citizenry
and a productive workforce;
•
helping the Congress strengthen a system of justice that
is effective in controlling crime, illegal drug use, and illegal
immigration;
•
providing analysis and other support concerning the
effectiveness of investments in communities and economic
development;
•
researching ways to increase responsible stewardship of
natural resources and the environment; and
•
helping the Congress maintain a safe and efficient
national physical infrastructure.
One of the important issues that reflect this goal and its
objectives is Demographics. The profound changes forecast in the
age and composition of our population will have enormous
consequences for the retirement and health care entitlement
programs as well as programs supporting the workforce.
The population is growing older. By 2030, about one fifth of the
U.S. population is projected to be over age 65, compared with about
13 percent in 1998. Also by 2030, Medicare beneficiaries, who
include the disabled as well as the elderly, are expected to
account for 20 percent of the population. The result will be that
fewer workers will be paying into Social Security for every person
receiving benefits. As shown in figure 8, in 1955, almost 9 persons
were paying into Social Security for every person receiving
benefits. Today, the ratio is down to 3.4 to 1, and, by 2030, it is
projected to be about 2 to 1.
Figure 8: Social Security Workers per Beneficiary
1955 1965 1975 1985 1995 2005 2015 2025 2035 2045 2055 2065
2075
Note: Projections based on intermediate assumptions of The 2000
Annual Report of the Board of Trustees of the Federal OldAge and
Survivors Insurance and Disability Insurance Trust Funds.
Source: Office of the Actuary, Social Security
Administration.
These trends will have enormous financial repercussions for the
solvency and sustainability of federal entitlement programs. The
Medicare Hospital Trust Fund has operated in the red since 1992 and
is projected to face insolvency in 2025. Social Security
expenditures are expected to exceed payroll tax revenues beginning
in 2015, with trust funds being depleted by 2037.
But crafting a solution to financing these entitlement programs
involves more than the traditional approach of closing the gap
between projected expenditures and revenues over a fixed time
period, such as 75 years. Rather, any financing solution needs to
achieve sustainablesolvency that balances projected expenditures
and revenues without requiring us to frequently revisit the
financing of these programs.
Figure 9: Medicare's Hospital Insurance Trust Fund Faces
Insolvency in
50 0
Billio ns o f 2 0 0 0 d olla rs
25 0
0
250
500 19 90 19 95 20 00 20 05 20 10 20 15 20 20 20 25 20 30 20 35
20 40 20 45 20 50
C ash surplus/d eficit H o s pital Insura nce trus t fund b ala
nc e
Note: Projections based on intermediate assumptions of The 2000
Annual Report of the Board of Trustees of the Federal Hospital
Insurance Trust Fund.
Source: GAO analysis of data from the Office Management and
Budget and the Office of the Actuary, Health Care Financing
Administration.
20 00 D ollar sin Billion s
40 0 0
30 0 0
20 0 0
10 0 0
0
1000
20 0 0 20 0 5 20 1 0 20 1 5 20 2 0 20 2 5 20 3 0 20 3 5 20 40 20
4 5 20 5 0
C a s h s u rplu s/d e f icit Tru st fu nds bal a n c e
Note: Projections based on intermediate assumptions of The 2000
Annual Report of the Federal OldAge and Survivors Insurance and
Disability Trust Funds.
Source: GAO analysis of data from the Office of the Chief
Actuary, Social Security Administration.
The population is also becoming more diverse. Women and
minorities as a proportion of the workforce have grown
significantly. This trend, along with the increased use of parttime
and other flexible work arrangements, has implications for federal
policies and programs related to education, training, childcare,
immigration, and retirement, and other areas. Although the
increased presence of women and minorities caused substantial
growth in the U.S. labor force in recent decades, this trend seems
to be changing. Projections for the future are that the annual
growth in the labor force will be only about 1 percent in the short
term and that this growth rate may even decline over the long term.
These trends further exacerbate the current tight labor market for
specialized skills and key sections of the economy, suggesting the
need for more policies designed to encourage people to retreat
gradually from work rather than plunge into retirement.
Another major concern is Quality of life. It has improved for
many but not for all Americans. At the same time, prosperity is
placing greater stresses on the quality of life.
The long period of strong economic performance has been
accompanied by economic prosperity. People are typically living
longer, with average life expectancy rising to age 76 over the past
20 years, while unemployment has fallen to low levels, and violent
crimes have dropped by 20 percent since 1990. The quality of the
physical environment has also improved, as levels of major air and
water pollutants have dropped since 1970.
However, many challenges remain. For example, the disparities
between the net worth of those without a high school education and
those with more education increased between 1989 and 1998. While
unemployment has reached record or nearrecord lows for
AfricanAmericans and Hispanics, unemployment rates for these two
groups still stand at nearly twice the rate for whites, and more
than 40 million Americans lack health insurance. Given the large
federal role in health care delivery and financing, there is a need
to weigh the needs of Americans against their wants and the overall
affordability of health care considered by policymakers.
At the same time prosperity is placing greater stresses on
quality of life. Greater economic activity, for example, increases
air and highway traffic and heightens concerns about congestion,
safety, and environmental quality. The shift to a more
technologically based economy raises long term concerns about
education, while population growth and geographic shifts, such as
urban sprawl, place greater strains on transportation and other
infrastructure. Over the coming years, these demands for new
investment will increasingly come into competition with other
national priorities, creating difficult choices for the federal
government.
Provide Timely, Quality As the world grows more interconnected
through open markets and technology, the United States faces
threats to its national security and
Service to the Congress
and the Federal economy from new sources. Simultaneously, the
federal government is
trying to promote foreign policy goals, sound trade policies,
and other Government to Respond to strategies to help nations
around the world that the United States now Changing Threats to
depends on as military allies and trading partners. GAO expects to
National Security and the continue its role in supporting efforts
by the Congress and the executive
branch to assess and respond to changing threats to national
security and
Challenges of Global
Interdependence the challenges of global interdependence.
To support the Congress in its decisionmaking in this area, GAO
will focus significant resources on the following important
strategic objectives:
•
helping the Congress respond to diffuse threats to
national and global security,
•
providing analysis and other support to ensure military
capabilities and readiness,
•
supporting efforts to advance and protect U.S.
international interests, and
•
reviewing ways to recognize and respond to the impact of
global market forces on U.S. economic and security
interests.
Several of the important themes influencing this goal and its
objectives include globalization and national security.
Globalization, or the interdependence of enterprises, economies,
and governments, presents new opportunities for U.S. producers and
consumers, but also new challenges for the country.
With rapid advances in technology and the ease with which
people, enterprises, and goods can cross borders, the economies and
activities of nations have become increasingly interdependent. From
1960 through 1997, world exports increased from about 12 percent to
about 24 percent of world GDP (gross domestic product).
Multinational enterprises are an important part of the trend
towards globalization. In 1997, 63 percent of
U.S. exports and 40 percent of U.S. imports were associated with
U.S. parent corporations or their foreign affiliates.
10
5
0 1960 1965 1970 1975 1980 1985 1990 1995
Source: World Bank.
The United States has been a principal architect of an open
world trading system and has benefited greatly. However, open trade
has increased the complexities of maintaining the U.S. economy.
Interdependence of the
U.S. and foreign economies is illustrated by foreign investment
in U.S.
business, which has increased to over $200 billion in 1998, an
amount nearly three times that invested the year before.
As the U.S. economy becomes increasingly linked with the global
economy, international trade is growing in importance as a foreign
policy issue. At the same time, significant national security
issues also need to be considered. The effectiveness of regional
and global trade arrangements in achieving their desired outcomes
is being questioned at home and abroad. Critics have expressed
concern that the United States has not been sufficiently aggressive
in monitoring and enforcing over 300 international trade agreements
that cover hundreds of billions of dollars in trade and affect
millions of U.S. jobs, and that some decisions by the World Trade
Organization could compromise U.S. sovereignty.
Recent financial crises in developing nations highlight the
implications of the interdependence of economies and financial
systems. For example, the emergence of financial difficulties in
Thailand in 1997 was followed by financial crises in Indonesia and
Korea, and eventually Russia and Brazil. Fear that these crises
could severely affect U.S. economic and security interests have (1)
focused attention on the interdependence of U.S. and global
economies and (2) raised questions about what can be done to
prevent or contain the spread of such crises. The International
Monetary Fund is a key organization that the United States
cooperates with to maintain global economic stability. Prompted by
financial crises and government corruption in some countries,
questions have been raised regarding their effectiveness and roles
in maintaining the health of the global finance and trade systems
and resolving countries' financial crises.
Economic and financial interdependence are not the only global
trends with implications for this country. Increased globalization
of information technology has resulted in significant new security
and privacy threats to our nation's information network. Similarly,
the spread of diseases around the world, like AIDS, and the global
nature of environmental problems affect us and also call for a
coordinated international response. Thus, in the future, federal
responses to problems will increasingly have to consider
international as well as national dimensions.
The nation's security concerns reflect new, diverse, and diffuse
threats of national, economic, and personal dimensions. Less
restricted trade, expanding democracy and capitalism, and rapidly
developing technology have broadened security concerns and changed
the way the United States prepares for conflict. In addition to
more conventional military threats, the United States is
confronting threats from terrorism; the proliferation of weapons of
mass destruction; information warfare; the international drug
trade; and other more diffuse sources, which are harder to
identify, respond to, and contain. Figure 12 shows the countries
that possess weapons of mass destruction posing national security
concerns to the United States.
Sources: DOD and State Department.
The bombings in New York City in 1993 and in Oklahoma City in
1995 have elevated concerns about the spread of terrorism to the
United States. More than 40 federal agencies, offices, and bureaus
spend over $10 billion a year to combat terrorism.
The structure of U.S. armed forces has been reviewed a number of
times since the end of the Cold War, resulting in substantial
reductions. The Congress has expressed concern that the forces that
remain may not be sufficient to implement the national military
strategy and may not be sufficiently prepared to respond to the
threats of the 21st century. In February 1999, the President
proposed that DOD begin the first sustained increase in defense
spending in 15 years, calling for additional resources totaling
$112 billion over the next 6 years. In particular, defending the
United States against an intercontinental ballistic missile attack
from a rogue nation and protecting U.S. and allied deployed forces
from theater missile attacks is receiving considerable attention.
This year, activities leading to the President's deployment
decision on a National Missile Defense system are moving ahead and
improvements to key theater missile defense systems, such as the
Theater High Altitude Area Defense system, are being instituted.
The President has proposed about $24 billion in total funding of
national and theater missile defense from 2001 through 2005.
Should disruptions occur, increasing reliance on complex
interconnected computer systems essential to public wellbeing and
the economy has created serious new vulnerabilities. Protection of
transportation, energy, emergency services, financial services, and
communication systems is becoming increasingly important because
they rely heavily on information technology. Criminals, terrorists,
and others, working anonymously from remote locations and with
relatively limited resources, can now use computers to severely
disrupt this infrastructure. An example of disruptions that could
occur is provided by recent denialofservice attacks on popular
websites.
Support the Transition to a American citizens are increasingly
demanding improved government services and better stewardship of
public resources. The federal
More ResultsOriented and
Accountable Federal government is adopting the principles of
performancebased management in an effort to address these demands.
This approach to managing
Government government systematically integrates thinking about
organizational structure; program and service delivery strategies;
and the use of technology, reliable financial information, and
effective human capital practices into government decisions. Many
initiatives now under way across government to improve operations
and strengthen accountability are being driven by management
reforms statutorily established by the Congress.
The reforms that have been adopted so far have profound
implications for what government does, how it is organized, and how
it performs its services to the country and its citizens.
Consequently, government decisionmakers and managers are adopting
new ways of thinking, considering different ways of achieving
goals, and using new information to guide decisions. At the same
time, with budget surpluses now projected for the coming years, the
U.S. government faces a new set of challenges, in both the near and
long terms, in making budget decisions.
To support the Congress in its decisionmaking in this area, GAO
will focus significant resources on the following important
strategic objectives:
•
analyzing the federal government's longterm and nearterm
fiscal position, outlook, and options;
•
examining ways to strengthen approaches for financing the
government and determining accountability for the use of taxpayer
dollars;
•
facilitating governmentwide management and institutional
reforms needed to build and sustain highperforming organizations
and more effective government; and
•
recommending economy, efficiency, and effectiveness
improvements in federal agency programs.
A number of important issues influence this goal and its
objectives. They include a stable federal budgetary future,
technological innovation, and improvements in the operations and
service provision of government agencies.
Future Budget Issues. Our federal government has gone from
budget deficit to surplus as a result of a burgeoning economy and
difficult decisions by the Congress and the executive branch to
control spending. Compared to the deficits of recent decades,
today's surplus represents a historic turnaround, and current
projections show surpluses continuing over the 10year budget
window, as figure 13 illustrates.
Percentage of GDP
25
20
15
10
5
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
2010
Surplus CBO Projection (Growth of Spending Federal Revenues
Federal Spending
at the Rate of Inflation)
Deficit
Note: These projections assume that discretionary spending grows
at the rate of inflation after 2000.
Source: Budget of the U.S. Government, Fiscal Year 2001,Office
of Management and Budget and the Congressional Budget Office's
January 2000 projections.
This picture of today's fiscal good fortune, however, masks a
change in the composition of federal spending during the past few
decades. Relative to federal spending subject to annual
appropriations-defense and nondefense discretionary spending-the
share devoted to federal health programs and Social Security
payments has grown steadily over time. Correspondingly, the share
available for all other programs, including defense, has decreased,
as shown in figure 14.
Figure 14: Distribution of Federal Spending, 196299
196 2 1974
30%
34 %
De fense
So cial Se curity 6%
50%
Health 1%
Ne t Inte rest
8%
13%
Othe r 8%
198 6
1999
11% 20 %
Source: Budget of the U.S. Government, Fiscal Year 2001.
Our longterm projections illustrate the consequences for the
federal budget, assuming that these trends continue. While we may
enjoy annual surpluses for some time, longterm projections show a
resumption of a pattern of deficits emerging after the anticipated
demographic tidal wave hits. Because of this coming demographic
shift, to move into the future without making changes to federal
retirement and health programs- Social Security, Medicare, and
Medicaid-is to envision a very different role for the federal
government. Even assuming, for example, that the Congress and the
President adhere to the oftenstated goal of saving the Social
Security surpluses, our longterm model shows a world by 2030 in
which these three programs alone would require almost threequarters
of total federal revenue. Budgetary flexibility would be
drastically constrained, and little room would be left for such
spending on programs for national defense, the young,
infrastructure, and law enforcement. The government and the
taxpayers will increasingly need to distinguish between wants,
needs, and affordability of programs and services in the coming
years. Figure 15 shows spending as a share of GDP under the
"Eliminate NonSocial Security Surpluses" simulation.
P e rce nto fG D P
Figure 15: Composition of Spending as a Share of GDP Under
"Eliminate NonSocial Security Surpluses" Simulation
40
30
Revenue
20
10
0
2000 2030 2050
So cial Se c urity Medica re & M edicaid
Ne t Interest
All o ther spending
Note: Revenue as a share of GDP falls from its 2000 level of
20.3 percent to slightly below CBO's level due to unspecified
permanent policy actions that reduce revenue and increase spending
to eliminate the nonSocial Security surpluses. The "Eliminate
NonSocial Security Surpluses" simulation can only be run through
2068 due to the elimination of the capital stock.
Source: GAO's April 2000 analysis.
In addition there are other looming fiscal pressures, such
as:
•
cleanup costs from federal operations that yield
hazardous wastes, including defense facilities and weapon
systems;
•
future claims on federal insurance programs by an
increasing number of retired federal employees and military
personnel; and
•
demands for new investment to modernize physical
infrastructure, public buildings, transportation systems, and
sewage and water treatment plants that are beginning to deteriorate
or become obsolete.
Today's surplus represents both opportunity and obligation.
While the new surplus projections offer an opportunity to address
today's needs, we should not forget our stewardship responsibility
to reduce the debt burden and increase the choices we leave to
future generations, to provide a strong foundation for future
economic growth and to ensure that future commitments are both
adequate and affordable. Continued debt reduction and entitlement
reforms are both critical to promoting a more sustainable budget
and economy for the long term. In the nearand mediumterm, surpluses
will depend on continued economic growth and fiscal restraint.
Technological innovation, especially in information technology,
has enhanced productivity, but also created new
vulnerabilities.
Information technology has transformed the ways we communicate,
learn, use information, conduct commerce, practice health care, and
build and design products. This trend is expected to accelerate,
with investment in information technology expected to account for
40 percent of all capital investment in the United States by 2004.
Roughly 172 million people around the world will have Internet
access in the year 2000, and by 2003 and that number is expected to
double. Businesses that produce computers, software,
semiconductors, and communications equipment have accounted for
over a third of the growth in the U.S. economy since 1992.
Government too is being affected, with information technology
providing new, more responsive and efficient ways of delivering
services and information to citizens, in such areas as tax
administration, higher education, transportation safety, and
environmental protection.
Millions 350.0
1998 1999 2000 2001 2002 2003
Source: eMarketer (1999).
The connectivity and interdependence created through information
technology also creates vulnerabilities. Computer security risks
associated with the widespread use of information create the
potential for disruptions to federal agencies and the private
sector in aviation, banking, law enforcement, emergency services,
and other critical services. The privacy and confidentiality of
medical records, credit histories, and other personal data on
millions of individuals stored in electronic databases are also at
potential risk. Unless appropriately controlled, computerized
operations can offer those with criminal or other malicious
intentions numerous opportunities for committing fraud, tampering
with data, or disrupting vital operations.
Faced with public demand for more economical, efficient, and
effective government, countries around the world are undertaking
major reform initiatives to improve government performance and
accountability. These reform efforts being undertaken in major
democracies are taking a generally consistent direction, requiring
government organizations to focus more on results and less on
process.
In the United States, American citizens are increasingly
demanding improved government services and better stewardship of
public resources. In an effort to meet these demands, the federal
government is adopting the principles of performancebased
management. As mentioned earlier, legislation enacted in the 1990s
has provided a statutory framework that includes the Government
Performance and Results Act of 1993, the Chief Financial Officers
(CFO) Act of 1990 and related financial management legislation, and
information technology reform legislation, including the
ClingerCohen Act of 1996 and the Paperwork Reduction Act of
1995.
The impetus for government reform came in part as a reaction to
poor performance, continuing disclosures of waste, and chronic
budget deficits. However, the fact that the federal budget has
turned the corner from deficit to surplus does not reduce the
importance of effective and efficient government-nor does it reduce
the importance of fiscal discipline. After a decade of focusing on
deficit reduction, we know there are pentup demands for using the
projected budget surpluses. The challenge for policymakers will be
to meet public expectations of government while maintaining the
financial discipline necessary to avoid a return to deficits.
Again, there is also the obligation for Americans to distinguish
between needs, wants and affordability.
The effective implementation of the statutory framework to
improve the performance, management, and accountability of the
federal government, although important, is not an end in itself.
Rather, the implementation of the framework is the means to an
end-improved federal performance through enhanced executive branch
and congressional decisionmaking and oversight. Performance
improvements occur only when congressional and executive branch
decisionmakers use information resulting from these reforms to help
inform decisions and improve the performance and accountability of
the federal government.
The government's human capital management has emerged as the
missing link in the statutory and management framework that the
Congress and the executive branch have established to provide for a
resultsoriented federal government.
Federal employees should be viewed not as costs to be cut, but
as assets to be valued. Only when the right employees are on board
and provided the training, technology, structure, incentives, and
accountability to work effectively is organizational success
possible. Modern human capital management principles recognize that
employees are a critical asset for success, and that an
organization's human capital policies and practices must be
designed, implemented, and assessed by the standard of how well
they support the organization's mission and goals.
As with the private sector, there have been-and will be-many
changes in the demographics of the federal workforce, the education
and skills required of its workers, and basic employment structures
and work arrangements used to accomplish jobs. The federal
workforce is aging: the baby boomers, with their valuable skills
and experience, are drawing near to retirement; new employees
joining the federal workforce today have different employment
options and different career expectations than the generation that
preceded them. In response to an increasingly competitive job
market, federal agencies will need the tools and flexibility to
attract, hire, retain, and reward topflight talent. More and more,
the work that federal agencies do requires a knowledgebased
workforce that is sophisticated in new technologies, flexible, and
open to continuous learning. Agencies' employment structures and
working arrangements will also be changing, and the workplace will
need to accommodate greater flexibility and uncertainty.
The implications of the downsizing of federal workforce over the
past decade are also significant. From fiscal year 1990 through
fiscal year 1999, the number of nonpostal civilian federal
employees fell from about 2.3 million to about 1.9 million.
Moreover, new permanent hires fell from about 118,000 in fiscal
year 1990 to a low of about 48,000 in 1994, before beginning a slow
rise to about 71,500 in fiscal year 1998.
In cutting back on hiring of new staff in order to reduce the
number of employees, agencies also reduced the influx of new people
with the new competencies needed to sustain excellence. Also, our
reviews have found, for example, that a lack of adequate strategic
and workforce planning during the initial rounds of downsizing by
some agencies affected their ability to achieve organizational
missions. We intend to do more work on the implications of
downsizing and of the government's human capital approach
generally. Nevertheless, our view today is that the widespread lack
of attention to strategic human capital management may be creating
a fundamental weakness in federal management, possibly even putting
at risk the federal government's ability to efficiently,
economically, and effectively deliver products and service to the
taxpayers in the future.
Information Technology, if leveraged properly, can be an
effective tool for highquality, costeffective government services.
Information technology effectively integrated into strategic plans
and performance management practices can lead to increased customer
satisfaction, government productivity gains, and significant cost
reductions- increasingly important attributes to a government with
a declining employee base.
Moreover, the government depends heavily on computer systems and
networks to implement vital public services supporting national
defense, revenue collections, and social benefits. The global
expansion of information technology has resulted in significant new
information security and privacy threats to our information
networks and technology infrastructure.
Such risks are of particular concern at the federal level.
Recent audit reports issued by us and by agency inspectors general
show that most of the largest federal agencies have significant
computer security weaknesses. These weaknesses place critical
federal operations, such as national defense, tax collection, law
enforcement, air traffic control, and benefit payments, at
significant risk of disruption as well as fraud and inappropriate
disclosures. In February 1997 and again in January 1999, our
reports to the Congress designated information security as a
governmentwide highrisk area.
At the same time, the government does not always effectively
plan, procure, and implement major technology investments. For
years, federal agencies have struggled with delivering promised
system capabilities on time and within budget. IRS spent more than
$3 billion in the late 1980s and early 1990s on systems
modernization without producing commensurate value. Accordingly,
our work over the last decade has focused on strengthening federal
agency management of IT investment. We continue to ask whether
agencies are spending their technology dollars on the right things
(i.e., investments that return business value in excess of costs)
and whether they are investing in technology the right way (i.e.,
employing management and engineering practices that are disciplined
and effective). In particular, we developed guidance,1 based on
best practices in the public and private sectors. We have also made
hundreds of recommendations to improve management of largescale IT
investments in many major departments and agencies.
1AssessingRisksandReturns:AGuideforEvaluatingAgencies'ITInvestmentDecisionmaking
(GAO/AIMD10.1.13, February 1997).
Maximize the Value of GAO by Being a Model Organization for the
Federal Government
Besides supporting the Congress directly through helping the
legislature respond to emerging issues and government challenges,
GAO also supports the Congress by maximizing its own value and
seeking to be a model agency in the federal government. To
successfully carry out its responsibilities to the Congress and the
American people, GAO first and foremost must be perceived as
credible and must lead by example. In conjunction with the agency's
mission and core values, GAO must, among other things, be
professional, objective, factbased, nonpartisan, nonideological,
fair, and balanced in all of its audit, investigation, and
evaluation work. The internal focus of the fourth goal provides a
framework for enhancing GAO's effectiveness and helping to improve
performance and accountability throughout the agency.
To ensure its ability to support the Congress in its
decisionmaking, GAO will focus significant resources on the
following important strategic objectives:
•
implementing a model strategic and annual planning and
reporting process,
•
aligning human capital policies and practices to support
the agency's mission,
•
cultivating and fostering effective congressional and
agency relations,
•
developing efficient and responsive business processes,
and
•
building an integrated and reliable information
technology infrastructure.
As mentioned throughout this testimony, GAO is utilizing its
strategic plan to help the Congress, the executive branch, and
itself confront the many current and emerging complex issues facing
the American people. The plan provides an opportunity to
constructively manage a difficult process of change and uncertainty
regarding critical national and international issues, now and in
the future.
GAO is also utilizing the strategic plan to
manage our own transition. The plan not only represents a road map
of how GAO will support the Congress in handling issues faced by
the country, but it also charts the approach we will use to guide
our efforts to strengthen that support and to ensure that GAO has
the capacity to serve the Congress effectively in the st
century.
Likewise, to accomplish the objectives for GAO's internal
improvements will take the dedication and persistence of all of our
talented employees.
As you know, Mr. Chairman, I am personally committed to the
successful implementation of GPRA. I have seen in my public and
private sector careers how GPRA's purposes of improved performance
and accountability can be achieved through the disciplined
application of the goalsetting, planning, performance measurement,
and reporting requirements of the act. That's why GAO's strategic
plan and associated annual performance plan are consistent with the
requirements and best practices of GPRA. We seek, through our
strategic and annual planning process, to "lead by example" by
being a model for implementation of GPRA. We are not required to
comply with GPRA, but we believe that its requirements make good
business sense.
As another example of our decision to voluntarily comply with
congressionally created management reforms and to "lead by
example," GAO issued in March its firstever accountability report.
This report discussed how GAO's work benefited the Congress and the
American people. The AccountabilityReportis different from GAO's
previous years' annual reports. It reviewed GAO's accomplishments
in meeting its mission consistent with applicable professional
standards and our core values of accountability, integrity, and
reliability. The report also included our financial statements and
an unqualified opinion from the agency's independent auditor.
Realignment. In order to better support the Congress and
maximize the value of our strategic plan, in April I announced a
realignment of GAO. This realignment, the first in more than 15
years, will be implemented beginning in October 2000, although the
planning and transition activities have already begun. As I've
discussed in my testimony, the increasing complexity of issues and
the accelerating change in government-major factors in GAO's
strategic plan-helped us realize that this realignment was
necessary to better position GAO for serving the future needs of
the Congress. Our goal is to better serve our client by making GAO
more responsive, more flexible - and more focused on our client.
GAO must become more capable of handling multiple responsibilities
in a rapidly changing environment-all while adhering to our core
values and applicable professional standards. We recognize that the
government of tomorrow must be leaner, that it must eliminate
bureaucracy and multiple management layers, that agencies must
respect future fiscal and budgetary realities, and that they must
be performancedriven and resultsoriented organizations. GAO's
realignment is part of our effort to lead the federal government by
example-we are certain that this realignment will eliminate
management layers, reduce silos, and improve coordination,
productivity, and teambuilding throughout the organization.
The realignment will ensure a continued ability to provide
timely, quality work; will build on efforts to provide broad
oversight support; will enhance client communications and feedback;
and will maintain a highlevel of return on investment. The
realignment also gives us a great opportunity to comprehensively
focus on how to make our processes work better to serve our staff
and our clients, and how we can broaden and retool our products to
make them as useful as possible to the Congress in the years ahead.
Moreover, the realignment will help us to enhance our longterm
capacity by improving recruitment and retention; building a
succession plan; focusing on emerging issues; and leveraging
technology opportunities for improvements to clients, processes,
and employees.
The realignment reduces the number of issue areas from 31 to
11.2 It eliminates the traditional GAO divisions and strengthens
teambased matrix management. We are creating a riskbased management
approach that will reduce the number and sequential nature of our
product reviews. We will increase empowerment and accountability at
the senior executive level. We also will leverage new teams to
focus on external issues important to our many stakeholders, and on
methodological issues, and strategic studies. And we will create
employee pools of generalists to increase our flexibility and
enhance development.
At the same time, we have taken a number of other important
steps to improveGAO to betterserve theCongress. We'vecreated
amoreeffective Engagement Acceptance and Review Meeting process to
help senior management direct and oversee work assignments. We've
developed an employee feedback system and facilitated an active
employee suggestion program that has achieved bottomline benefits,
and we have established a Comptroller General Employee Advisory
Council, with which I will meet every quarter to discuss current
and emerging issues of mutual interest and concern. And, as I
mentioned earlier, we are continuing to consolidate and reduce our
field offices to streamline our operations, reduce silos, and
improve productivity. Earlier this year, I announced that we would
be reducing our field offices from 16 to 11 effective November
2000.
Human Capital. As part of the realignment efforts, GAO needs to
invest more heavily in its people. Targeted investments need to be
made in our
2GAO's 11 teams will be Acquisition and Sourcing Management;
Education Workforce and Income Security; Finance and Assurance;
Financial Markets and Community Investments; Health Care;
Information Technology; International Affairs and Trade; Military
Strategy and Readiness; Natural Resources and Environment; Physical
Infrastructure; and Tax Administration and Justice.
training, performance rewards and incentives, and performance
appraisal systems. We have begun efforts to strengthen and redesign
our performance appraisal system to better assess employee
strengths and weaknesses, identify training needs, reward and
recognize exceptional performance, and improve performance at all
levels. We have a goal of implementing a new performance appraisal
system for our evaluators beginning in fiscal year 2001, but no
later than fiscal year 2002.
Efforts also are underway to develop a skills and knowledge
inventory system that will be used to identify skill gaps and
training and succession planning needs, both at an institutional
and individual level, and to staff assignments more effectively. We
will continue to correct skill gaps and increase staff productivity
and effectiveness through training. To maximize this investment, we
are reviewing and updating our training curriculum to address the
organizational, behavioral, and technical needs of our staff.
GAO's overall human capital situation also is of growing
concern. GAO faces many of the same difficult personnel issues the
executive branch is now confronting. Our current human capital
profile has succession planning, structural, and skills imbalance
problems that we need to address if we are to maintain and build
our capacity to support the Congress and achieve the goals of our
strategic plan in the 21st century. For example, nearly 34 percent
of our evaluator and related staff will be eligible to retire by
the end of fiscal year 2004. In addition, about 55 percent of our
senior executives and 48 percent of our management evaluators will
become eligible to retire by that time. Other critical positions,
such as attorneys, criminal investigators, and mission support, are
also vulnerable.
55
Percent of Current Staff
50
47
40
34
32
30
21
20
10
0
0 Band I-D Band I-F Band II Band III SES All Staff
Staff Level
Note: Current staff onboard at end of fiscal year 1999.
Another human capital issue is more structural in terms of
staffing. As illustrated in the following graphics, we are sparse
at the entrylevel-a result of the 5year hiring freeze we began in
1992-and rather bulky in the middle. We have been more fortunate
than many agencies, in that our attrition rate is extremely low. We
believe this low rate reflects the quality and dedication of our
employees as well as the strength of our recent human capital
management improvements. Cultural transitions of major
organizations are never easy to accomplish, and I would certainly
not claim that it will be easy for GAO. Still, through a
combination of employee communications and outreach efforts, most
of our staff recognize that change is not only good for GAO at this
time, it is imperative for the future.
Figure 18: GAO's New Hires
Number of New Hires
262
250
206
200
150
130
100
51
50
33
26 17
3
0 1992 1993 1994 1995 1996 1997 1998 1999
Fiscal Years
GAO's significant human capital imbalances and risks stem from
dramatic budgetary cuts, downsizing, hiring freezes, and other
related actions from 1992 through1997. Over that period, GAO
underwent budgetary cuts totaling 33 percent in constant fiscal
year 1992 dollars. In order to achieve these budgetary reductions,
GAO staff was reduced by 39 percent. These actions have had a
considerable impact on GAO's human capital structure. Figure 19
shows GAO's human capital profile as of fiscal years 1989 and
2000.
Figure 19: GAO's Human Capital Profile
Number of authorized staff 5,204 3,275
Mission (Percent)
3.2
2.4 SES
BAND III
BAND II
BAND I
3.1 OTHER1
4.3
74.1% 78.7
Mission Support2
FY 1989 FY 2000
GAO has turned to contracted resources to achieve its mission
and missionsupport requirements. Contract funding in inflation
adjusted dollars has increased from $13.1 million in 1981 to $29.2
million in 1999.
Clearly, GAO needs assistance to meet its looming human capital
challenges. The agency has made considerable progress in
confronting its problems, but more needs to be done. In order to
effect the realignment, strengthen our human capital profile, and
position GAO to fulfill its strategic plan and support the future
needs of the Congress, GAO has requested legislation from the
Congress to
•
give GAO the flexibility to appoint scientific,
technical, or professional staff to seniorlevel positions with the
same pay, rights, and other attributes as members of the Senior
Executive Service;
•
authorize voluntary early retirement for selected
individual employees for the purpose of realigning the agency's
workforce;
•
authorize separation payments for realignment purposes;
and
•
authorize the Comptroller General to release officers and
employees in RIFs which are carried out for purposes of downsizing,
realignment or correcting skills imbalances.
This legislation would be a supplement to administrative actions
that we have taken and will be taking in the near future, and it is
based on a sound business case focused on enabling us to better
support Congress in the future. The legislation would be used to
realign GAO, not to downsize it, and would only be for GAO-the
legislation would have no effect on the executive branch agencies.
It also would provide relief from applying certain reductioninforce
(RIF) provisions that could result in an even more unbalanced
workforce than exists today and a consequent detrimental impact on
our ability to serve the Congress. RIFs would be used only as a
last resort. I want to stress that our proposal would maintain the
statutory preference for veterans and that we have no intention of
deemphasizing our attempts to attain and maintain a highquality and
diverse workforce. Also, to provide us greater ability to attract
and retain technical talent, the legislation would provide
authority comparable to that of the executive branch to compensate
selected scientific and technical staff at seniorexecutive pay
levels. We would use such authority, if granted, sparingly to
address specific targeted needs, such as information technology
specialists and actuaries.
Client Focus. The Congress continues to turn to GAO for
assistance on significant issues facing the nation-in fact, we face
record demands for our services. As illustrated in the following
graphic, congressional requests and mandates for GAO services have
increased in recent years. From a longterm historical viewpoint,
requests for GAO's services have never been higher, and we
anticipate that this historic growth will continue as the Congress
grapples with increasingly complex and contentious issues requiring
greater contextual sophistication. GAO, perhaps more than any other
organization, is positioned through its broadbased skills,
knowledge, and expertise to support the Congress in meeting
responsibilities that will only become more difficult as the 21st
century evolves. Figure 20 shows congressional requests as a
percentage of GAO's work from fiscal year 1992 through fiscal year
1999.
Percentage 96 95
100
8280 83
90
77 78 73
80
70
60
50
40
30
10
0 1992 1993 1994 1995 1996 1997 1998 1999
Fiscal Year
Mandates
Committee/Member
During fiscal year 1999, we were called upon to testify 229
times before 93 congressional committees or subcommittees as shown
in Figure 21 below. Examples of important testimonies that helped
the Congress in its oversight include our performance
accountability and highrisk series, which depict the government's
major management challenges and program risks; Social Security
reform proposals; financial and operational aspects of the
International Monetary Fund; DOD's anthrax vaccination program, and
Medicare reform.
GAO has recently strengthened its client outreach program to
assist both GAO and the Congress in understanding how best to meet
congressional needs. We plan to meet regularly with the Senate and
House leadership, all Committee Chairs and Ranking Minority
Members, and members of our appropriations and oversight committees
to obtain feedback on our performance and to help guide work plans
in the context of the strategic plan. Our realignment is a critical
component in improving our communications and outreach with the
Congress and ensuring that we continue to maintain and foster ways
to help the Congress meet its responsibilities.
GAO has expanded its electronic link to Congress, and we are now
providing a list of active assignments. We plan to provide other
products and information through this link in the future. Through
consultation with key congressional leaders, members, and staff, we
also have developed a set of clearly defined, well documented, and
transparent protocols, intended to be consistently applied in
setting priorities, allocating resources, recognizing existing
commitments, and serving the Congress. These protocols will help
GAO to better serve the Congress and improve customer satisfaction,
to close "expectation gaps" between the Congress and GAO wherever
they exist, to ensure equitable treatment of all requesters
consistent with the protocols, and to maintain and strengthen GAO's
performance and accountability. We began implementing these
protocols in January of this year and will test them until August
2000. We will finalize them by October 2000.
GAO is also interested in fostering constructive engagement with
executive branch stakeholders and enhancing the partnership between
the Congress and GAO by strengthening oversight in order to improve
the performance and accountability of government. For instance, it
is important to work closely with agencies-while maintaining our
independence-and to utilize our skills, knowledge, and experience
in working cooperatively to improve government operations. For
example, we have successfully worked with a variety of agencies on
Y2K and with IRS to face management problems and improve government
operations. I am convinced there are additional opportunities for
developing constructive engagements while maintaining the integrity
of our principal mission as an accountability organization.
Moreover, the pervasive changes confronting the Congress and the
nation present an opportunity for the Congress to reconsider the
approach it takes to oversight responsibilities. Persistent
attention, new models of performance, and different oversight
structures and processes may be necessary to achieve this
objective.
GAO is uniquely positioned to help the Congress examine what
government does and how government does business-by attacking known
areas of fraud, waste, abuse, and mismanagement; reassessing how
government provides services; improving the performance and
accountability of government agencies; and preparing for the
government's longterm challenges. GAO can provide support to the
Congress for holding oversight hearings on major agencies and
programs on an annual basis. Based on its insight and knowledge of
government accountability, GAO can provide effectively packaged
information about agencies and programs from a variety of audit and
program sources to support the oversight work of congressional
committees, including the information resulting from the management
reforms in the 1990s. GAO resources can also be leveraged through
the strategic plan, support of task forces and other congressional
oversight approaches, increased communication with committees, and
the selective use of detailees.
Information Technology. GAO also seeks to lead the government in
the strategic management and security of effective technology
utilization. Over the years, we have made important strides in-and
realized efficiencies by-introducing technology into the
organization. Most recently, we have successfully managed the Y2K
transition. However, we need to maintain and enhance our ability to
take greater advantage of modern technology and achieve an
integrated infrastructure that supports our client service,
strategic planning, human capital, and business process goals and
objectives. To this end we are:
•
developing a longterm comprehensive plan for an
integrated information technology approach;
•
developing and implementing a shortterm, costeffective
approach to quickly begin to satisfy GAO's information
needs;
•
establishing performance and cost metrics addressing the
quality and value of information technology services;
•
ensuring the availability of required information
technology skills,
•
replacing obsolete hardware and software agencywide to
help ensure the efficiency and effectiveness in our operations and
enhance our productivity, and
•
stabilizing and improving the responsiveness of our
network.
It is clear that additional investments will be necessary in the
coming years to increase our enabling technology and knowledge
management efforts to meet the challenges of the future and
effectively support Congress.
GAO Initiatives and Challenges
Mr. Chairman, for GAO to continue maintaining the strength of
its mission, we are committed to find new ways to streamline our
operations while building on our responsiveness and flexibility. I
am convinced that the Strategic Plan we have articulated with the
support of the Congress will provide a strong framework for
improving government and meeting the nation's challenges in the
years ahead.
For GAO to achieve its mission and effectively support Congress
in the future, it will be important for us to have the support of
the Congress. As I have mentioned, demand for our work is
essentially at an all time high, especially with regard to mandates
and requests from Congress. This change in the composition of our
work has left GAO less flexibility to pursue R&D work-a
component of our services to Congress that we believe is vital to
ensuring that we can help Congress recognize important and emerging
issues before they reach a crisis stage. Clearly, that was the case
with our work in the Y2K area and I have no doubt that there are
similar issues out there that we must be sure to identify and
examine before they become major problems. But this becomes harder
and harder for GAO to do as the demands for our work
increase-requests and mandates already represent 95 percent of our
total workload.
It is also extremely important that we maintain and strengthen
our capacity to effectively serve the Congress and meet the growing
demand level in the future. This will require a more stable
budgetary and personnel environment than has been the case
historically. Figure 22 clearly reflects a resource environment
that has changed dramatically in the last decade:
Figure 22: GAO Appropriations and FullTime Equivalent Staff
Levels
Number of FTE staff Appropriations (1992 Dollars in
thousands)
6000 500,000
5000
400,000
4000
300,000
3000
200,000
2000
100,0001000
0 1992 1993 1994 1995 1996 1997 1998 1999 2000 Fiscal Year
0
Total FTE's (authorized levels for 1999 and 2000) 1992 $
In an era of shrinking government capacity but expanding
demands, vigorous congressional oversight and growing requests
requires a strong GAO. It will certainly require a more stable GAO,
in which budget and personnel levels remain consistent from year to
year and reflect a work plan built from the strategic plan. A
stable funding level not only supports GAO's strong return on
investment of $57 for every $1 spent, it creates the environment
necessary to recruit, retain, compensate, train and motivate a
strong and capable workforce. It is increasingly clear that the
continued decline in the staff levels of the Congress will also
necessitate that GAO retain sufficient resources to ensure
effective partnering with the Congress as well as an institutional
memory about government programs and operations.
Without the broadbased assistance and experience of GAO to
support the Congress, the Congress would clearly lose opportunities
for obtaining an array of options, undertaking informed
decisionmaking, and fully pursuing oversight-all important elements
of the Congress' constitutional responsibilities. Without stable
funding and personnel levels, it will be extremely difficult for
GAO engage in the types of partnering so critical to the future
oversight work needed to strengthen government's performance and
accountability. GAO would also have difficulty in taking on some of
the expanded roles that Congress has asked of the agency in recent
years, such as assisting on task forces and commissions without any
commensurate adjustment for resources. As I've discussed in this
testimony, without some immediate stability, GAO faces many of the
same problems as other federal agencies in being able to
effectively deliver services now and in the future. Right now,
considerable differences still exist with respect to our
appropriations levels in the House and the Senate-stable funding
for GAO next year is still not assured.
GAO needs funding to support the realignment so critical to our
growing mission. GAO has requested funding to improve compensation
comparability with the executive branch, strengthen performance
reward and recognition programs, reengineer our performance
appraisal system, and increase our staff productivity through
training and development as well as new information technology
resources.
At the same time, flexibility may be just as important as
resources. The human capital legislation is one example. Another
example is the mandates issue. Its is becoming difficult to do
R&D work, like Y2K, as I mentioned earlier. Without GAO's
ability to pursue research and development issues, many other
consequential issues could go unrecognized and ultimately create
fundamental and serious problems for the Congress and the American
people. We must have a reasonable amount of flexibility to address
emerging challenges before they reach crisis proportions. Thus, I
would urge the Congress to not lose sight of the important balance
between mandates, requests, and research and development in the mix
of GAO's work supporting the Congress.
In addition to the legislative support I've already discussed,
GAO will be assessing whether it may need additional authority from
the Congress to obtain certain types of records for conducting our
work. As the budgets, functions, and points of service of many
government programs devolve to state and local government, private
entities and nonprofit organizations, and other third parties, it
may become harder for GAO to obtain the records it needs to
complete audits and evaluations. For GAO to effectively do its job
and obtain all the facts, we must have unfettered access to records
no matter where the federal dollar goes and services are
delivered.
As I've stressed, we are making major changes in how GAO will
face the future, both to support Congress and to lead the
government in strategic planning, human capital management,
information technology, and other areas. That is why GAO's human
capital legislation is so important. The legislation is absolutely
critical to an evolving GAO that is realigning toward a 21st
century Strategic Plan and more modern human capital approaches to
meet its mission.
Moreover, it will important for Congress to consider issues that
will help GAO to recruit, retain and motivate an effective
workforce. Clearly, it is important for GAO to continue to attract
bright, able staff, which is increasingly difficult given the
excellent economy and private sector competition. For GAO-and for
most of the federal government-to compete with the private sector,
we must be able to have a more flexible compensation system that
can bring people into government employment at attractive pay
levels. This makes it incumbent on the government to create
incentives to recruit new employees and retain older employees.
Congress should consider establishing incentives such as debt
relief for school loans for new hires, an ability for staff that is
eligible to retire to retreat slowly into retirement through part
time work, while obtaining a portion of their pension, and a
provision that allows federal employees- like private sector
employees-to keep frequent flier miles. Many commercial firms, in
recognition of the physical impact and disruption of family life
that results from frequent travel, allow their employees to keep
frequent flyer awards. The federal government has always considered
frequent flyer awards to be property of the government, and sought
to reduce travel costs by requiring their use only for official
travel. Six years ago the Congress enacted this requirement into
law, and required the General Services Administration to promote
the use of frequent flyer programs. It is time to examine whether
the financial benefits of trying to make use of frequent flyer
benefits would be outweighed by the recruiting and retention
benefits of allowing personal use of those benefits.
Finally, one area I believe the Congress needs to begin thinking
about is the process for appointment of the Deputy Comptroller
General. The current process was established in 1982. The governing
statute provides that a committee consisting of the Comptroller
General, the Speaker of the House and President Pro Tempore of the
Senate, the Majority and Minority leaders, and the Chairmen and
Ranking Minority Members of the Senate Governmental Affairs and
House Government Reform Committees recommend an individual to the
President for appointment. This process has never worked and it is
too complicated. There has been no Deputy Comptroller General since
Bob Keller passed away over two decades ago. There are a number of
possible alternatives to the current process that would avoid
conflicts between the Congress and the administration. For example,
I could appoint a deputy with the approval of at least three
members of a panel consisting of the Chairmen and Ranking Minority
Members of our oversight committees. The Director of the
Congressional Budget Office appoints his deputy, whose term is tied
to the Director's just as the Deputy Comptroller General's term is
tied to the Comptroller General's. Let me also note that Gene L.
Dodaro, GAO's Chief Operating Officer, would make a terrific Deputy
Comptroller General.
Mr. Chairman, this concludes my prepared statement. I would be
pleased to respond to any questions that you or the other
Subcommittee members have.
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