oversight

Opportunities for Oversight and Improved Use of Taxpayer Funds: Examples from Selected GAO Work

Published by the Government Accountability Office on 2003-08-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

              United States General Accounting Office

GAO           Report to Committees on the Budget




August 2003
              OPPORTUNITIES
              FOR OVERSIGHT
              AND IMPROVED USE
              OF TAXPAYER
              FUNDS
              Examples from
              Selected GAO Work




GAO-03-1006
              a
Contents



Letter                                                                                                  1


Appendixes
             Appendix I:   Opportunities to Improve the Economy, Efficiency, and
                           Effectiveness of Federal Programs                                            4
                           050 National Defense                                                         5
                           Examples from Selected GAO Work                                              7
                             Reduce the Number of Carrier Battle Group Expansions
                                and Upgrades                                                            7
                             Limit Commitment to Production of the F/A-22 Fighter until
                                Operational Testing Is Complete                                         9
                             Reassess the Need for the Selective Service System                        13
                             Consolidate Military Exchange Stores                                      15
                             Reorganize C-130 Reserve Squadrons                                        17
                             Acquire Conventionally Rather Than Nuclear-Powered
                                Aircraft Carriers                                                      19
                             Improve the Administration of Defense Health Care                         22
                             Seek Additional Opportunities for VA and DOD to Increase Joint
                                Activities to Enhance Services to Beneficiaries and Reduce
                                Costs                                                                  24
                             Continue Defense Infrastructure Reform                                    27
                             Reduce Funding for Renovation and Replacement of Military
                                Housing until DOD Completes Housing Assessment                         33
                             Improve DOD Procurement Practices Regarding Canceling Orders              35
                             Reduce Planned Military Construction Costs for Barracks                   37
                             Take a Strategic Approach to Department of Defense Acquisition
                                of Services                                                            39
                             Address Overpayments to Defense Contractors                               42
                           CBO Options Where Related GAO Work Is Identified                            45
                             050-05 Cancel the Army’s Comanche Helicopter Program                      45
                             050-10 Reduce Purchases of the Air Force’s F/A-22 Fighter                 45
                             050-11 Slow the Schedule of the F-35 Joint Strike Fighter Program         46
                             050-19 Replace Military Personnel in Some Support Positions with
                                Civilian Employees of the Department of Defense                        46
                             050-22 Have the Departments of Defense and Veterans Affairs
                                Purchase Drugs Jointly                                                 46
                           150 International Affairs                                                   47
                           Examples from Selected GAO Work                                             48
                             Eliminate U.S. Contributions to Administrative Costs in
                                Rogue States                                                           48



                           Page i                                  GAO-03-1006 Opportunities for Oversight
Contents




  Streamline U.S. Overseas Presence                                         50
CBO Options Where Related GAO Work Is Identified                            52
  150-01 Eliminate the Export-Import Bank, the Overseas Private
     Investment Corporation, and the Trade and Development
     Agency                                                                 52
  150-02 End the United States’ Capital Subscriptions to the
     European Bank for Reconstruction and Development                       52
250 General Science, Space, and Technology                                  53
Example from Selected GAO Work                                              54
  Continue Oversight of the International Space Station and
     Related Support Systems                                                54
270 Energy                                                                  56
Examples from Selected GAO Work                                             57
  Corporatize or Divest Selected Power Marketing Administrations            57
  Recover Power Marketing Administrations’ Costs                            60
  Increase Nuclear Waste Disposal Fees                                      64
  Recover Federal Investment in Successfully Commercialized
     Technologies                                                           65
  Reduce the Costs of the Rural Utilities Service’s Electricity and
     Telecommunications Loan Programs                                       67
300 Natural Resources and Environment                                       69
Examples from Selected GAO Work                                             70
  Terminate Land-Exchange Programs                                          70
  Deny Additional Funding for Commercial Fisheries Buyback
     Programs                                                               72
  Revise the Mining Law of 1872                                             74
  Reexamine Federal Policies for Subsidizing Water for Agriculture
     and Rural Uses                                                         76
  Reassess Federal Land Management Agencies’ Functions and
     Programs                                                               78
350 Agriculture                                                             81
Examples from Selected GAO Work                                             82
  Terminate or Significantly Reduce the U.S. Department of
     Agriculture’s Market Access Program                                    82
  Consolidate Common Administrative Functions at the
     U.S. Department of Agriculture                                         85
  Further Consolidate the U.S. Department of Agriculture’s
     County Offices                                                         87
370 Commerce and Housing Credit                                             89
Examples from Selected GAO Work                                             90
  Recapture Interest on Rural Housing Loans                                 90




Page ii                                 GAO-03-1006 Opportunities for Oversight
Contents




  Require Self-Financing of Mission Oversight by Fannie Mae and
     Freddie Mac                                                            92
  Reduce Federal Housing Administration’s Insurance Coverage                94
  Merging U.S. Department of Agriculture and Department of
     Housing and Urban Development Single-Family Insured Lending
     Programs and Multifamily Portfolio Management Programs                 96
  Consolidate Homeless Assistance Programs                                  98
  Reorganize and Consolidate Small Business Administration’s
     Administrative Structure                                              100
  Improve Reviews of Small Business Administration’s Preferred
     Lenders                                                               102
CBO Options Where Related GAO Work Is Identified                           104
  370-01 End the Credit Subsidy for the Small Business
     Administration’s Major Business Loan Guarantee Programs               104
  370-05 Charge All Banks and Thrifts Deposit Insurance Premiums           104
400 Transportation                                                         106
Examples from Selected GAO Work                                            107
  Eliminate the Pulsed Fast Neutron Analysis Inspection System             107
  Develop a Passenger Intercity Rail Policy to Meet National Goals         109
  Eliminate Cargo Preference Laws to Reduce Federal
     Transportation Costs                                                  111
  Increase Aircraft Registration Fees to Enable the Federal Aviation
     Administration to Recover Actual Costs                                113
  Apply Cost-Benefit Analysis to Replacement Plans for Airport
     Surveillance Radars                                                   114
  Close, Consolidate, or Privatize Some Coast Guard Operating and
     Training Facilities                                                   116
  Convert Some Support Officer Positions to Civilian Status                118
CBO Options Where Related GAO Work Is Identified                           120
  400-01 Reduce Federal Subsidies for Amtrak                               120
  400-02 Eliminate the Essential Air Service Program                       121
  400-03 Eliminate Grants to Large and Medium-Sized Hub Airports           121
  400-04 Increase Fees for Certificates and Registrations Issued
     by the Federal Aviation Administration                                122
  400-08 Eliminate Funding for the “New Starts” Transit Program            122
450 Community and Regional Development                                     123
Examples from Selected GAO Work                                            124
  Limit Eligibility for Federal Emergency Management Agency
     Public Assistance                                                     124
  Eliminate the Flood Insurance Subsidy on Properties That
     Suffer the Greatest Flood Loss                                        126




Page iii                                GAO-03-1006 Opportunities for Oversight
Contents




  Eliminate Flood Insurance for Certain Repeatedly Flooded
     Properties                                                          128
  Consolidate or Terminate the Department of Commerce’s Trade
     Adjustment Assistance for Firms Program                             130
  Improve Federal Foreclosure and Property Sales Processes               132
CBO Options Where Related GAO Work Is Identified                         135
  450-02 Eliminate Region-Specific Development Agencies                  135
  450-05 Drop Flood Insurance for Certain Repeatedly Flooded
     Properties                                                          135
500 Education, Training, Employment, and Social Services                 137
CBO Options Where Related GAO Work Is Identified                         138
  500-02 Repeal the Safe and Drug-Free Schools and
     Communities Act                                                     138
  500-11 Eliminate the Senior Community Service Employment
     Program                                                             138
550 Health                                                               139
Examples from Selected GAO Work                                          140
  Improve Fairness of Medicaid Matching Formula                          140
  Charge Beneficiaries for Food Inspection Costs                         142
  Implement Risk-Based Meat and Poultry Inspections at USDA              144
  Prevent States from Using Illusory Approaches to Shift
     Medicaid Program Costs to the Federal Government                    146
  Create a Uniform Federal Mechanism for Food Safety                     149
  Control Provider Enrollment Fraud in Medicaid                          152
  Eliminate Federal Funding for SCHIP Covering Adults
     without Children                                                    154
CBO Option Where Related GAO Work Is Identified                          155
  550-06 Require All States to Comply with New Rules About
     Medicaid’s Upper Payment Limit by 2004                              155
570 Medicare                                                             156
Examples from Selected GAO Work                                          157
  Reassess Medicare Incentive Payments in Health Care Shortage
     Areas                                                               157
  Adjust Medicare Payment Rates to Reflect Changing Technology,
     Costs, and Market Prices                                            159
  Increase Medicare Program Safeguard Funding                            163
  Modify the New Skilled Nursing Facility Payment Method to
     Ensure Appropriate Payments                                         166
  Implement Risk-Sharing in Conjunction with Medicare Home
     Health Agency Prospective Payment System                            169
  Eliminate Medicare Competitive Sourcing Restrictions                   171




Page iv                               GAO-03-1006 Opportunities for Oversight
Contents




  Change Pricing Formula for Medicare-Covered Drugs
    and Biologicals                                                       173
CBO Options Where Related GAO Work Is Identified                          175
  570-10 Reduce Medicare Payments for Currently Covered
    Prescription Drugs                                                    175
  570-11 Require Competitive Bidding for High-Volume Items of
    Durable Medical Equipment                                             176
  570-15 Simplify and Limit Medicare’s Cost-Sharing Requirements          176
  570-19 Reduce Medicare Payments for Home Health Care                    176
600 Income Security                                                       178
Examples from Selected GAO Work                                           179
  Develop Comprehensive Return-to-Work Strategies for People
    with Disabilities                                                     179
  Revise Benefit Payments under the Federal Employees’
    Compensation Act                                                      182
  Increase Congressional Oversight of PBGC’s Budget                       187
  Share the Savings from Bond Refundings                                  189
  Implement a Service Fee for Successful Non-Temporary
    Assistance for Needy Families Child Support Enforcement
    Collections                                                           191
  Improve Reporting of DOD Reserve Employee Payroll Data
    to State Unemployment Insurance Programs                              193
  Improve Social Security Benefit Payment Controls                        196
  Simplify Supplemental Security Income Recipient Living
    Arrangements                                                          198
  Reduce Federal Funding Participation Rate for Automated
    Child Support Enforcement Systems                                     200
  Obtain and Share Information on Medical Providers and
    Middlemen to Reduce Improper Payments to Supplemental
    Security Income Recipients                                            202
  Sustain/Expand Range of SSI Program Integrity Activities                204
  Revise Government Pension Offset (GPO) Exemption                        206
  Better Congressional Oversight of PRWORA’s Fugitive Felon
    Provisions                                                            208
  Improve the Administrative Oversight of Food Assistance
    Programs                                                              211
CBO Option Where Related GAO Work Is Identified                           215
  600-07 Reduce the Federal Matching Rate for Administrative
    and Training Costs in the Foster Care and Adoption Assistance
    Programs                                                              215
700 Veterans Benefits and Services                                        216
Examples from Selected GAO Work                                           217



Page v                                 GAO-03-1006 Opportunities for Oversight
Contents




  Revise VA’s Disability Ratings Schedule to Better Reflect Veterans’
     Economic Losses                                                        217
  Discontinue Veterans’ Disability Compensation for Nonservice
     Connected Diseases                                                     219
  Reassess Unneeded Health Care Assets within the Department of
     Veterans Affairs                                                       221
  Reducing VA Inpatient Food and Laundry Service Costs                      224
CBO Options Where Related GAO Work Is Identified                            226
  700-01 Narrow the Eligibility for Veterans’ Disability
     Compensation to Include Only Veterans with High-Rated
     Disabilities                                                           226
  700-02 Narrow the Eligibility for Veterans’ Disability
     Compensation to Veterans Whose Disabilities Are Related
     to Their Military Duties                                               226
  700-03 Increase Beneficiaries’ Cost Sharing for Care at Nursing
     Facilities Operated by the Department of Veterans Affairs              227
800 General Government; 900 Net Interest; and 999 Multiple                  228
Examples from Selected GAO Work                                             229
  Prevent Delinquent Taxpayers from Benefiting from Federal
     Programs                                                               229
  Target Funding Reductions in Formula Grant Programs                       231
  Adjust Federal Grant Matching Requirements                                235
  Replace the 1-Dollar Note with a 1-Dollar Coin                            237
  Increase Fee Revenue from Federal Reserve Operations                      239
  Recognize the Costs Up-front of Long-term Space Acquisitions              241
  Seek Alternative Ways to Address Federal Building Repair Needs            244
  Improper Benefit Payments Could Be Avoided or More Quickly
     Detected if Data from Various Programs Were Shared                     246
  Better Target Infrastructure Investments to Meet Mission and
     Results-Oriented Goals                                                 249
  Information Sharing Could Improve Accuracy of Workers’
     Compensation Offset Payments                                           251
  Determine Feasibility of Locating Federal Facilities in Rural Areas       254
  Leverage Buying Power to Reduce Costs of Supplies and Services            256
  Consolidate Grants for First Responders to Improve Efficiency             259
CBO Options Where Related GAO Work Is Identified                            261
  800-03 Eliminate Federal Antidrug Advertising                             261
  920-03 Impose a Fee on the Investment Portfolios of
     Government-Sponsored Enterprises                                       261
Receipts                                                                    262
Examples from Selected GAO Work                                             263




Page vi                                  GAO-03-1006 Opportunities for Oversight
Contents




  Tax Interest Earned on Life Insurance Policies and Deferred
    Annuities                                                                         263
  Further Limit the Deductibility of Home Equity Loan Interest                        264
  Limit the Tax Exemption for Employer-Paid Health Insurance                          265
  Repeal the Partial Exemption for Alcohol Fuels from Excise
    Taxes on Motor Fuels                                                              267
  Index Excise Tax Rates for Inflation                                                269
  Increase Highway User Fees on Heavy Trucks                                          270
  Require Corporate Tax Document Matching                                             272
  Improve Administration of the Tax Deduction for Real Estate
    Taxes                                                                             273
  Increase Collection of Returns Filed by U.S. Citizens Living
    Abroad                                                                            274
  Increase the Use of Seizure Authority to Collect Delinquent
    Taxes                                                                             276
  Increase Collection of Self-employment Taxes                                        278
  Increase the Use of Electronic Funds Transfer for Installment
    Tax Payments                                                                      280
  Reduce Gasoline Excise Tax Evasion                                                  282
  Improve Independent Contractor Tax Compliance                                       283
  Expand the Use of IRS’s TIN-Matching Program                                        285
  Improve Administration of the Federal Payment Levy Program                          287
  Enhance Nontax Debt Collection Using Available Tools                                288
Slowing the Long-Term Growth of Social Security and Medicare                          291
CBO Options Where Related GAO Work Is Identified                                      292
  Constrain the Increase in Initial Benefits                                          292
  Raise the Retirement Age                                                            292




 This is a work of the U.S. government and is not subject to copyright protection in the
 United States. It may be reproduced and distributed in its entirety without further
 permission from GAO. However, because this work may contain copyrighted images or
 other material, permission from the copyright holder may be necessary if you wish to
 reproduce this material separately.




Page vii                                         GAO-03-1006 Opportunities for Oversight
A
United States General Accounting Office
Washington, D.C. 20548
                                                                                             Comptroller General
                                                                                             of the United States




                                    August 1, 2003                                                                          Leter




                                    The Honorable Jim Nussle
                                    Chairman
                                    The Honorable John Spratt
                                    Ranking Minority Member
                                    Committee on the Budget
                                    House of Representatives

                                    The Honorable Don Nickles
                                    Chairman
                                    The Honorable Kent Conrad
                                    Ranking Minority Member
                                    Committee on the Budget
                                    United States Senate

                                    This report is submitted pursuant to section 301(e) of the Concurrent
                                    Resolution on the Budget for Fiscal Year 2004,1 which directs the
                                    Comptroller General to submit to the Committees on the Budget a
                                    comprehensive report identifying instances in which the committees of
                                    jurisdiction may make legislative changes to improve the economy,
                                    efficiency, and effectiveness of federal programs within their jurisdiction.

                                    In this report, we highlight opportunities for and specific examples of
                                    legislative and administrative change that might yield budgetary savings.
                                    We identify illustrative examples from GAO work of changes or steps that
                                    would improve the economy, efficiency, and effectiveness of given
                                    programs, sorted by budget function. We indicate whether an example
                                    appeared in our 2002 report, Supporting Congressional Oversight:
                                    Budgetary Implications of Selected GAO Work for Fiscal Year 2003,2 and
                                    whether a Congressional Budget Office (CBO) estimate was included in
                                    that report. Each specific example included in this report is not presented
                                    as the only way to address the significant economy, efficiency, and
                                    effectiveness issues identified in our reviews of federal programs and
                                    operations but rather as one of many possible approaches available to the



                                    1
                                     H.R. Rep. No. 108-71, Sec. 301(e) (2003).
                                    2
                                     U.S. General Accounting Office, Supporting Congressional Oversight: Budgetary
                                    Implications of Selected GAO Work for Fiscal Year 2003, GAO-02-576 (Washington, D.C.:
                                    Apr. 26, 2002).




                                    Page 1                                          GAO-03-1006 Opportunities for Oversight
Congress. The inclusion of a specific example does not mean we endorse it
as the only feasible or appropriate approach.

We drew on GAO’s work that highlights opportunities to improve the
economy, efficiency, and effectiveness of government programs. The report
is based on program design and operational issues that we have identified
in reports for the Congress. Major risks and challenges faced by federal
agencies are summarized in the Performance and Accountability Series.3
The High-Risk Series4 is designed to help the Congress focus its attention
on the most important issues and challenges facing the federal government.

Although we derived the examples presented in this report from our
existing body of work, there are similarities between the specific examples
presented here and those presented by CBO’s annual spending and revenue
options report. To assist the Congress, we also have listed GAO reports
identified as relating to options included in the CBO March 2003 Budget
Options report.5 We included GAO reports if they related to the topic of the
CBO option, regardless of whether our work supported the option or not.

Addressing the myriad of issues reflected in this volume will help improve
economy, efficiency, and effectiveness and reduce costs. The budget
process should prompt us to periodically focus not only on new proposals
but on existing programs. Hard questions need to be asked not only about
the economy and efficiency of our existing programs, but about their need,
fit, relevance, priority and sustainability in the 21st century. Given the fiscal
challenges the United States faces in both the near and the longer term,
tough choices will be required in connection with what government does,
how it does business, and sometimes even who does the federal
government’s business.

We are also sending copies of this report to other interested committees of
the Congress. Copies will be made available to others upon request.




3
 U.S. General Accounting Office, Major Management Challenges and Risks: A
Governmentwide Perspective, GAO-03-95 (Washington, D.C.: January 2003).
4
 U.S. General Accounting Office, High-Risk Series: An Update, GAO-03-119 (Washington,
D.C.: January 2003).
5
Congressional Budget Office, Budget Options (Washington, D.C.: March 2003).




Page 2                                          GAO-03-1006 Opportunities for Oversight
This report was prepared under the coordination of Paul L. Posner,
Managing Director and Susan J. Irving, Director, Federal Budget Analysis,
Strategic Issues, who may be reached at (202) 512-9573 or (202) 512-9142,
respectively. The examples provided in the appendix draw on work from
across GAO. Specific questions about individual examples may be directed
to the GAO contact listed with each example.




David M. Walker
Comptroller General
of the United States




Page 3                                  GAO-03-1006 Opportunities for Oversight
Appendix I

Opportunities to Improve the Economy,                                                                  Appendx
                                                                                                             ies




Efficiency, and Effectiveness of Federal
Programs                                                                                                Append
                                                                                                             x
                                                                                                             Ii




               This appendix is organized by budget function. The following two sections
               are included, where available, for each budget function.

               Examples from Selected GAO Work

               We identify illustrative examples based on GAO’s work that highlight
               opportunities to improve the economy, efficiency, and effectiveness of
               federal programs. We indicate whether an example appeared in our 2002
               report Supporting Congressional Oversight: Budgetary Implications of
               Selected GAO Work for Fiscal Year 20031 and whether a CBO estimate was
               included in that report.

               CBO Options Where Related GAO Work Is Identified

               We list GAO reports identified as relating to options included in the CBO
               March 2003 Budget Options report.2 Only those CBO options for which we
               identified related GAO products are included. We included GAO reports if
               they related to the topic of the CBO option, regardless of whether our work
               supported the option or not.




               1
                U.S. General Accounting Office, Supporting Congressional Oversight: Budgetary
               Implications of Selected GAO Work for Fiscal Year 2003, GAO-02-576 (Washington, D.C.:
               Apr. 26, 2002).
               2
                Congressional Budget Office, Budget Options (Washington, D.C.: March 2003).




               Page 4                                          GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




050 National Defense   Examples from Selected GAO Work

                       Reduce the Number of Carrier Battle Group Expansions and Upgrades

                       Limit Commitment to Production of the F/A-22 Fighter until Operational
                       Testing Is Complete

                       Reassess the Need for the Selective Service System

                       Consolidate Military Exchange Stores

                       Reorganize C-130 Reserve Squadrons

                       Acquire Conventionally Rather Than Nuclear-Powered Aircraft Carriers

                       Improve the Administration of Defense Health Care

                       Seek Additional Opportunities for VA and DOD to Increase Joint Activities
                       to Enhance Services to Beneficiaries and Reduce Costs

                       Continue Defense Infrastructure Reform

                       Reduce Funding for Renovation and Replacement of Military Housing until
                       DOD Completes Housing Needs Assessment

                       Improve DOD Procurement Practices Regarding Canceling Orders

                       Reduce Planned Military Construction Costs for Barracks

                       Take a Strategic Approach to Department of Defense Acquisition of
                       Services

                       Address Overpayments to Defense Contractors

                       CBO Options Where Related GAO Work Is Identified

                       050-05 Cancel the Army’s Comanche Helicopter Program

                       050-10 Reduce Purchases of the Air Force’s F/A-22 Fighter

                       050-11 Slow the Schedule of the F-35 Joint Strike Fighter Program



                       Page 5                                     GAO-03-1006 Opportunities for Oversight
Appendix I
Opportunities to Improve the Economy,
Efficiency, and Effectiveness of Federal
Programs




050-19 Replace Military Personnel in Some Support Positions with Civilian
Employees of the Department of Defense

050-22 Have the Departments of Defense and Veterans Affairs Purchase
Drugs Jointly




Page 6                                     GAO-03-1006 Opportunities for Oversight
                          Appendix I
                          Opportunities to Improve the Economy,
                          Efficiency, and Effectiveness of Federal
                          Programs




Examples from
Selected GAO Work

Reduce the Number of
Carrier Battle Group
Expansions and Upgrades
                          Primary agency                             Department of Defense
                          Accounts                                   Multiple
                          Spending type                              Discretionary
                          Budget subfunction                         051/Department of Defense—Military

                          Aircraft carrier battle groups are the centerpiece of the Navy’s surface
                          force and significantly influence the size, composition, and cost of the fleet.
                          The annualized cost to acquire, operate, and support a single navy carrier
                          battle group is about $2 billion (in fiscal year 2000 dollars) and is likely to
                          increase as older units are replaced and modernized. The Navy has several
                          costly ongoing carrier-related programs: two nuclear-powered Nimitz-class
                          carriers are under construction ($9.6 billion); a research and development
                          program ($3.6 billion) for a new nuclear-powered carrier design is
                          underway; the second ship of the 10-ship Nimitz-class began its 3-year
                          refueling complex overhaul in 2001 ($2.5 billion) and the third ship is
                          scheduled to begin in 2005; AEGIS destroyers are being procured and the
                          next generation of surface combatants is being designed; and carrier-based
                          aircraft are expected to be replaced/upgraded by a new generation of strike
                          fighters and mission support aircraft throughout the next decade.

                          Our analysis indicates that there are opportunities to use less costly
                          options to satisfy many of the carrier battle groups’ traditional roles
                          without unreasonably increasing the risk that U.S. national security would
                          be threatened. For example, one less costly option would be to rely more
                          on battle groups centered around increasingly capable amphibious assault
                          ships, surface combatants and Trident SSGNs for overseas presence and
                          crisis response. In the past, CBO concluded that savings could be achieved
                          if the Congress chose to retire one aircraft carrier, the CVN-70, and one
                          active air wing in 2005.




                          Page 7                                         GAO-03-1006 Opportunities for Oversight
                                 Appendix I
                                 Opportunities to Improve the Economy,
                                 Efficiency, and Effectiveness of Federal
                                 Programs




CBO 5-Year Cost Estimate         Yes.3
Included in GAO’s 2002
Budgetary Implications Report3

Related GAO Products             Force Structure: Options for Enhancing the Navy’s Attack Submarine
                                 Force. GAO-02-97. Washington, D.C.: November 14, 2001.

                                 Navy Aircraft Carriers: Cost-Effectiveness of Conventionally and
                                 Nuclear-Powered Carriers. GAO/NSIAD-98-1. Washington, D.C.: August 27,
                                 1998.

                                 Aircraft Acquisition: Affordability of DOD’s Investment Strategy.
                                 GAO/NSIAD-97-88. Washington, D.C.: September 8, 1997.

                                 Surface Combatants: Navy Faces Challenges Sustaining Its Current
                                 Program. GAO/NSIAD-97-57. Washington, D.C.: May 21, 1997.

                                 Cruise Missiles: Proven Capability Should Affect Aircraft and Force
                                 Structure Requirements. GAO/NSIAD-95-116. Washington, D.C.: April 20,
                                 1995.

                                 Navy’s Aircraft Carrier Program: Investment Strategy Options.
                                 GAO/NSIAD-95-17. Washington, D.C.: January 1, 1995.

                                 Navy Carrier Battle Groups: The Structure and Affordability of the
                                 Future Force. GAO/NSIAD-93-74. Washington, D.C.: February 25, 1993.

GAO Contact                      Henry L. Hinton, Jr., (202) 512-4300




                                 3
                                  Throughout this document, “GAO’s 2002 Budget Implications Report” refers to U.S. General
                                 Accounting Office, Supporting Congressional Oversight: Budgetary Implications of
                                 Selected GAO Work for Fiscal Year 2003, GAO-02-576 (Washington, D.C.: Apr. 26, 2002).




                                 Page 8                                           GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Limit Commitment to
Production of the F/A-22
Fighter until Operational
Testing Is Complete         Primary agency                             Department of Defense
                            Account                                    Aircraft Procurement, Air Force (57-3010)
                            Spending type                              Discretionary
                            Budget subfunction                         051/Department of Defense—Military

                            The fiscal year 2003 Defense Appropriations Act provided funds for low-
                            rate initial production of 20 F/A-22 aircraft, and DOD plans to procure 22
                            aircraft in fiscal year 2004, 24 aircraft in fiscal year 2005, 26 aircraft in fiscal
                            year 2006, and begin full-rate production of 32 aircraft in fiscal year 2007.

                            In several reports over the last 8 years, and as recently as March 2003, GAO
                            concluded that the Department of Defense (DOD) should minimize
                            commitments to F/A-22 production until completion of operational testing,
                            now planned for fiscal year 2004. Limiting initial production rates until
                            completion of operational testing affords the opportunity to confirm the
                            stability and soundness of a new system before committing large amounts
                            of production funding to purchase aircraft. In the past, buying production
                            articles before they could be adequately tested has resulted in buying
                            systems that require modifications to achieve satisfactory performance.
                            The F/A-22 development program did not meet key performance, schedule,
                            and cost goals in fiscal year 2002. We reported in March 2003 that the
                            program continues to address technical problems that have limited the
                            performance of test aircraft, including excessive movement or “buffeting”
                            of the vertical tail fins, weakening of materials in the horizontal tail, and
                            instability of avionics software. Air Force officials cannot predict when
                            they will resolve the avionics problem.

                            Further, commercial and DOD best practices have shown that completing a
                            system’s testing prior to producing significant quantities will substantially
                            lower the risk of costly fixes and retrofits. Conversely, lower production
                            rates could increase average procurement cost over the life of the program
                            and, if the Air Force maintains its plan to procure 276 production aircraft,
                            lead to difficulties in completing the production program within the
                            production cost estimate.

                            Low-rate initial production of 20 aircraft has been approved by the
                            Congress for fiscal year 2003. The Air Force subsequently determined that
                            21 aircraft could be purchased for the amount of funding provided in the



                            Page 9                                         GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                fiscal year 2003 defense appropriations act. To avoid the acceleration of
                                production until completion of operational testing, low-rate initial
                                production could be maintained at 21 aircraft through fiscal year 2004. If
                                the Congress were to limit funding to no more than 21 aircraft in fiscal year
                                2004, and then proceed with the planned acceleration of production to 24
                                aircraft in fiscal year 2005, 26 aircraft in 2006, and 32 aircraft in 2007,
                                budget savings could be achieved.

CBO 5-Year Cost Estimate        No—the number of aircraft associated with this option has increased since
Included in GAO’s 2002          the CBO estimates were published.
Budgetary Implications Report

Related GAO Products            Best Practices: Better Acquisition Outcomes Are Possible If DOD Can
                                Apply Lessons from F/A-22 Program. GAO-03-645T, Washington, D.C.:
                                April 11, 2003.

                                Tactical Aircraft: Status of the F/A-22 Program. GAO-03-603T.
                                Washington, D.C.: April 2, 2003.

                                Tactical Aircraft: DOD Should Reconsider Decision to Increase F/A-22
                                Production Rates While Development Risks Continue. GAO-03-431.
                                Washington, D.C.: March 14, 2003.

                                Tactical Aircraft: DOD Needs to Better Inform Congress about
                                Implications of Continuing F/A-22 Cost Growth. GAO-03-280.
                                Washington, D.C.: February 28, 2003.

                                Tactical Aircraft: F/A-22 Delays Indicate Initial Production Rates Should
                                Be Lower to Reduce Risks. GAO-02-298. Washington, D.C.:
                                March 5, 2002.

                                Tactical Aircraft: Continuing Difficulty Keeping F-22 Production Costs
                                Within the Congressional Limitation. GAO-01-782. Washington, D.C.:
                                July 16, 2001.

                                Tactical Aircraft: F-22 Development and Testing Delays Indicate Need for
                                Limit on Low-Rate Production. GAO-01-310. Washington, D.C.: March 15,
                                2001.

                                Defense Acquisitions: Recent F-22 Production Cost Estimates Exceeded
                                Congressional Limitation. GAO/NSIAD-00-178. Washington, D.C.:
                                August 15, 2000.



                                Page 10                                    GAO-03-1006 Opportunities for Oversight
Appendix I
Opportunities to Improve the Economy,
Efficiency, and Effectiveness of Federal
Programs




F-22 Aircraft: Development Cost Goal Achievable If Major Problems Are
Avoided. GAO/NSIAD-00-68. Washington, D.C.: March 14, 2000.

Defense Acquisitions: Progress in Meeting F-22 Cost and Schedule Goals.
GAO/T-NSIAD-00-58. Washington, D.C.: December 7, 1999.

Fiscal Year 2000 Budget: DOD’s Procurement and RDT&E Programs.
GAO/NSIAD-99-233R. Washington, D.C.: September 23, 1999.

Defense Acquisitions: Progress of the F-22 and F/A-18E/F Engineering
and Manufacturing Development Programs. GAO/T-NSIAD-99-113.
Washington, D.C.: March 17, 1999.

F-22 Aircraft: Issues in Achieving Engineering and Manufacturing
Development Goals. GAO/NSIAD-99-55. Washington, D.C.: March 15, 1999.

1999 DOD Budget: DOD’s Procurement and RDT&E Programs.
GAO/NSIAD-98-216R. Washington, D.C.: August 14, 1998.

F-22 Aircraft: Progress of the Engineering and Manufacturing
Development Program. GAO/T-NSIAD-98-137. Washington, D.C.: March 25,
1998.

F-22 Aircraft: Progress in Achieving Engineering and Manufacturing
Development Goals. GAO/NSIAD-98-67. Washington, D.C.: March 10, 1998.

Aircraft Acquisition: Affordability of DOD’s Investment Strategy.
GAO/NSIAD-97-88. Washington, D.C.: September 8, 1997.

F-22 Restructuring. GAO/NSIAD-97-100BR. Washington, D.C.: February 28,
1997.

Tactical Aircraft: Concurrency in Development and Production of F-22
Aircraft Should Be Reduced. GAO/NSIAD-95-59. Washington, D.C.: April 19,
1995.

Weapons Acquisition: Low-Rate Initial Production Used to Buy Weapon
Systems Prematurely. GAO/NSIAD-95-18. Washington, D.C.: November 21,
1994.

Tactical Aircraft: F-15 Replacement Is Premature As Currently Planned.
GAO/NSIAD-94-118. Washington, D.C.: March 25, 1994.



Page 11                                    GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




GAO Contact   Allen Li, (202) 512-4841




              Page 12                                    GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Reassess the Need for the
Selective Service System

                                Primary agency                             Department of Defense
                                Spending type                              Discretionary
                                Budget subfunction                         054/Defense-related activities

                                No one has been drafted since 1973 and the advent of the all-volunteer
                                force. Since 1980, after the Soviet invasion of Afghanistan, males from ages
                                of 18 through 26 have continued registering with the Selective Service
                                System for a potential draft in the event of a national emergency. However,
                                it would still require congressional action to actually draft anyone into the
                                military. A return to a military draft seems unlikely. One reason for this is
                                that any recruiting shortfalls represent only a minute percentage of the
                                over 13 million males of draft age and it would be very difficult to ensure a
                                fair and equitable draft to cover such shortfalls. The likelihood of the
                                United States engaging in a manpower-intensive conflict in the future is
                                very remote, so alternative approaches to a draft could be devised to fill
                                personnel needs.

                                Supporters of continuing registration maintain that it is a relatively
                                inexpensive insurance policy in case the government underestimates the
                                threat level the U.S. military may face in a future contingency. Supporters
                                also contend that registration maintains the link between the military and
                                society-at-large and reinforces the notion that citizenship involves an
                                obligation to the nation. They also maintain that it would ensure a fair and
                                equitable draft should one need to be reinstated in the future. Nevertheless,
                                it was estimated in 1997 that it would take a little more than a year and cost
                                about $23 million (or about 1 year’s appropriation) to bring the Selective
                                Service System back from a “deep standby” status. In the past, CBO
                                concluded that savings could be achieved if the Congress chose to
                                terminate the Selective Service System.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Selective Service: Cost and Implications of Two Alternatives to the
                                Present System. GAO/NSIAD-97-225. Washington, D.C.: September 10,
                                1997.



                                Page 13                                        GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




GAO Contact   Henry L. Hinton, Jr., (202) 512-4300




              Page 14                                    GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Consolidate Military
Exchange Stores

                                Primary agency                             Department of Defense
                                Accounts                                   Multiple
                                Spending type                              Discretionary
                                Budget subfunction                         051/Department of Defense—Military

                                Since 1968, studies by GAO, the Department of Defense (DOD), and others
                                have concluded that financial benefits could be achieved through
                                consolidation of military exchange stores into a single entity. The Office of
                                the Secretary of Defense in a decision memorandum dated May 9, 2003,
                                decided that a single optimized Armed Service exchange system would best
                                serve the department and exchange patrons. DOD has established a task
                                force to produce, within 24 months, a plan to consolidate the three
                                exchange systems (Army and Air Forces Exchange Service, Navy
                                Exchange, and the Marine Corps Exchange) into one. The consolidation
                                will affect management and “back room” operations of the exchanges.
                                However, it will be transparent to the exchange workers and shoppers as
                                sailors, for example, will still go to a Navy Exchange. The director of this
                                effort believes it is too early in the process to estimate savings from the
                                consolidation. While savings are expected to accrue to the exchange
                                system and benefit Morale, Welfare and Recreation funding, it appears that
                                any savings to appropriation accounts would be limited because the
                                exchanges only indirectly receive benefits from appropriated funds. For
                                example, they do not pay (1) rent for use of properties owned by the U.S.
                                government, (2) the salaries of military personnel working for the
                                exchanges, and (3) utilities associated with overseas exchanges.
                                Significant savings to appropriated funds are likely to result only to the
                                extent that reductions occur in military personnel and facilities. It is not
                                clear at this point to what extent, if any, that will occur as part of this effort.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Defense Management: Industry Practices Can Help Military Exchanges
                                Better Assure That Their Goods Are Not Made by Child or Forced Labor.
                                GAO-02-256. Washington, D.C.: January 31, 2002.




                                Page 15                                        GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Excess Equipment for Former Castle AFB (BXMART). GAO/NSIAD-98-
              94R. Washington, D.C.: February 27, 1998.

              Morale, Welfare, and Recreation: Declining Funds Require DOD to Take
              Action. GAO/NSIAD-94-120. Washington, D.C.: February 28, 1994.

GAO Contact   Barry W. Holman, (202) 512-8412




              Page 16                                    GAO-03-1006 Opportunities for Oversight
                           Appendix I
                           Opportunities to Improve the Economy,
                           Efficiency, and Effectiveness of Federal
                           Programs




Reorganize C-130 Reserve
Squadrons

                           Primary agency                                Department of Defense
                           Accounts                                      Multiple
                           Spending type                                 Discretionary
                           Budget subfunction                            051/Department of Defense—Military

                           Currently, the majority of the Air Force’s C-130 aircraft are in the reserve
                           component—that is, assigned to the Air Force Reserve and the Air National
                           Guard. Typically, reserve component wings are organized in one squadron
                           of 8 C-130 aircraft. However, active Air Force wings flying the same aircraft
                           are generally organized in two to three squadrons of 14 C-130 aircraft.
                           Given this organizational approach, reserve component C-130 aircraft are
                           widely dispersed throughout the continental United States, Hawaii, and
                           Alaska.

                           The Air Force could reduce costs and meet peacetime and wartime
                           commitments if it reorganized its reserve component C-130 aircraft into
                           larger squadrons and wings at fewer locations. These savings would
                           primarily result from fewer people being needed to operate these aircraft.
                           For example, we reported in 1998 that redistributing 16 C-130 aircraft from
                           two 8-aircraft reserve wings to one 16-aircraft reserve wing could save
                           about $11 million dollars annually. This reorganization could eliminate
                           about 155 full-time positions and 245 part-time positions; the decrease in
                           full-time positions is especially significant, since the savings associated
                           with these positions represents about $8 million, or 75 percent of the total
                           savings. Fewer people would be needed in areas such as wing
                           headquarters, logistics, operations, and support group staffs as well as
                           maintenance, support, and military police squadrons.4

                           Several alternatives could be developed to redistribute existing reserve
                           component C-130 aircraft into larger squadrons. Sufficient personnel could
                           be recruited for the larger squadrons, and most locations’ facilities could be
                           inexpensively expanded to accommodate the unit sizes. Overall savings
                           will depend on the organizational model selected, but each should produce


                           4
                            To the extent that alternatives are selected that would cause civilian personnel reductions
                           that exceed the thresholds established in 10 U.S.C. 2687, the department would have to
                           follow the procedures provided in that section.




                           Page 17                                            GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                savings to help make additional funding available for force modernization.
                                The alternative that requires the most reorganizing would increase the
                                squadron size to 16 aircraft for the C-130 by redistributing aircraft from 13
                                C-130 squadrons to other squadrons.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Air Force Aircraft: Reorganizing Mobility Aircraft Units Could Reduce
                                Costs. GAO/NSIAD-98-55. Washington, D.C.: January 21, 1998.

GAO Contact                     Henry L. Hinton, Jr., (202) 512-4300




                                Page 18                                    GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Acquire Conventionally
Rather Than Nuclear-
Powered Aircraft Carriers
                            Primary agency                             Department of Defense
                            Accounts                                   Multiple
                            Spending type                              Discretionary
                            Budget subfunction                         051/Department of Defense—Military

                            Throughout the 1960s and most of the 1970s, the Navy pursued a goal of
                            creating a fleet of nuclear carrier task forces. The centerpiece of these task
                            forces, the nuclear-powered aircraft carrier, would be escorted by nuclear-
                            powered surface combatants and nuclear-powered submarines. In deciding
                            to build nuclear-powered surface combatants, the Navy believed that the
                            greatest benefit would be achieved when all the combatant ships in the task
                            force were nuclear-powered. However, the Navy stopped building nuclear-
                            powered surface combatants after 1975 because of the high cost. The last
                            nuclear-powered surface combatants were decommissioned in the late
                            1990s because they were not cost-effective to operate and maintain.

                            Our analysis shows that both conventional and nuclear aircraft carriers
                            have been effective in fulfilling U.S. forward presence, crisis response, and
                            war-fighting requirements and share many characteristics and capabilities.
                            Conventionally and nuclear-powered carriers both have the same standard
                            air wing and train to the same mission requirements. Each type of carrier
                            offers certain advantages. For example, conventionally powered carriers
                            spend less time in extended maintenance and, as a result, can provide more
                            forward presence coverage. By the same token, nuclear carriers can store
                            larger quantities of aviation fuel and munitions and, as a result, are less
                            dependent upon at-sea replenishment. There was little difference in the
                            operational effectiveness of nuclear and conventional carriers in the 1991
                            Persian Gulf War.

                            The United States maintains a continuous presence in the Pacific region by
                            homeporting a conventionally powered carrier in Japan. If the Navy
                            switches to an all-nuclear carrier force, it would need to homeport a
                            nuclear-powered carrier there to maintain the current level of worldwide
                            overseas presence with a 12-carrier force. Homeporting a nuclear-powered
                            carrier in Japan could prove difficult and costly because of the need for




                            Page 19                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                support facilities, infrastructure improvements, and additional personnel.5
                                The United States would need a larger carrier force if it wanted to maintain
                                a similar level of presence in the Pacific region with nuclear-powered
                                carriers homeported in the United States. During fiscal year 2003, a new
                                nuclear-powered carrier replaced a retiring conventionally powered
                                carrier, leaving a mix of 10 nuclear and 2 conventionally powered carriers.

                                The life-cycle costs—investment, operating and support, and inactivation
                                and disposal costs—are greater for nuclear-powered carriers than
                                conventionally powered carriers. Our analysis, based on historical and
                                projected costs, shows that life-cycle costs for conventionally powered and
                                nuclear-powered carriers (for a notional 50-year service life) are estimated
                                at $14.1 billion and $22.2 billion (in fiscal year 1997 dollars), respectively.

                                In assessing design concepts for the next class of aircraft carriers—and
                                consistent with the Navy’s objectives to reduce life-cycle costs by 20
                                percent—our analysis indicates that national security requirements can be
                                met at less cost with conventionally powered carriers rather than nuclear-
                                powered carriers. In the past, CBO concluded that savings could be
                                achieved if the Congress chose to acquire a conventionally powered carrier
                                in 2007 instead of a nuclear-powered carrier.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Navy Aircraft Carriers: Cost-Effectiveness of Conventionally and
                                Nuclear-Powered Carriers. GAO/NSIAD-98-1. Washington, D.C.: August 27,
                                1998.

                                Nuclear Waste: Impediments to Completing the Yucca Mountain
                                Repository Project. GAO/RCED-97-30. Washington, D.C.: January 17, 1997.

                                Navy Carrier Battle Groups: The Structure and Affordability of the
                                Future Force. GAO/NSIAD-93-74. Washington, D.C.: February 25, 1993.



                                5
                                 The State Department has noted that the entry of nuclear-powered vessels into Japanese
                                ports remains sensitive in Japan and there would have to be careful consultations with the
                                government of Japan should the U.S. Government wish to homeport a nuclear-powered
                                carrier in Japan.




                                Page 20                                           GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Nuclear-Powered Ships: Accounting for Shipyard Costs and Nuclear
              Waste Disposal Plans. GAO/NSIAD-92-256. Washington, D.C.: July 1, 1992.

GAO Contact   Henry L. Hinton, Jr., (202) 512-4300




              Page 21                                    GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Improve the Administration
of Defense Health Care

                                Primary agency                             Department of Defense
                                Account                                    Defense Health Program (97-0130)
                                Spending type                              Discretionary
                                Budget subfunction                         051/Department of Defense—Military

                                Each of the three military departments (Army, Navy, and Air Force)
                                operates its own health care system, providing medical care to active duty
                                personnel, their dependents, retirees, and survivors of military personnel.
                                To a large extent, these separate, costly systems perform many of the same
                                administrative, management, and operational functions.

                                Numerous studies since 1949, with the most recent completed in 2001, have
                                reviewed whether a central entity should be created within the Department
                                of Defense (DOD) for the centralized management and administration of
                                the three systems. Most of these studies encouraged some form of
                                organizational consolidation. A Defense health agency would consolidate
                                the three military medical systems into one centrally managed system,
                                eliminating duplicate administrative, management, and operational
                                functions. No specific budget estimate can be developed until numerous
                                variables, such as the extent of consolidation and the impact on command
                                and support structures, are determined.

                                Although in the past CBO agreed that improving the administration of
                                Defense health care had the potential to create savings, it could not
                                develop a savings estimate without a specific legislative proposal.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Defense Health Care: TRICARE Resource Sharing Program Failing to
                                Achieve Expected Savings. GAO/HEHS-97-130. Washington, D.C.:
                                August 22, 1997.

                                Defense Health Care: Actions Under Way to Address Many TRICARE
                                Contract Change Order Problems. GAO/HEHS-97-141. Washington, D.C.:
                                July 14, 1997.



                                Page 22                                            GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              TRICARE Administrative Prices in the Northwest Region May Be Too
              High. GAO/HEHS-97-149R. Washington, D.C.: June 24, 1997.

              Defense Health Care: New Managed Care Plan Progressing, but Cost and
              Performance Issues Remain. GAO/HEHS-96-128. Washington, D.C.:
              June 14, 1996.

              Defense Health Care: Despite TRICARE Procurement Improvements,
              Problems Remain. GAO/HEHS-95-142. Washington, D.C.: August 3, 1995.

              Defense Health Care: DOD’s Managed Care Program Continues to Face
              Challenges. GAO/T-HEHS-95-117. Washington, D.C.: March 28, 1995.

              Defense Health Care: Issues and Challenges Confronting Military
              Medicine. GAO/HEHS-95-104. Washington, D.C.: March 22, 1995.

GAO Contact   Marjorie E. Kanof, (202) 512-7101




              Page 23                                    GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Seek Additional
Opportunities for VA and
DOD to Increase Joint
Activities to Enhance       Primary agencies                           Department of Defense
                                                                       Department of Veterans Affairs
Services to Beneficiaries
                            Accounts                                   Multiple
and Reduce Costs
                            Spending type                              Discretionary
                            Budget subfunctions                        Multiple

                            Together, the Department of Veterans Affairs (VA) and the Department of
                            Defense (DOD) provide health care services to more than 12 million
                            beneficiaries at a cost of about $34 billion annually. To promote more cost-
                            effective use of these health care resources and more efficient delivery of
                            care, in 1982 the Congress passed the VA and DOD Health Resources
                            Sharing and Emergency Operations Act (Sharing Act). Specifically, the act
                            authorizes VA medical centers (VAMC) and military treatment facilities
                            (MTF) to become partners and enter into sharing agreements to buy, sell,
                            and barter medical and support services.

                            VA and DOD continue to be hampered by long-standing barriers, including
                            inconsistent reimbursement and budgeting policies and burdensome
                            agreement approval processes. These long-standing barriers, along with
                            changes in how VA and DOD provide medical care, present challenges for
                            future collaboration and cost efficiencies. Although VA and DOD have
                            taken some actions to address these barriers and seek more opportunities
                            to maximize resources, challenges still remain. In a February 2002 staff
                            report to the House Committee on Veterans’ Affairs, new opportunities for
                            enhancing sharing authority between the VA and DOD were discussed and
                            legislation recommended to achieve more VA and DOD resource sharing.
                            Further, in May 2003, the President’s Task Force to Improve Health Care
                            Delivery For Our Nation’s Veterans submitted its final report, which
                            includes a series of recommendations to remove barriers and improve
                            collaboration between VA and DOD. It is too early to determine what
                            impact the findings and recommendations of the Presidential Task Force
                            will have on joint activities between VA and DOD.

                            VA and DOD sharing partners generally believe the sharing program yielded
                            benefits in both dollar savings and qualitative gains. Recognizing joint
                            purchasing as an area where efficiencies could be achieved, in June 1999,
                            VA and DOD signed a memorandum of agreement to combine their buying
                            power and eliminate contracting redundancies for certain items, including



                            Page 24                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                pharmaceuticals and medical and surgical supplies. In 2001, we reported
                                that VA and DOD saved over $170 million annually by jointly procuring
                                pharmaceuticals. However, as we testified in June 2002, VA and DOD had
                                not awarded joint contracts for medical and surgical supplies, as
                                envisioned by their memorandum of agreement. In fiscal year 2001, VA
                                spent about $500 million and DOD spent about $240 million for medical and
                                surgical supplies. Our analysis of about 100 identical medical and surgical
                                items that VA and DOD now contract for separately indicates that jointly
                                purchasing these items will yield additional savings, although we were
                                unable to quantify the full potential. For example, in fiscal year 2001, if VA
                                had collaborated with DOD and obtained a discounted price from one of
                                DOD’s regions for needle and syringe disposal containers, VA could have
                                saved tens of thousands of dollars on this one item alone. Similarly, DOD
                                could have realized additional savings if it had obtained VA’s lower national
                                contract price on one type of intravenous tubing.

                                While it is difficult to quantify the potential savings that joint contracting
                                and other shared approaches could yield, as we reported in 2002, these
                                savings could be meaningful given that VA’s and DOD’s separate
                                approaches to procuring surgical and medical supplies have yielded an
                                estimated $19 million annually in savings. However, much needs to be done
                                to take advantage of additional savings opportunities. At this point, neither
                                department has accurate, reliable, and comprehensive procurement
                                information—a basic requirement for identifying potential medical and
                                surgical items to standardize. Furthermore, because DOD has opted to
                                follow a regional rather than a national approach to standardization,
                                opportunities for national joint procurement will be more difficult to
                                achieve.

                                Other types of potential sharing exist to maximize each system’s capacities
                                and result in the most effective delivery of health care. For example, having
                                DOD use VA’s consolidated mail outpatient pharmacies could yield
                                additional significant savings. VA and DOD need to continue to work
                                together to determine an appropriate course of action to ensure that
                                resource-sharing opportunities are realized to the maximum extent
                                possible.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report




                                Page 25                                    GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




Related GAO Products   VA and Defense Health Care: Potential Exists for Savings through Joint
                       Purchasing of Medical and Surgical Supplies. GAO-02-872T. Washington,
                       D.C.: June 26, 2002.

                       DOD and VA Pharmacy: Progress and Remaining Challenges in Jointly
                       Buying and Mailing Out Drugs. GAO-01-588. Washington, D.C.: May 25,
                       2001.

                       DOD and VA Health Care: Jointly Buying and Mailing Out
                       Pharmaceuticals Could Save Millions of Dollars. GAO/T-HEHS-00-121.
                       Washington, D.C.: May 25, 2000.

                       VA and Defense Health Care: Rethinking of Resource Sharing Strategies
                       Is Needed. GAO/T-HEHS-00-117. Washington, D.C.: May 17, 2000.

                       VA and Defense Health Care: Evolving Systems Require Rethinking of
                       Resource Sharing Strategies. GAO/HEHS-00-52. Washington, D.C.: May 17,
                       2000.

GAO Contact            Cynthia A. Bascetta, (202) 512-7101




                       Page 26                                    GAO-03-1006 Opportunities for Oversight
                        Appendix I
                        Opportunities to Improve the Economy,
                        Efficiency, and Effectiveness of Federal
                        Programs




Continue Defense
Infrastructure Reform

                        Primary agency                                 Department of Defense
                        Accounts                                       Multiple
                        Spending type                                  Discretionary
                        Budget subfunction                             051/Department of Defense—Military

                        Although the Department of Defense (DOD) has made significant
                        reductions in defense force structure and military spending since the end of
                        the Cold War, it has not achieved commensurate reductions in
                        infrastructure6 costs. We previously reported that the proportion of planned
                        infrastructure funding in DOD’s budgets would remain relatively constant
                        at about 60 percent through 2005. DOD recognized that it must make better
                        use of its scarce resources and announced a major reform effort—the
                        Defense Reform Initiative (DRI). This effort began in November 1997. A
                        major thrust of the DRI was to reduce unneeded infrastructure, primarily
                        through a number of initiatives aimed at substantially streamlining and
                        improving the economy and efficiency of DOD’s business operations and
                        support activities. The resulting savings were expected to help DOD
                        modernize its war fighting forces.

                        While the administration has not continued the formal DRI program, it has
                        recognized the need to continue reform efforts. Secretary of Defense
                        Rumsfeld announced on June 18, 2001, the creation of two new
                        management committees to recommend ways to improve DOD’s business
                        activities and transform the U.S. military into a 21st century fighting force.
                        The Senior Executive Committee, which includes the Secretary and deputy
                        secretaries of Defense and the service secretaries, is expected to meet
                        monthly and use its members’ unique qualifications as business leaders to
                        recommend changes to DOD’s business practices. The second committee,
                        the Business Initiative Council, also includes the service secretaries but is
                        chaired by the Under Secretary of Defense for Acquisition, Technology, and
                        Logistics. Its mission is to recommend good business practices and achieve
                        cost savings that will help pay for other DOD priorities. Although the


                        6
                         DOD defines infrastructure as those activities that provide support services to mission
                        programs, such as combat forces, and primarily operate from fixed locations. They include
                        such program elements as installation support, acquisition infrastructure, central logistics,
                        central training, central medical, and central personnel.




                        Page 27                                            GAO-03-1006 Opportunities for Oversight
Appendix I
Opportunities to Improve the Economy,
Efficiency, and Effectiveness of Federal
Programs




agendas of these committees are not clear at this time, their members have
endorsed several initiatives that were part of the DRI program (e.g., family
housing and utilities privatization) and indicated that they would consider
25 other areas that impact readiness and quality of life. They also
emphasized that the committees do not intend to conduct another study.
Rather, they will execute those initiatives or ideas that have already been
researched and offer opportunities to fundamentally change DOD’s
business practices and reduce infrastructure costs.

Despite the change in the management structure, a number of old
initiatives continue. However, progress in achieving the goals is mixed, as
the following illustrate.

• A major efficiency initiative is to subject 226,000 government positions
  to public-private competition using OMB Circular A-76 or to subject
  those positions to alternative sourcing such as partnering or divestiture.
  Competitive sourcing is one of the five governmentwide initiatives in the
  President’s Management Agenda. Under this initiative, OMB has
  directed agencies to compete 15 percent of positions deemed
  commercial in their fiscal year 2000 Federal Activities Inventory Reform
  Act inventories by the end of fiscal year 2003, with the ultimate goal of
  at least 50 percent through fiscal year 2008. DOD expects that they will
  meet these goals predominately through A-76 competitions. DOD has
  not attached savings targets to these goals, although it has in the past.
  Nevertheless, we have noted that these efforts can produce significant
  savings regardless of whether governmental organizations or private
  contractors win the competitions. However, we have raised questions
  about the precision of DOD’s past savings estimates and the likelihood
  that the savings will not be realized as quickly as DOD projected.

• DOD has initiated a program to demolish and dispose of over 80 million
  square feet of excess buildings on military facilities. The military
  services were each given a demolition goal and expect to meet their
  goals and complete the program by 2003.

• Closing unneeded research development test and evaluation (RDT&E)
  facilities has proved to be more difficult. DOD’s RDT&E infrastructure
  consists of 131 facilities that develop and test military technologies.
  Over the years, DOD has tried to reduce the size of its RDT&E
  infrastructure. In addition, DOD reduced its RTD&E personnel by about
  40,000 between fiscal years 1990 and 1997, saving an estimated
  $2.4 billion annually in personnel costs. Despite these reductions, the



Page 28                                    GAO-03-1006 Opportunities for Oversight
Appendix I
Opportunities to Improve the Economy,
Efficiency, and Effectiveness of Federal
Programs




   RDT&E infrastructure continues to have excess capacity. DOD
   estimates that excess capacity, in terms of square footage, is between 20
   percent and 60 percent, depending on the military service and the
   method of estimation used. Moreover, DOD has stated that estimated
   personnel reductions are somewhat inflated because many government
   employees were replaced by on-site contractor employees who are
   conducting essentially the same tasks as government employees.

• Privatizing utilities has also proved to be more complicated and costly
  than anticipated and, consequently, progress has been very limited. The
  department established the goal of privatizing utility systems on military
  bases by September 30, 2003. However, as of March 2003, almost 6 years
  after the goal was established, DOD had privatized only 38 of the
  approximately 1,700 systems being considered for privatization under
  existing legislation. The effort has proven to be more complex, time-
  consuming, and expensive than originally anticipated. Although exact
  costs are not known, DOD estimates that it could cost hundreds of
  millions of dollars to complete required feasibility and environmental
  studies and upgrade the facilities to make them attractive to private
  investors. Additionally, instead of realizing significant savings, as once
  envisioned, the program might instead increase costs to the
  department’s operations and maintenance budgets to pay for privatized
  utility services. By not privatizing, however, DOD faces large capital
  costs (possibly in the billions) to repair the utility systems and ensure
  they continue to operate at an acceptable level. DOD sees privatization
  as a way to use private resources to finance these needed capital repairs
  and to get out of a business that is clearly not central to its mission.

• Privatizing family housing through private sector financing, ownership,
  operation, and maintenance has also experienced delays. Since the
  program began, the department has awarded a small number of
  contracts. DOD has not implemented a departmentwide standard
  process for determining housing requirements. DOD and the services
  have worked to develop the framework for this process, but technical
  concerns—such as standards for affordable housing and commuting
  distance—have stalled its adoption. Also, DOD’s life-cycle cost analyses
  for housing privatization have been incomplete and inaccurate, and have
  overstated savings. Moreover, increasing military members’ housing
  allowance to secure private sector housing may be a better alternative
  to more quickly increase the availability of quality housing to military
  members.




Page 29                                    GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                The administration also continues to emphasize the need for at least one
                                additional base realignment and closure round in 2005 to reduce unneeded
                                infrastructure and free up funds for readiness, weapon modernization, and
                                other needs.7 DOD projects that additional base closure rounds could save
                                several billion dollars annually once realignment and closure actions are
                                completed and the costs of implementing the actions are offset by savings.
                                While we have previously raised questions about the precision of DOD’s
                                savings estimate, our work has nevertheless shown that the department
                                will realize net annual recurring savings once initial investment costs from
                                implementing realignment and closure decisions have been offset.

                                Undoubtedly, opportunities remain for DOD to reduce its infrastructure
                                costs through additional strategic sourcing, streamlining, consolidating,
                                and possibly privatizing. However, DOD needs a plan and investment
                                strategy to maximize the results of these efforts. In particular, a
                                comprehensive integrated consolidation and downsizing plan that sets
                                goals, identifies specific initiatives, and sets priorities across DOD is
                                needed to guide and sustain reform efforts. Ongoing DRI initiatives from
                                the previous administration as well as initiatives involving the 25 business
                                areas being evaluated by the Business Initiatives Council need to be
                                addressed by the plan. Savings for this option cannot be fully estimated
                                until such a plan is developed.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Defense Management: New Management Reform Program Still Evolving.
                                GAO-03-58. Washington, D.C.: December 12, 2002.

                                Major Management Challenges and Program Risks, Department of
                                Defense. GAO-01-244. Washington, D.C.: January 2001.

                                Future Years Defense Program: Risks in Operation and Maintenance and
                                Procurement Programs. GAO-01-33. Washington, D.C.: October 5, 2000.




                                7
                                 The National Defense Authorization Act for Fiscal Year 2002 authorized another Base
                                Realignment and Closure (BRAC) round to be conducted in 2005.




                                Page 30                                          GAO-03-1006 Opportunities for Oversight
Appendix I
Opportunities to Improve the Economy,
Efficiency, and Effectiveness of Federal
Programs




Defense Infrastructure: Improved Performance Measures Would Enhance
Defense Reform Initiative. GAO/NSIAD-99-169. Washington, D.C.:
August 4, 1999.

Defense Reform Initiative: Organization, Status and Challenges.
GAO/NSIAD-99-87. Washington, D.C.: April 21, 1999.

Defense Reform Initiative: Progress, Opportunities, and Challenges.
GAO/T-NSIAD-99-95. Washington, D.C.: March 2, 1999.

Force Structure: A-76 Not Applicable to Air Force 38th Engineering
Installation Wing Plan. GAO/NSIAD-99-73. Washington, D.C.: February 26,
1999.

Major Management Challenges and Program Risks: Department of
Defense. GAO/OCG-99-4. Washington, D.C.: January 1999.

Army Industrial Facilities: Workforce Requirements and Related Issues
Affecting Depots and Arsenals. GAO/NSIAD-99-31. Washington, D.C.:
November 30, 1998.

Military Bases: Review of DOD’s 1998 Report on Base Realignment and
Closure. GAO/NSIAD-99-17. Washington, D.C.: November 13, 1998.

Defense Infrastructure: Challenges Facing DOD in Implementing Reform
Initiatives. GAO/T-NSIAD-98-115. Washington, D.C.: March 18, 1998.

Best Practices: Elements Critical to Successfully Reducing Unneeded
RDT&E Infrastructure. GAO/NSIAD/RCED-98-23. Washington, D.C.:
January 8, 1998.

Future Years Defense Program: DOD’s 1998 Plan Has Substantial Risk in
Execution. GAO/NSIAD-98-26. Washington, D.C.: October 23, 1997.

1997 Defense Reform Bill: Observations on H.R. 1778. GAO/T-NSIAD-97-
187. Washington, D.C.: June 17, 1997.

Defense Infrastructure: Demolition of Unneeded Buildings Can Help
Avoid Operating Costs. GAO/NSIAD-97-125. Washington, D.C.: May 13,
1997.




Page 31                                    GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              DOD High-Risk Areas: Eliminating Underlying Causes Will Avoid
              Billions of Dollars in Waste. GAO/T-NSIAD/AIMD-97-143. Washington,
              D.C.: May 1, 1997.

              Defense Acquisition Organizations: Linking Workforce Reductions With
              Better Program Outcomes. GAO/T-NSIAD-97-140. Washington, D.C.:
              April 8, 1997.

              Defense Budget: Observations on Infrastructure Activities. GAO/NSIAD-
              97-127BR. Washington, D.C.: April 4, 1997.

GAO Contact   Henry L. Hinton, Jr., (202) 512-4300




              Page 32                                    GAO-03-1006 Opportunities for Oversight
                          Appendix I
                          Opportunities to Improve the Economy,
                          Efficiency, and Effectiveness of Federal
                          Programs




Reduce Funding for
Renovation and
Replacement of Military
Housing until DOD         Primary agency                             Department of Defense
Completes Housing         Accounts                                   Multiple
Assessment                Spending type                              Discretionary
                          Budget subfunction                         051/Department of Defense—Military

                          One of the Department of Defense’s (DOD’s) most pressing problems is its
                          outsized and decaying infrastructure, and this problem is prominent in the
                          family housing program. By DOD’s March 2002 estimates, about 60 percent
                          of military housing is inadequate and would require as much as $16 billion
                          to renovate or replace using traditional military construction. Efforts to use
                          private contractors to build and operate housing are off to a slow start and
                          may require a long-term (50 years or more) commitment from the
                          government. DOD’s policy is to rely on the private sector first for housing,
                          but military members that receive a cash allowance to live in private sector
                          housing must often pay out-of-pocket costs also. These additional costs
                          have been a significant disincentive for living in civilian housing. However,
                          in 2001, an initiative started to eliminate the service members’ out-of-
                          pocket costs for living in civilian housing by fiscal year 2005. While the full
                          impact of this initiative on military housing requirements is not known, it
                          will provide added incentive for service members to move into civilian
                          housing, thereby reducing the potential need for DOD constructed housing.

                          Despite efforts to improve the quality and availability of housing for
                          military families, DOD has not implemented a departmentwide standard
                          process for determining military housing requirements. A requirements-
                          setting process that first considers the housing available around
                          installations would likely decrease the amount of needed military housing.
                          Without an accurate requirements-setting process based on the availability
                          of private sector housing, DOD will continue to have inadequate
                          information with which to make decisions about where it should renovate,
                          build, or seek to privatize military housing. Increasing the housing
                          allowance heightens the urgency for a consistent process to determine
                          military housing requirements because it is expected to increase demand
                          for civilian housing, and lessen the demand for military housing.
                          Considerable evidence suggests that it is less expensive to provide
                          allowances for military personnel to live within the civilian market than to
                          provide military housing. While overall program costs are increasing
                          significantly over the short term to cover increased allowances, DOD could



                          Page 33                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                save money in the longer term by encouraging more personnel to move into
                                civilian housing. In the meantime, without an accurate determination of
                                military housing needs, the department may spend millions of dollars to
                                construct, renovate, or privatize housing that in some locations is
                                unnecessary.

                                In order to better ensure that DOD’s renovation and replacement of military
                                housing is needed, the Congress may wish to reduce spending on
                                noncritical housing construction and renovation until DOD completes a full
                                needs assessment to determine if less expensive alternatives exist in the
                                private market. Such a needs assessment would better enable DOD to
                                target its limited financial resources to where military housing needs are
                                most immediate. In the past, CBO could not estimate the savings for this
                                option unless the funds needed for noncritical construction and renovation
                                projects were identified. Although CBO agreed some savings would result
                                from this option, it estimated that some of those savings would be offset in
                                future years by additional spending for projects that are delayed but
                                ultimately funded.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Military Housing: DOD Needs to Address Long-Standing Requirements
                                Determination Problems. GAO-01-889. Washington, D.C.: August 3, 2001.

GAO Contact                     Barry W. Holman, (202) 512-8412




                                Page 34                                    GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Improve DOD Procurement
Practices Regarding
Canceling Orders
                                Primary agency                             Department of Defense
                                Accounts                                   Multiple
                                Spending type                              Discretionary
                                Budget subfunction                         051/Department of Defense—Military

                                As of September 30, 2001, Department of Defense (DOD) records showed
                                that the department had inventory on order valued at about $1.6 billion that
                                would not have been ordered based on current requirements. We have
                                issued several reports in the past few years highlighting weaknesses in the
                                department’s requirements determination processes for materials and its
                                procedures for canceling orders for items that are no longer needed. For
                                example, we reported in May 2001 that the Army was unable to accurately
                                identify its requirements for war reserve spare parts because (1) it was not
                                using the best available data concerning the rate at which spares would be
                                consumed during wartime and (2) a potential mismatch existed between
                                how the Army determined spare parts requirements for war reserves and
                                how the Army plans to repair equipment on the battlefield.

                                Additional budgetary savings in this area can be anticipated because the
                                department has a number of initiatives underway to better define spare
                                parts requirements and to more efficiently cancel orders for items it
                                determines are no longer needed.

                                The Congress may wish to continue to monitor the DOD’s annual reports
                                on the value of its unneeded inventory in order to ensure that the value
                                continues to decrease. In addition, the Congress could consider requiring
                                that the department’s logistics transformation initiatives include
                                (1) enhancements to its models for computing inventory requirements to
                                ensure greater accuracy and (2) more efficient procedures for canceling
                                orders it determines are no longer needed.

CBO 5-Year Cost Estimate        No, this is a new example. CBO could not develop an estimate for this
Included in GAO’s 2002          example.
Budgetary Implications Report

Related GAO Product             Major Management Challenges and Program Risks: Department of
                                Defense. GAO-03-98. Washington, D.C.: January 2003.



                                Page 35                                        GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




GAO Contact   William Solis, (202) 512-8365




              Page 36                                    GAO-03-1006 Opportunities for Oversight
                          Appendix I
                          Opportunities to Improve the Economy,
                          Efficiency, and Effectiveness of Federal
                          Programs




Reduce Planned Military
Construction Costs for
Barracks
                          Primary agency                             Department of Defense
                          Accounts                                   Multiple
                          Spending type                              Discretionary
                          Budget subfunction                         051/Department of Defense—Military

                          In January 2003, GAO reported that over the next few years the military
                          services plan to eliminate barracks with gang latrines and provide private
                          sleeping rooms (to meet the Department of Defense’s (DOD) 1+1 barracks
                          design standard) for all permanent party service members. The Navy has
                          an additional goal to provide barracks for sailors who currently live aboard
                          ships when in homeport. To implement these goals, the services plan to
                          spend about $6 billion over the next 7 years to construct new barracks.

                          GAO reported that the DOD Housing Management manual, which
                          provides policy guidance about who should live in barracks, appears to be
                          out of date and is under revision, and the military services have adopted
                          different barracks occupancy requirements. The rationale for the services’
                          requirements, and in particular for the requirement that more experienced
                          junior service members live in barracks, appears to be a matter of military
                          judgment and preference with less emphasis on systematic, objective
                          analyses. Requiring more personnel (more pay grades) to live in barracks
                          than is justified results in increased barracks program and construction
                          costs and may be inconsistent with DOD’s policy to maximize reliance on
                          civilian housing to the extent this policy is applied to barracks. There are
                          also quality-of-life implications because most junior service members
                          prefer to live off base. GAO reported that the timely resolution of these
                          matters could potentially affect future budget decisions by reducing the
                          number of new barracks to construct.

                          GAO recommended that DOD revise its barracks occupancy guidance
                          based, at least in part, on the results of objective, systematic analyses to
                          determine who should be required to live in barracks on base or permitted
                          to reside off base and seek to ensure greater consistency in requirements
                          among the military services to the extent practical. DOD agreed, in
                          principle, to base the department’s barracks policy revision and the
                          services’ barracks occupancy requirements—at least in part—on the
                          results of systematic analyses, but left unclear the extent to which it is
                          likely to do so. GAO continues to believe that, given the variations noted in



                          Page 37                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                the report, the services requirements determinations should be supported
                                with more objective analyses to the extent practical. If the Congress
                                required DOD to revise its barracks occupancy guidance according to GAO
                                recommendations, then future construction and operation costs for
                                barracks could be significantly lowered.

CBO 5-Year Cost Estimate        No, this is a new example.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Military Housing: Opportunity for Reducing Planned Military
                                Construction Costs for Barracks. GAO-03-257R. Washington, D.C.:
                                January 7, 2003.

GAO Contact                     Barry W. Holman, (202) 512-8412




                                Page 38                                    GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Take a Strategic Approach
to Department of Defense
Acquisition of Services
                            Primary agency                             Department of Defense
                            Accounts                                   Multiple
                            Spending type                              Discretionary
                            Budget subfunction                         051/Department of Defense—Military

                            Over the last decade, much of the Department of Defense’s (DOD)
                            management control of the billions it has spent in procuring services has
                            been inefficient and ineffective. Today, DOD spending on a wide range of
                            services—such as information technology, administrative support, and
                            research and development—is approaching $100 billion annually. All too
                            often, our work—and the work of the DOD Inspector General—has found
                            that DOD organizations have not clearly defined service contract
                            requirements nor adequately pursued competition. Award of these
                            contracts has been widely dispersed, and DOD or the military services have
                            had limited control on a servicewide or DOD-wide basis. Recent legislation
                            requires DOD to improve procurement practices to achieve savings and
                            other benefits.

                            Like the federal government, private companies increasingly rely on
                            services and also struggle with methods to better manage their purchasing.
                            To reduce costs and more effectively procure services, many companies
                            have adopted a strategic approach—centralizing and reorganizing their
                            operations to get the best value for the company as a whole—that is based
                            on the implementation of a variety of best practices. These range from
                            learning much more about their service spending to buying services on an
                            enterprisewide rather than business unit basis.

                            A strategic approach pulls together participants from a variety of places
                            within an organization who recommend changes that can constrain rising
                            acquisition costs. These changes can include analyzing spending to identify
                            opportunities to leverage their buying power; instituting companywide
                            purchasing of specific services; reshaping a decentralized process to follow
                            a more center-led, strategic approach; and increasing the involvement of
                            the enterprise procurement organization, including working across units to
                            help identify service needs, select providers, and manage contractor
                            performance.




                            Page 39                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                Studies have reported significant cost savings in the private sector, with
                                some companies achieving reported savings of 10 to 20 percent of their
                                total procurement costs through the use of a strategic approach to buying
                                goods and services. A recent Purchasing Magazine poll finds that
                                companies employing procurement best practices—including employing
                                effective spend analysis processes—are routinely delivering a 3 percent to
                                7 percent savings on their procurement costs.

                                One option for achieving significant savings is for DOD to adopt the very
                                same strategic approach and practices employed by the private sector. In
                                response to recent legislation requiring management improvements in
                                service contracts, DOD is beginning a pilot to analyze spending data from a
                                DOD-wide perspective. The pilot is expected to identify 5 to 10 categories
                                of smaller service requirements that can be consolidated for large-scale
                                savings opportunities and other efficiencies over the current decentralized
                                contracting environment. Although moving in the right direction, DOD has
                                not yet adopted best practices to the same extent as the companies we
                                studied. Whether DOD can adopt these practices depends on its ability to
                                make long-term management changes necessary to implement a more
                                strategic approach to service contracts. DOD cites a number of challenges
                                that may hamper adoption of these practices. These include the size and
                                complexity of DOD’s service needs, the fragmentation of spending data
                                across multiple financial and procurement systems, and socioeconomic
                                goals for contracting with small businesses that may constrain its ability to
                                consolidate smaller requirements into larger contracts.

                                While seemingly daunting, each of the challenges to be faced by DOD has
                                been faced and overcome by private sector companies. Given that DOD’s
                                spending on service contracts is approaching $100 billion annually, the
                                potential benefits of overcoming the challenges and using best practices to
                                establish an effective spending analysis program are significant—achieving
                                total spending perspective across DOD; making the business case for
                                collaboration in joint purchasing rather than fragmented purchasing;
                                organizing an effective management structure to assign accountability and
                                exercise oversight; and identifying potentially billions of dollars in
                                procurement savings opportunities by leveraging buying power.

CBO 5-Year Cost Estimate        No, this is a new example. CBO could not develop an estimate for this
Included in GAO’s 2002          example.
Budgetary Implications Report




                                Page 40                                    GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




Related GAO Products   Best Practices: Improved Knowledge of DOD Service Contracts Could
                       Reveal Significant Savings. GAO-03-661. Washington, D.C.: June 10, 2003.

                       Sourcing and Acquisition: Challenges Facing the Department of Defense.
                       GAO-03-574T. Washington, D.C.: March 19, 2003.

                       Major Management Challenges and Program Risks: Department of
                       Defense. GAO-03-98. Washington, D.C.: January 2003.

                       Best Practices: Taking a Strategic Approach Could Improve DOD’s
                       Acquisition of Services. GAO-02-230. Washington, D.C.: January 18, 2002.

                       Contract Management: Trends and Challenges in Acquiring Services.
                       GAO-01-753T. Washington, D.C.: May 22, 2001.

GAO Contact            David E. Cooper, (617) 788-0555




                       Page 41                                    GAO-03-1006 Opportunities for Oversight
                          Appendix I
                          Opportunities to Improve the Economy,
                          Efficiency, and Effectiveness of Federal
                          Programs




Address Overpayments to
Defense Contractors

                          Primary agency                                Department of Defense
                          Accounts                                      Multiple
                          Spending type                                 Discretionary
                          Budget subfunctions                           Multiple

                          Ensuring prompt, proper, and accurate payments is a key element of a
                          sound contract management process. Yet, for the Department of Defense
                          (DOD), completing such basic tasks has long been a challenge. GAO first
                          reported problems with contractor overpayments in 1994. That report, and
                          those issued subsequently, noted that contractors were refunding hundreds
                          of millions of dollars to DOD each year, for a total of about $6.7 billion
                          between fiscal year 1994 and 2001. GAO also found that a substantial
                          portion of overpayments was not repaid promptly—in some cases for
                          years. As an example, in a 1999 review of 13 contractors, GAO found that it
                          took about a year, on average, before overpayments of $56.2 million were
                          refunded to DOD. The time taken for repayment ranged from 2 weeks to
                          nearly 6 years.

                          While DOD has a number of initiatives underway to address its payment
                          problems, it will be some time before the problems are resolved. Until then,
                          DOD contractors will continue receiving a sizable amount of cash beyond
                          what is intended to finance and pay for the goods and services DOD is
                          purchasing. In effect, such overpayments provide an interes-free loan to
                          contractors.

                          In December 2001, in response to GAO’s work, the Federal Acquisition
                          Regulation (FAR) was revised to require contractors receiving
                          overpayments on invoice payments to notify the government and seek
                          instructions for disposing of the overpayment. However, the revision does
                          not address overpayments stemming from financing payments8—although
                          GAO found that most overpayments involve contracts with financing


                          8
                           Contract payments involve payments for the delivery of goods and services and financing
                          payments. Financing payments include (1) progress payments to cover a contractor’s costs
                          as they are incurred during the construction of facilities or the production of major weapons
                          systems and (2) performance-based payments that are based on the accomplishment of
                          particular events or milestones—typically used on production contracts.




                          Page 42                                            GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                payments. In June 2003, the Civilian Agency Acquisition Council and the
                                Defense Acquisition Regulations Council were proposing to require
                                contractors to notify the government when they received overpayments
                                stemming from either invoice or financing payments on commercial item
                                and non-commercial item contracts.

                                While we have recommended that the Secretary of Defense require
                                contractors to promptly notify the government of overpayments made to
                                them, given the extent of the overpayment problem, one option is for the
                                Congress to require contractors to notify the government of overpayments
                                when they become aware of them, for all types of contracts, and to return
                                the money promptly upon becoming aware of the overpayments.
                                Additional steps could be taken to create incentives for contractors to
                                refund money they have not earned. For example, a requirement could be
                                established for contractors to pay interest on overpayments at the
                                discretion of DOD on a facts and circumstances basis if they do not return
                                the money promptly.

CBO 5-Year Cost Estimate        No, this is a new example. However, CBO indicated it could probably make
Included in GAO’s 2002          an estimate for this example.
Budgetary Implications Report

Related GAO Products            Major Management Challenges and Program Risks: Department of
                                Defense. GAO-03-98. Washington, D.C.: January 2003.

                                Financial Management: Coordinated Approach Needed to Address the
                                Government’s Improper Payments Problems. GAO-02-749. Washington,
                                D.C.: August 9, 2002.

                                DOD Contract Management: Overpayments Continue and Management
                                and Accounting Issues Remain. GAO-02-635. Washington, D.C.: May 30,
                                2002.

                                Department of Defense: Status of Achieving Outcomes and Addressing
                                Major Management Challenges. GAO-01-783. Washington, D.C.: June 25,
                                2001.

                                Contract Management: Excess Payments and Underpayments Continue
                                to Be a Problem at DOD. GAO-01-309. Washington, D.C.: February 22, 2001.




                                Page 43                                    GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              DOD Contract Management: Greater Attention Needed to Identify and
              Recover Overpayments. GAO/NSIAD-99-131. Washington, D.C.: July 19,
              1999.

              Recovery Auditing: Reducing Overpayments, Achieving Accountability,
              and the Government Waste Corrections Act of 1999. GAO/T-NSIAD-99-213.
              Washington, D.C.: June 29, 1999.

              DOD Procurement: Millions in Contract Payment Errors Not Detected
              and Resolved Promptly. GAO/NSIAD-96-8. Washington, D.C.: October 6,
              1995.

GAO Contact   David E. Cooper, (617) 788-0555




              Page 44                                    GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




                             9
CBO Options Where
Related GAO Work Is
Identified9

050-05 Cancel the Army’s
Comanche Helicopter
Program

Related GAO Product          Defense Acquisition: Comanche Program Objectives Need to Be Revised
                             to More Achievable Levels. GAO-01-450. Washington, D.C.: June 7, 2001.

GAO Contact                  William Graveline, (256) 922-7514



050-10 Reduce Purchases of
the Air Force’s F/A-22
Fighter

Related GAO Products         Tactical Aircraft: DOD Should Reconsider Decision to Increase F/A-22
                             Production Rates While Development Risks Continue. GAO-03-431.
                             Washington, D.C.: March 14, 2003.

                             Tactical Aircraft: DOD Needs to Better Inform Congress about
                             Implications of Continuing F/A-22 Cost Growth. GAO-03-280.
                             Washington, D.C.: February 28, 2003.

GAO Contact                  Michael Hazard, (937) 258-7917




                             9
                              We list GAO reports identified as relating to options included in the CBO March 2003
                             Budget Options report. Only those CBO options for which we identified related GAO
                             products are included. We included GAO reports if they related to the topic of the CBO
                             option, regardless of whether our work supported the option or not.




                             Page 45                                          GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




050-11 Slow the Schedule of
the F-35 Joint Strike Fighter
Program

Related GAO Product             Joint Strike Fighter Acquisition: Mature Critical Technologies Needed to
                                Reduce Risk. GAO-02-39. Washington, D.C.: October 19, 2001.

GAO Contact                     Brian Mullins, (202) 512-4384



050-19 Replace Military
Personnel in Some Support
Positions with Civilian
Employees of the
Department of Defense

Related GAO Product             DOD Competitive Sourcing: Some Progress, but Continuing Challenges
                                Remain in Meeting Program Goals. GAO/NSIAD-00-106. Washington, D.C.:
                                August 8, 2000.

GAO Contact                     Barry W. Holman, (202) 512-5581



050-22 Have the
Departments of Defense and
Veterans Affairs Purchase
Drugs Jointly

Related GAO Products            VA and DOD Health Care: Factors Contributing to Reduced Pharmacy
                                Costs and Continuing Challenges. GAO-02-969T. Washington, D.C.: July 22,
                                2002.

                                DOD and VA Pharmacy: Progress and Remaining Challenges in Jointly
                                Buying and Mailing Out Drugs. GAO-01-588. Washington, D.C.: May 25,
                                2001.

GAO Contact                     Cynthia A. Bascetta, (202) 512-7101




                                Page 46                                    GAO-03-1006 Opportunities for Oversight
                    Appendix I
                    Opportunities to Improve the Economy,
                    Efficiency, and Effectiveness of Federal
                    Programs




150 International   Examples from Selected GAO Work

Affairs             Eliminate U.S. Contributions to Administrative Costs in Rogue States

                    Streamline U.S. Overseas Presence

                    CBO Options Where Related GAO Work Is Identified

                    150-01 Eliminate the Export-Import Bank, the Overseas Private Investment
                    Corporation, and the Trade and Development Agency

                    150-02 End the United States’ Capital Subscriptions to the European Bank
                    for Reconstruction and Development




                    Page 47                                    GAO-03-1006 Opportunities for Oversight
                          Appendix I
                          Opportunities to Improve the Economy,
                          Efficiency, and Effectiveness of Federal
                          Programs




Examples from
Selected GAO Work

Eliminate U.S.
Contributions to
Administrative Costs in
Rogue States              Primary agency                             Department of State
                          Account                                    International Organizations and Programs
                                                                     (19-1005)
                          Spending type                              Discretionary
                          Budget subfunction                         151/International development and
                                                                     humanitarian assistance

                          International organizations, such as the United Nations Development
                          Program, fund projects in countries that are legislatively prohibited from
                          receiving U.S. funding under section 307 of the Foreign Assistance Act of
                          1961, as amended. The list of countries varies over time but has included
                          Afghanistan, Burma, Cuba, Iran, Iraq, Libya, Serbia, and Syria. To comply
                          with the legislation, the Department of State withholds from its voluntary
                          contributions to international organizations the U.S. share of funding for
                          projects in these countries.

                          However, the department does not withhold administrative expenditures
                          associated with the operation of field offices in these countries.
                          Consequently, a portion of the U.S. contribution still goes to projects in
                          states prohibited from receiving U.S. funds. We did not attempt to calculate
                          the total amount that the United States contributes to all international
                          organizations for administrative expenses in rogue states. However, in 1998
                          GAO estimated that the amount for one United Nations organization, the
                          United Nations Development Program, was about $600,000.

                          The Department of State has indicated that it would not, as a matter of
                          policy, withhold U.S. contributions to United Nations organizations for
                          administrative expenses in these countries. The department believes the
                          legislative restriction invites politicization and contradicts the principle of
                          universality for participating in United Nations organizations.

                          Savings may be achieved if the Department of State were to include field
                          office administrative costs when calculating the amount of U.S.



                          Page 48                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                withholdings for all international organizations that are subject to section
                                307 of the Foreign Assistance Act of 1961.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Multilateral Organizations: U.S. Contributions to International
                                Organizations for Fiscal Years 1993-95. GAO/NSIAD-97-42. Washington,
                                D.C.: May 1, 1997.

                                International Organizations: U.S. Participation in the United Nations
                                Development Program. GAO/NSIAD-97-8. Washington, D.C.: April 17, 1997.

GAO Contact                     Susan S. Westin, (202) 512-4128




                                Page 49                                    GAO-03-1006 Opportunities for Oversight
                           Appendix I
                           Opportunities to Improve the Economy,
                           Efficiency, and Effectiveness of Federal
                           Programs




Streamline U.S. Overseas
Presence

                           Primary agency                             Department of State
                           Accounts                                   Multiple
                           Spending type                              Discretionary
                           Budget subfunction                         153/Conduct of foreign affairs

                           The U.S. overseas presence at more than 260 overseas posts consists of
                           more than 90,000 people (including dependents). The workforce has been
                           estimated at as many as 60,000 personnel representing over 30 U.S.
                           agencies. The Department of State employs about a third of the U.S.
                           workforce overseas and its embassies and consulates have become bases
                           for the operations of agencies involved in hundreds of activities. U.S.
                           direct hire staffing levels have increased over the years, most notably in the
                           nonforeign affairs agencies.

                           The costs of overseas operations and related security requirements are
                           directly linked to the size of the overseas workforce. By reducing the
                           number of employees at posts where U.S. interests are lower priority,
                           consolidating functions, establishing regional centers, or relocating
                           personnel to the United States, the costs of overseas operations could be
                           significantly reduced. The average annual cost of an American at a post
                           overseas varies by location, but can cost several hundred thousand dollars,
                           not including salary. The costs to station an American overseas have been
                           estimated to be about two times as much as for Washington-based staff. In
                           addition, reductions in the number of personnel overseas could
                           substantially enhance the safety of Americans and other U.S. employees,
                           reduce the costly security demands placed on the State Department, and
                           help control the costs of new embassy construction estimated to cost as
                           much as $16 billion.

                           Since the mid-1990s, we have encouraged actions to reevaluate overseas
                           staffing requirements and levels. In late 1999, the Overseas Presence
                           Advisory Panel concluded that substantial monetary savings and
                           reductions in security vulnerabilities could be achieved through
                           streamlining posts. In August 2001, The President’s Management Agenda
                           noted that the U.S. overseas presence is costly, increasingly complex, and
                           of growing security concern. The President’s Management Agenda
                           concluded that cost and security considerations demand that the overseas
                           staffing process be improved. We have developed a rightsizing framework



                           Page 50                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                that encourages overseas staffing decisions to be based on a full
                                consideration of cost, security, and mission factors. In the past, CBO
                                estimated that savings could be achieved if the Congress chose to reduce
                                overseas staffing by 1 percent, either through domestic reallocation or
                                elimination.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Embassy Construction: Process for Determining Staffing Requirements
                                Needs Improvement. GAO-03-411. Washington, D.C.: April 7, 2003.

                                Overseas Presence: Rightsizing Framework Can Be Applied at U.S.
                                Diplomatic Posts in Developing Countries. GAO-03-396. Washington, D.C.:
                                April 7, 2003.

                                Overseas Presence: Systematic Processes Needed to Rightsize Posts and
                                Guide Embassy Construction. GAO-03-582T. Washington, D.C.: April 7,
                                2003.

                                Overseas Presence: Conditions of Overseas Diplomatic Facilities. GAO-
                                03-557T. Washington, D.C.: March 20, 2003.

GAO Contact                     Jess T. Ford, (202) 512-4128




                                Page 51                                    GAO-03-1006 Opportunities for Oversight
                               Appendix I
                               Opportunities to Improve the Economy,
                               Efficiency, and Effectiveness of Federal
                               Programs




CBO Options Where
Related GAO Work Is
Identified10

                               10
150-01 Eliminate the Export-
Import Bank, the Overseas
Private Investment
Corporation, and the Trade
and Development Agency

Related GAO Product            Export Promotion: Mixed Progress in Achieving a Governmentwide
                               Strategy. GAO-02-850. Washington, D.C.: September 4, 2002.

GAO Contact                    Ginny Hughes, (202) 512-5481



150-02 End the United
States’ Capital
Subscriptions to the
European Bank for
Reconstruction and
Development

Related GAO Product            Foreign Assistance: International Efforts to Aid Russia’s Transition
                               Have Had Mixed Results. GAO-01-8. Washington, D.C.: November 1, 2000.

GAO Contact                    Celia Thomas, (202) 512-8987




                               10
                                We list GAO reports identified as relating to options included in the CBO March 2003
                               Budget Options report. Only those CBO options for which we identified related GAO
                               products are included. We included GAO reports if they related to the topic of the CBO
                               option, regardless of whether our work supported the option or not.




                               Page 52                                          GAO-03-1006 Opportunities for Oversight
                        Appendix I
                        Opportunities to Improve the Economy,
                        Efficiency, and Effectiveness of Federal
                        Programs




250 General Science,    Example from Selected GAO Work

Space, and Technology   Continue Oversight of the International Space Station and Related Support
                        Systems




                        Page 53                                    GAO-03-1006 Opportunities for Oversight
                              Appendix I
                              Opportunities to Improve the Economy,
                              Efficiency, and Effectiveness of Federal
                              Programs




Example from Selected
GAO Work

Continue Oversight of the
International Space Station
and Related Support
Systems                       Primary agency                             National Aeronautics and Space
                                                                         Administration
                              Accounts                                   Multiple
                              Spending type                              Discretionary
                              Budget subfunction                         252/Space flight, research, and supporting
                                                                         activities

                              Recent events associated with the National Aeronautics and Space
                              Administration’s (NASA) human space flight programs have generated
                              major congressional concern. First, the Space Launch Initiative—a
                              planned $4.8 billion research and development effort—was significantly
                              downsized in November 2002. This decision made the prospect of a Shuttle
                              replacement unlikely for the foreseeable future and necessitated
                              investment in extending the life of the Shuttle fleet. Second, the tragic loss
                              of Shuttle Columbia has engendered intense scrutiny by the Columbia
                              Accident Investigation Board and NASA’s congressional oversight
                              committees into various aspects of the agency’s activities—from budgetary
                              decisions to emphasis on flight safety. Third, the uncertain status of the
                              unfinished International Space Station (ISS) is worrisome. Construction
                              has halted due to postponement of shuttle flights and a crew size larger
                              than three is still being negotiated among the international partners. As a
                              result, the projected scientific benefits from this orbital laboratory have
                              been further delayed.

                              The Congress is well aware of the challenges NASA faces in developing,
                              building, and transporting crew to the ISS—challenges that have in the past
                              resulted in schedule delays and higher program cost estimates to complete
                              development. Although assembly of the ISS is well underway, it warrants
                              continued congressional oversight because the ISS will impose continued
                              demands on future budgets and will require critical decisions on Shuttle
                              modernization and replacement efforts. As NASA returns the Space
                              Shuttle fleet to safe flight by incorporating the accident board’s
                              recommendations and more clearly defines the future of human space



                              Page 54                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                flight and commensurate financial commitments, continued congressional
                                oversight will help to ensure that NASA’s priorities and supporting funding
                                are appropriately matched.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            NASA: Major Management Challenges and Program Risks. GAO-03-849T.
                                Washington, D.C.: June 12, 2003.

                                Major Management Challenges and Program Risks: National Aeronautics
                                and Space Administration. GAO-03-114. Washington, D.C.: January 1,
                                2003.

                                Relocation of Space Shuttle Major Modification Work. GAO-03-294R.
                                Washington, D.C.: December 2, 2002.

                                Space Transportation: Challenges Facing NASA’s Space Launch
                                Initiative. GAO-02-1020. Washington, D.C.: September 17, 2002.

                                NASA Management Challenges: Human Capital and Other Critical Areas
                                Need to be Addressed. GAO-02-945T. Washington, D.C.: July 18, 2002.

                                Space Station: Actions Under Way to Manage Cost, but Significant
                                Challenges Remain. GAO-02-735. Washington, D.C.: July 17, 2002.

                                NASA: Compliance With Cost Limits Cannot Be Verified. GAO-02-504R.
                                Washington, D.C.: April 10, 2002.

GAO Contact                     Allen Li, (202) 512-4841




                                Page 55                                    GAO-03-1006 Opportunities for Oversight
             Appendix I
             Opportunities to Improve the Economy,
             Efficiency, and Effectiveness of Federal
             Programs




270 Energy   Examples from Selected GAO Work

             Corporatize or Divest Selected Power Marketing Administrations

             Recover Power Marketing Administrations’ Costs

             Increase Nuclear Waste Disposal Fees

             Recover Federal Investment in Successfully Commercialized Technologies

             Reduce the Costs of the Rural Utilities Service’s Electricity and
             Telecommunications Loan Programs




             Page 56                                    GAO-03-1006 Opportunities for Oversight
                           Appendix I
                           Opportunities to Improve the Economy,
                           Efficiency, and Effectiveness of Federal
                           Programs




Examples from
Selected GAO Work

Corporatize or Divest
Selected Power Marketing
Administrations
                           Primary agency                             Department of Energy
                           Spending type                              Direct

                           The federal government began to market electricity after the Congress
                           authorized the construction of dams and established major water projects,
                           primarily in the 1930s to the 1960s. The Department of Energy’s (DOE)
                           power marketing administrations (PMA)—Bonneville Power
                           Administration, Southeastern Power Administration, Southwestern Power
                           Administration, and Western Area Power Administration—market
                           primarily wholesale power in 33 states produced at large, multiple-purpose
                           water projects. Our March 1998 report identified options that the Congress
                           and other policymakers can pursue to address concerns about the role of
                           three PMAs—Southeastern, Southwestern, and Western—in emerging
                           restructured markets or to manage them in a more business-like fashion.
                           Our work has demonstrated that, although federal laws and regulations
                           generally require that the PMAs recover the full costs of building,
                           operating, and maintaining the federal power plants and transmission
                           assets, in some cases federal statutes and DOE’s rules are ambiguous about
                           or prohibit the recovery of certain costs. For fiscal years 1992 through 1996,
                           the federal government incurred a net cost of $1.5 billion from its
                           involvement in the electricity-related activities of Southeastern,
                           Southwestern, and Western. We also reported that the appropriated and
                           other debt that is recoverable through the PMAs’ power sales totaled about
                           $22 billion at the end of fiscal year 1997 and included nearly $2.5 billion in
                           irrigation costs. In addition, our work has demonstrated that the
                           availability of federal power plants to generate electricity has been below
                           that of nonfederal plants because the federal planning and budgeting
                           processes do not always ensure that funds are available to make repairs
                           when needed.

                           Our March 1998 report outlined three general options to address the federal
                           role in restructuring markets: (1) maintaining the status quo of federal
                           ownership and operation of the power generating projects, (2) maintaining



                           Page 57                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                the federal ownership of these assets but improving how they are operated
                                (an example of which is reorganizing the PMAs to operate as federally
                                owned corporations), and (3) divesting these assets. The third option
                                would eliminate the government’s presence in a commercial activity and,
                                depending on a divestiture’s terms and conditions and the price obtained,
                                could produce both a net gain and a future stream of tax payments to the
                                Treasury. Corporatization or divestitures of government assets have been
                                accomplished in the United States and also overseas, and corporatization
                                could serve as an interim step toward ultimate divestiture. Our March 1997
                                report concluded that divesting the federal hydropower assets would be
                                complicated but not impossible. Such a transaction would need to balance
                                the multiple purposes of the water project as well as other claims on the
                                water.

                                CBO estimated previously that divesting the federal hydropower assets for
                                Southeastern, Southwestern, and Western would result in budgetary
                                savings. The savings assumed that the divestiture would not occur for 2
                                years and was based on the net present value of outstanding debt for the
                                Southeastern, Southwestern, and Western PMAs.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Budget Issues: Effective Oversight and Budget Discipline Are Essential—
                                Even in a Time of Surplus. GAO/T-AIMD-00-73. Washington, D.C.:
                                February 1, 2000.

                                Potential Candidates for Congressional Oversight. GAO/OGC-00-3R.
                                Washington, D.C.: November 1, 1999.

                                Federal Power: The Role of the Power Marketing Administrations in a
                                Restructured Electricity Industry. GAO/T-RCED/AIMD-99-229.
                                Washington, D.C.: June 24, 1999.

                                Federal Power: PMA Rate Impacts by Service Area. GAO/RCED-99-55.
                                Washington, D.C.: January 28, 1999.

                                Federal Power: Regional Effects of Changes in PMAs’ Rates. GAO/RCED-
                                99-15. Washington, D.C.: November 16, 1998.




                                Page 58                                    GAO-03-1006 Opportunities for Oversight
               Appendix I
               Opportunities to Improve the Economy,
               Efficiency, and Effectiveness of Federal
               Programs




               Power Marketing Administrations: Repayment of Power Costs Needs
               Closer Monitoring. GAO/AIMD-98-164. Washington, D.C.: June 30, 1998.

               Federal Power: Options for Selected Power Marketing Administrations’
               Role in a Changing Electricity Industry. GAO/RCED-98-43. Washington,
               D.C.: March 6, 1998.

               Federal Electricity Activities: The Federal Government’s Net Cost and
               Potential for Future Losses. GAO/AIMD-97-110 and 110A. Washington,
               D.C.: September 19, 1997.

               Federal Power: Issues Related to the Divestiture of Federal Hydropower
               Resources. GAO/RCED-97-48. Washington, D.C.: March 31, 1997.

               Power Marketing Administrations: Cost Recovery, Financing, and
               Comparison to Nonfederal Utilities. GAO/AIMD-96-145. Washington, D.C.:
               September 19, 1996.

               Federal Power: Recovery of Federal Investment in Hydropower Facilities
               in the Pick-Sloan Program. GAO/T-RCED-96-142. Washington, D.C.: May 2,
               1996.

GAO Contacts   Bob Robinson, (202) 512-3841
               Jim Wells, (202) 512-3841




               Page 59                                    GAO-03-1006 Opportunities for Oversight
                          Appendix I
                          Opportunities to Improve the Economy,
                          Efficiency, and Effectiveness of Federal
                          Programs




Recover Power Marketing
Administrations’ Costs

                          Primary agency                               Department of Energy
                          Spending type                                Direct

                          Four of the Department of Energy’s (DOE) power marketing
                          administrations (PMA)—Bonneville Power Administration, Southeastern
                          Power Administration, Southwestern Power Administration, and Western
                          Area Power Administration—market primarily wholesale power in 33
                          states produced at large, multiple-purpose water projects. Except for
                          Bonneville, these PMAs receive annual appropriations to cover operating
                          and maintenance (O&M) expenses and, if applicable, the capital investment
                          in transmission assets.11 Federal law requires the PMAs to repay these
                          appropriations as well as the power-related O&M and the capital
                          appropriations expended by the operating agencies generating the power.

                          Current monitoring activities do not ensure that the federal government
                          recovers the full cost of its power-related activities from the beneficiaries
                          of federal power. The full cost of the power-related activities—which are to
                          be recovered under DOE policy—include all direct and indirect costs
                          incurred by the federal government in producing, transmitting, and
                          marketing federal power. Neither DOE nor the Federal Energy Regulatory
                          Commission, which reviews the PMAs’ rate proposals, is effectively
                          monitoring the rate-making process and the amounts due and repayments
                          made to ensure their accuracy, completeness, and timeliness. Unrecovered
                          power-related costs relate to (1) Civil Service Retirement System (CSRS)
                          pensions and postretirement health benefits, (2) life insurance benefits,
                          (3) certain workers’ compensation benefits, and (4) interest on some of the
                          federal appropriations used to construct certain projects. The full
                          magnitude of the underrecovery of power-related costs is unknown. Until
                          an effective monitoring system is implemented, the federal government will
                          continue to be exposed to financial loss due to the underrecovery of power-
                          related costs.



                          11
                             In 1974, the Congress stopped providing Bonneville with annual appropriations and
                          instead provided it with a revolving fund maintained by the Treasury; however, Bonneville
                          remains responsible for repaying its debt prior to 1974 and debt stemming from
                          appropriations expended by the operating agencies on power-related expenses.




                          Page 60                                           GAO-03-1006 Opportunities for Oversight
Appendix I
Opportunities to Improve the Economy,
Efficiency, and Effectiveness of Federal
Programs




The federal government is also incurring other substantial net costs
annually—the amount by which the full costs of providing electric power
exceed the revenues from the sale of power—from the electricity-related
activities of the PMAs. Although the PMAs are generally required to recover
all costs, favorable financing terms and the lack of specific requirements to
recover certain costs have resulted in net costs to the federal government
because these PMAs’ electricity rates do not recover all costs that are to be
repaid through the sale of power. It is important to note that the PMAs were
generally following applicable laws and regulations applying to the
recovery of costs; however, in some cases, federal statutes and an
applicable DOE order are ambiguous about or prohibit the recovery of
certain costs.

In part because the PMAs sell power generated almost exclusively from
hydropower, are not required to earn a profit, and do not fully recover the
government’s costs in their rates, they are generally able to sell power more
cheaply than other providers. Southeastern, Southwestern, and Western
sold wholesale power to their preference customers, such as public entities
and rural cooperatives, from 1990 through 1995, at average rates from 40 to
50 percent below the rates nonfederal utilities charged. If the PMAs were
authorized to charge market rates for power in conjunction with federal
restructuring legislation, some preference customers who now purchase
power from the PMAs at rates that are less than those available from other
sources would see their rates increase. However, we have reported that
slightly more than two-thirds of the preference customers, which are
located in varying portions of 29 states, that purchased power directly from
Southeastern, Southwestern, and Western would experience small or no
rate increases—increases of one-half cent per kilowatt hour or less—if
those PMAs charged market rates.

The Congress and/or the Secretary of Energy may wish to consider
directing the PMAs to more fully recover power-related costs or revising
DOE’s policy on high-interest debt repayment. We have recommended a
number of specific actions aimed at enhancing DOE’s oversight. For
example, changes could be implemented to recover the full costs to the
federal government of providing postretirement health benefits and
pensions for current employees and operating agency employees engaged
in producing and marketing the power sold by the PMAs. We and CBO
agree that several PMAs have begun to address some of these actions. The
Congress has the option of requiring the PMAs to sell their power at market
rates to better ensure the full recovery of the appropriated and other debt
that is recoverable through the PMAs’ power sales. This debt totaled about



Page 61                                    GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                $22 billion at the end of fiscal year 1997 and included nearly $2.5 billion in
                                irrigation costs that are to be recovered through the PMAs’ power sales.
                                This option would likely also lead to more efficient management of the
                                taxpayers’ assets.

                                Although in the past, CBO agreed that savings would occur if the PMAs
                                were directed to fully recover power-related costs or set their power at
                                market rates, it could not develop an estimate for this option without a
                                specific proposal.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Congressional Oversight: Opportunities to Address Risks, Reduce Costs,
                                and Improve Performance. GAO/T-AIMD-00-96. Washington, D.C.:
                                February 17, 2000.

                                Federal Power: The Role of the Power Marketing Administrations in a
                                Restructured Electricity Industry. GAO/T-RCED/AIMD-99-229.
                                Washington, D.C.: June 24, 1999.

                                Federal Power: PMA Rate Impacts, by Service Area. GAO/RCED-99-55.
                                Washington, D.C.: January 28, 1999.

                                Federal Power: Regional Effects of Changes in PMAs’ Rates. GAO/RCED-
                                99-15. Washington, D.C.: November 16, 1998.

                                Power Marketing Administrations: Repayment of Power Costs Needs
                                Closer Monitoring. GAO/AIMD-98-164. Washington, D.C.: June 30, 1998.

                                Federal Power: Options for Selected Power Marketing Administrations’
                                Role in a Changing Electricity Industry. GAO/RCED-98-43. Washington,
                                D.C.: March 6, 1998.

                                Federal Electricity Activities: The Federal Government’s Net Cost and
                                Potential for Future Losses. GAO/AIMD-97-110 and 110A. Washington,
                                D.C.: September 19, 1997.

                                Federal Power: Issues Related to the Divestiture of Federal Hydropower
                                Resources. GAO/RCED-97-48. Washington, D.C.: March 31, 1997.




                                Page 62                                    GAO-03-1006 Opportunities for Oversight
               Appendix I
               Opportunities to Improve the Economy,
               Efficiency, and Effectiveness of Federal
               Programs




               Power Marketing Administrations: Cost Recovery, Financing, and
               Comparison to Nonfederal Utilities. GAO/AIMD-96-145. Washington, D.C.:
               September 19, 1996.

               Federal Power: Outages Reduce the Reliability of Hydroelectric Power
               Plants in the Southeast. GAO/T-RCED-96-180. Washington, D.C.: July 25,
               1996.

               Federal Power: Recovery of Federal Investment in Hydropower Facilities
               in the Pick-Sloan Program. GAO/T-RCED-96-142. Washington, D.C.: May 2,
               1996.

               Federal Electric Power: Operating and Financial Status of DOE’s Power
               Marketing Administrations. GAO/RCED/AIMD-96-9FS. Washington, D.C.:
               October 13, 1995.

GAO Contacts   Bob Robinson, (202) 512-3841
               Jim Wells, (202) 512-3841




               Page 63                                    GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Increase Nuclear Waste
Disposal Fees

                                Primary agency                             Department of Energy
                                Spending type                              Direct

                                Utilities pay a fee to the Nuclear Waste Fund to finance the development of
                                storage and permanent disposal facilities for high-level radioactive wastes.
                                The amount of this fee has not changed since 1983, making the fund
                                susceptible to future budget shortfalls. To help ensure that sufficient
                                revenues are collected to cover increases in cost estimates caused by price
                                inflation, the Congress should amend the Nuclear Waste Policy Act of 1982
                                to direct the Secretary of Energy to automatically adjust for inflation the
                                nuclear waste disposal fee that utilities pay into the Nuclear Waste Fund.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Status of Actions to Improve DOE User-Fee Assessments. GAO/RCED-92-
                                165. Washington, D.C.: June 10, 1992.

                                Changes Needed in DOE User-Fee Assessments. GAO/T-RCED-91-52.
                                Washington, D.C.: May 8, 1991.

                                Changes Needed in DOE User-Fee Assessments to Avoid Funding
                                Shortfall. GAO/RCED-90-65. Washington, D.C.: June 7, 1990.

GAO Contacts                    Bob Robinson, (202) 512-3841
                                Ms. Gary Jones, (202) 512-3841




                                Page 64                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Recover Federal Investment
in Successfully
Commercialized
Technologies                    Primary agency                             Department of Energy
                                Accounts                                   Multiple
                                Spending type                              Discretionary
                                Budget subfunctions                        Multiple

                                The Department of Energy (DOE) and the private sector are involved in
                                hundreds of cost-shared projects aimed at developing a broad spectrum of
                                cost-effective, energy-efficiency technologies that protect the environment,
                                support the nation’s economic competitiveness, and promote the increased
                                use of oil, gas, coal, nuclear, and renewable energy resources. In June 1996,
                                we reported that DOE generally does not require repayment of its
                                investment in technologies that are successfully commercialized. Our
                                review identified four DOE programs that require industry repayment if the
                                technologies are ultimately commercialized. The offices in which we
                                focused most of our work planned to devote about $8 billion in federal
                                funds to cost-shared projects over their lifetime, of which about $2.5 billion
                                would be subject to repayment.

                                Our June 1996 report discussed the advantages and disadvantages of
                                having a repayment policy and pointed out that many of the disadvantages
                                can be mitigated by structuring a flexible repayment requirement with the
                                disadvantages in mind. It also discussed the types of programs and
                                projects that would be the most appropriate or suitable for repayment of
                                the federal investment.

                                Because opportunities exist for substantial repayment in some of DOE’s
                                programs, requiring repayment under a flexible policy would allow the
                                government to share in the benefits of successfully commercialized
                                technologies that could amount to significant cost savings. However,
                                repayment provisions would only apply to future technology development
                                projects not yet negotiated with industry.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report




                                Page 65                                        GAO-03-1006 Opportunities for Oversight
                      Appendix I
                      Opportunities to Improve the Economy,
                      Efficiency, and Effectiveness of Federal
                      Programs




Related GAO Product   Energy Research: Opportunities Exist to Recover Federal Investment in
                      Technology Development Projects. GAO/RCED-96-141. Washington, D.C.:
                      June 26, 1996.

GAO Contacts          Bob Robinson, (202) 512-3841
                      Jim Wells, (202) 512-3841




                      Page 66                                    GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Reduce the Costs of the
Rural Utilities Service’s
Electricity and
Telecommunications Loan         Primary agency                             Department of Agriculture
Programs                        Accounts                                   Multiple
                                Spending type                              Discretionary
                                Budget subfunction                         271/Energy supply

                                The Rural Utilities Service (RUS), created by the Federal Crop Insurance
                                Reform and Department of Agriculture Reorganization Act of 1994 (P.L.
                                103-354, Oct. 13, 1994), was established to provide loan funds intended to
                                assist in the development of the utility infrastructure in the nation’s rural
                                areas. RUS finances the construction, improvement, and repair of
                                electrical, telecommunications, and water and waste facility systems
                                through direct loans and through repayment guarantees on loans made by
                                other lenders. According to the Financial Statements For Fiscal Year 2002
                                of Rural Development (the U.S. Department of Agriculture agency
                                responsible for administering RUS), RUS loans receivable totaled about
                                $39.5 billion as of September 30, 2002. From a financial standpoint, RUS
                                has successfully operated the telecommunications loan program, but the
                                agency has had, and continues to have significant financial problems with
                                the electricity loan program. For example, since fiscal year 1992, RUS
                                wrote off the debt of 9 electricity loan borrowers totaling more than
                                $4.9 billion.

                                RUS needs to take steps to increase the effectiveness and reduce the costs
                                of its loan programs. RUS could, for example, (1) target loans to borrowers
                                that provide services to areas with low populations, (2) target subsidized
                                direct loans to borrowers that have a financial need for the agency’s
                                assistance, and (3) graduate the agency’s financially viable borrowers from
                                direct loans to commercial credit. Also, to reduce its vulnerability to losses,
                                RUS could (1) establish loan and indebtedness limits, (2) set the repayment
                                guarantee at a level below 100 percent, and (3) prohibit loans to delinquent
                                borrowers or to borrowers who have caused the agency to incur loan
                                losses. In the past, CBO could not develop an estimate for this option
                                unless specific proposals to improve efficiency were identified.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report



                                Page 67                                        GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




Related GAO Products   Rural Utilities Service: Status of Electric Loan Portfolio. GAO/AIMD-99-
                       264R. Washington, D.C.: August 17, 1999.

                       Rural Water Projects: Federal Assistance Criteria and Potential Benefits
                       of the Proposed Lewis and Clark Project. GAO/T-RCED-99-252.
                       Washington, D.C.: July 29, 1999.

                       Rural Water Projects: Identifying Benefits of the Proposed Lewis and
                       Clark Project. GAO/RCED-99-115. Washington, D.C.: May 28, 1999.

                       Rural Water Projects: Federal Assistance Criteria Related to the Fort Peck
                       Reservation Rural Water Project. GAO/T-RCED-98-230. Washington, D.C.:
                       June 18, 1998.

                       Rural Utilities Service: Risk Assessment for the Electric Loan Portfolio.
                       GAO/T-AIMD-98-123. Washington, D.C.: March 30, 1998.

                       Rural Utilities Service: Opportunities to Operate Electricity and
                       Telecommunications Loan Programs More Effectively. GAO/AIMD-98-42.
                       Washington, D.C.: January 21, 1998.

                       Federal Electricity Activities: The Federal Government’s Net Cost and
                       Potential for Future Losses. GAO/AIMD-97-110. Washington, D.C.:
                       September 19, 1997.

                       Rural Development: Financial Condition of the Rural Utilities Service’s
                       Electricity Loan Portfolio. GAO/T-RCED-97-198. Washington, D.C.: July 8,
                       1997.

                       Rural Development: Financial Condition of the Rural Utilities Service’s
                       Loan Portfolio. GAO/RCED-97-82. Washington, D.C.: April 11, 1997.

GAO Contacts           Bob Robinson, (202) 512-3841
                       Lawrence J. Dyckman, (202) 512-3841
                       McCoy Williams, (202) 512-6906




                       Page 68                                    GAO-03-1006 Opportunities for Oversight
                        Appendix I
                        Opportunities to Improve the Economy,
                        Efficiency, and Effectiveness of Federal
                        Programs




300 Natural Resources   Examples from Selected GAO Work

and Environment         Terminate Land-Exchange Programs

                        Deny Additional Funding for Commercial Fisheries Buyback Programs

                        Revise the Mining Law of 1872

                        Reexamine Federal Policies for Subsidizing Water for Agriculture and Rural
                        Uses

                        Reassess Federal Land Management Agencies Functions and Programs




                        Page 69                                    GAO-03-1006 Opportunities for Oversight
                          Appendix I
                          Opportunities to Improve the Economy,
                          Efficiency, and Effectiveness of Federal
                          Programs




Examples from
Selected GAO Work

Terminate Land-Exchange
Programs

                          Primary agencies                           Department of the Interior
                                                                     Department of Agriculture
                          Accounts                                   Multiple
                          Spending type                              Discretionary
                          Budget subfunction                         302/Conservation and land management

                          The Bureau of Land Management (BLM) and the Forest Service have long
                          used land exchanges—trading federal lands for lands that are owned by
                          corporations, individuals, or state or local governments—as a tool for
                          acquiring nonfederal land and conveying federal land. By law, for an
                          exchange to occur, the estimated value of the nonfederal land must be
                          within 25 percent of the estimated value of the federal land, the public
                          interest must be well served, and certain other exchange requirements
                          must be met. Recognizing the importance of land exchanges in
                          supplementing the federal funds that were available for purchasing land,
                          the Congress, in 1988, passed legislation to facilitate and expedite land
                          exchanges. Between fiscal years 1989 and 1999, BLM and the Forest
                          Service acquired about 1,500 total square miles of land through land
                          exchanges.

                          Several fundamental issues create significant problems in the use of land
                          exchanges. For instance, in 1998, the cognizant inspectors general
                          identified exchanges in which lands were inappropriately valued and the
                          public interest was not well served. Also, although current law does not
                          authorize BLM to retain or use proceeds from selling federal land, BLM
                          sold federal land and retained the sales proceeds in escrow accounts.
                          Further, BLM did not track these sales proceeds in its financial
                          management system. At least some of BLM’s and the Forest Service’s
                          continuing problems may reflect inherent underlying difficulties associated
                          with exchanging land—rather than buying and selling land for cash. In
                          fiscal year 2002, BLM contracted with the Appraisal Foundation to conduct
                          a review of the agency’s appraisal organization, policies, and procedures.
                          The Appraisal Foundation’s report listed numerous problems with BLM’s



                          Page 70                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                appraisal process and concluded “violations of law may have occurred.”
                                The report contained seven principal recommendations including the
                                recommendation that the “previously recommended moratorium on BLM
                                land exchanges be implemented immediately.” The Foundation performed
                                a similar evaluation for the U.S. Department of Agriculture (USDA) Forest
                                Service in 2000. That study resulted in a number of recommendations,
                                which the Foundation noted, “have been successfully implemented.” In
                                most circumstances, cash-based transactions would be simpler and less
                                costly.

                                While both agencies have taken steps to improve their land-exchange
                                programs, the many controversies and problems associated with their
                                programs reflect, in part, the difficulties and inefficiencies inherent in these
                                exchange programs. On the basis of these difficulties and inefficiencies, the
                                Congress may wish to consider directing both agencies to terminate their
                                land-exchange programs. In the past, CBO was unable to develop a savings
                                estimate for this option.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            National Park Service: Federal Taxpayers Could Have Benefited More
                                From Potomac Yard Land Exchange. GAO-01-292. Washington, D.C.:
                                March 15, 2001.

                                BLM and the Forest Service: Land Exchanges Need to Reflect Appropriate
                                Value and Serve the Public Interest. GAO/RCED-00-73. Washington, D.C.:
                                June 22, 2000.

GAO Contacts                    Bob Robinson, (202) 512-3841
                                Barry Hill, (202) 512-3841




                                Page 71                                     GAO-03-1006 Opportunities for Oversight
                              Appendix I
                              Opportunities to Improve the Economy,
                              Efficiency, and Effectiveness of Federal
                              Programs




Deny Additional Funding for
Commercial Fisheries
Buyback Programs
                              Primary agency                             Department of Commerce
                              Account                                    Operations, Research, and Facilities
                                                                         (13-1450)
                              Spending type                              Discretionary
                              Budget subfunction                         306/Other natural resources

                              Fish populations in many commercial fisheries are declining, resulting in a
                              growing imbalance between the number of vessels in fishing fleets and the
                              number of fish available for harvest. In response to this growing imbalance,
                              the federal government has provided $140 million from 1994 to 2002 to
                              purchase fishing permits, fishing vessels, and related gear from fishermen,
                              thereby reducing the capacity of fishermen to harvest fish. Generally, the
                              government designed these purchases, called buybacks, to achieve
                              multiple goals, such as reducing the capacity to harvest fish, providing
                              economic assistance to fishermen, and improving the conservation of fish.
                              Coastal states issue permits and develop and enforce regulations for fishing
                              in waters that are near their shores. In areas outside state jurisdiction, the
                              National Marine Fisheries Service (NMFS) within the Department of
                              Commerce is responsible for issuing permits and developing and enforcing
                              regulations for harvesting fish. Because excessive fishing capacity has been
                              a continuing problem in many fisheries, several additional buybacks have
                              been proposed that, if implemented, would be in excess of $250 million.

                              GAO found that buyback programs in three fisheries we evaluated removed
                              from 10 to 24 percent of their respective fishing capacities. However, the
                              experiences of these three cases demonstrate that the long-term
                              effectiveness of buyback programs depends upon whether previously
                              inactive fishermen or buyback beneficiaries return to the fishery. For
                              example, while 79 boats were sold in the New England buyback, 62
                              previously inactive boats have begun catching groundfish since the
                              buyback. In addition, several buyback participants purchased boats with
                              buyback funds and returned to the fishery. Long-term effectiveness of
                              buyback programs may also depend on whether fishermen have incentives
                              to increase remaining fishing capacity in a fishery. Importantly, buyback
                              programs by themselves do not address the root cause of excess fishing
                              capacity, that being the ongoing incentives fishermen have to invest in
                              larger or better equipped fishing vessels in order to catch fish before
                              someone else does.



                              Page 72                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                The problems of past buyback programs should be addressed as part of the
                                design of any future programs. Given the experiences of buyback programs
                                to date—both in terms of their limited effects on reducing fishing capacity
                                and in terms of their inability to effectively address the root causes of over-
                                fishing— one option the Congress may wish to consider is denying
                                additional funding for proposed programs until these fundamental
                                weaknesses are resolved. In the past, CBO could not develop a savings
                                estimate without a more specific proposal.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Commercial Fisheries: Effectiveness of Fishing Buyback Programs Can
                                Be Improved. GAO-01-699T. Washington, D.C.: May 10, 2001.

                                Commercial Fisheries: Entry of Fishermen Limits Benefits of Buyback
                                Programs. GAO/RCED-00-120. Washington, D.C.: June 14, 2000.

GAO Contact                     Anu Mittal, (202) 512-9846




                                Page 73                                    GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Revise the Mining Law of
1872

                                Primary agencies                           Department of the Interior
                                                                           Department of Agriculture
                                Spending type                              Direct

                                The Mining Law of 1872 allows holders of economically minable claims on
                                federal lands to obtain all rights and interests to both the land and the
                                hardrock minerals by patenting the claims for $2.50 or $5.00 an acre—
                                amounts that do not necessarily reflect the market value of such lands
                                today. Since 1872, the federal government has patented more than 3 million
                                acres of mining claims (an area about the size of Connecticut), and some
                                patent holders have reaped huge profits by reselling their lands.
                                Furthermore, miners do not pay royalties to the government on hardrock
                                minerals they extract from federal lands.

                                Among the options that are available are to prohibit the issuance of new
                                patents, require the payment of fair market value for a patent, or otherwise
                                modify the requirements for patenting. Legislation could also be enacted to
                                impose royalties on hardrock minerals extracted from federal lands, such
                                as a 5 percent royalty on net smelter returns.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Bureau of Land Management: Improper Charges Made to Mining Law
                                Administration Program. GAO-01-491T. Washington, D.C.: March 29, 2001.

                                Bureau of Land Management: Improper Charges Made to Mining Law
                                Administration Program. GAO-01-356. Washington, D.C.: March 8, 2001.

                                National Park Service: Agency Should Recover Costs of Validity
                                Examinations for Mining Claims. GAO/RCED-00-265. Washington, D.C.:
                                September 19, 2000.

                                Review of the Bureau of Land Management’s Administration and Use of
                                Mining Maintenance Fees. GAO/AIMD-00-184R. Washington, D.C.: June 2,
                                2000.




                                Page 74                                        GAO-03-1006 Opportunities for Oversight
               Appendix I
               Opportunities to Improve the Economy,
               Efficiency, and Effectiveness of Federal
               Programs




               Mineral Royalties: Royalties in the Western States and in Major Mineral-
               Producing Countries. GAO/RCED-93-109. Washington, D.C.: March 29,
               1993.

               Natural Resources Management Issues. GAO/OCG-93-17TR. Washington,
               D.C.: December 1992.

               Mineral Resources: Value of Hardrock Minerals Extracted From and
               Remaining on Federal Lands. GAO/RCED-92-192. Washington, D.C.:
               August 24, 1992.

               Federal Land Management: The Mining Law of 1872 Needs Revision.
               GAO/RCED-89-72. Washington, D.C.: March 10, 1989.

GAO Contacts   Bob Robinson, (202) 512-3841
               Barry Hill, (202) 512-3841




               Page 75                                    GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Reexamine Federal Policies
for Subsidizing Water for
Agriculture and Rural Uses
                                Primary agency                             Department of the Interior
                                Spending type                              Direct

                                Federal water programs to promote efficient use of finite water resources
                                for the nation’s agricultural and rural water systems have been used to
                                provide higher subsidies than Congress may have intended. To improve
                                the effectiveness and efficiency of federal water programs, the Congress
                                could consider several options to reduce duplication or inconsistencies.

                                The Congress could, for example, consider collecting the full costs of
                                federal water for large farms. Under the Reclamation Reform Act of 1982,
                                as amended, some farmers have reorganized large farming operations into
                                multiple, smaller landholdings to be eligible to receive additional federally
                                subsidized irrigation water. The act limits to 960 the maximum number of
                                owned or leased acres that individuals or legal entities (such as
                                partnerships or corporations) can irrigate with federal water at rates that
                                exclude interest on the government’s investment in the irrigation
                                component of its water resource projects. However, due to the vague
                                definition of the term “farm,” the flow of federally subsidized water to land
                                holdings above the 960 acre-limit has not been stopped, and the federal
                                government is not collecting revenues to which it is entitled under the act.
                                According to the Department of Interior, a portion of the acreage served by
                                the Bureau of Reclamation was used to produce crops that were also
                                eligible for USDA commodity subsidies. Farmers received the water
                                subsidy for using irrigated water from Interior as well as USDA subsidies
                                per crop production. Another option would be for the Congress to
                                consider restructuring the subsidies for crops produced with federally
                                subsidized water.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Rural Water Projects: Federal Assistance Criteria and Potential Benefits
                                of the Proposed Lewis and Clark Project. GAO/RCED-99-252T. Washington,
                                D.C.: July 29, 1999.




                                Page 76                                        GAO-03-1006 Opportunities for Oversight
               Appendix I
               Opportunities to Improve the Economy,
               Efficiency, and Effectiveness of Federal
               Programs




               Rural Water Projects: Identifying the Benefits of the Proposed Lewis and
               Clark Project. GAO/RCED-99-115. Washington, D.C.: May 28, 1999.

               Rural Water Projects: Federal Assistance Criteria Related to the Lewis
               and Clark Rural Water Project. GAO/RCED-98-231T. Washington, D.C.:
               June 18, 1998.

               Rural Water Projects: Federal Assistance Criteria Related to the Fort Peck
               Reservation Rural Water Project. GAO/RCED-98-230. Washington, D.C.:
               June 18, 1998.

               Rural Water Projects: Federal Assistance Criteria. GAO/RCED-98-204R.
               Washington, D.C.: May 29, 1998.

               Federal Power: Recovery of Federal Investment in Hydropower Facilities
               in the Pick-Sloan Program. GAO/T-RCED-96-142. Washington, D.C.: May 2,
               1996.

               Rural Development: Patchwork of Federal Water and Sewer Programs Is
               Difficult to Use. GAO/RCED-95-160BR. Washington, D.C.: April 13, 1995.

               Water Subsidies: Impact of Higher Irrigation Rates on Central Valley
               Project Farmers. GAO/RCED-94-8. Washington, D.C.: April 19, 1994.

               Natural Resources Management Issues. GAO/OCG-93-17TR. Washington,
               D.C.: December 1992.

               Reclamation Law: Changes Needed Before Water Service Contracts Are
               Renewed. GAO/RCED-91-175. Washington, D.C.: August 22, 1991.

               Water Subsidies: The Westhaven Trust Reinforces the Need to Change
               Reclamation Law. GAO/RCED-90-198. Washington, D.C.: June 5, 1990.

               Water Subsidies: Basic Changes Needed to Avoid Abuse of the 960-Acre
               Limit. GAO/RCED-90-6. Washington, D.C.: October 12, 1989.

GAO Contacts   Bob Robinson, (202) 512-3841
               Barry Hill, (202) 512-3841




               Page 77                                    GAO-03-1006 Opportunities for Oversight
                         Appendix I
                         Opportunities to Improve the Economy,
                         Efficiency, and Effectiveness of Federal
                         Programs




Reassess Federal Land
Management Agencies’
Functions and Programs
                         Primary agencies                           Department of the Interior
                                                                    Department of Agriculture
                         Accounts                                   Multiple
                         Spending type                              Discretionary
                         Budget subfunction                         302/Conservation and land management

                         The responsibilities of the four major federal land management agencies--
                         the National Park Service, the Bureau of Land Management (BLM), the Fish
                         and Wildlife Service within the Department of the Interior, and the Forest
                         Service within the Department of Agriculture—have grown more similar
                         over time. Most notably, the Forest Service and BLM now provide more
                         noncommodity uses, including recreation and protection for fish and
                         wildlife, on their lands. In addition, managing federal lands has become
                         more complex. Managers have to reconcile differences among a growing
                         number of laws and regulations, and the authority for these laws is
                         dispersed among several federal agencies and state and local agencies.
                         These changes have coincided with two other developments—the federal
                         government’s increased emphasis on downsizing and budgetary constraint
                         and scientists’ increased understanding of the importance and functioning
                         of natural systems whose boundaries may not be consistent with existing
                         jurisdictional and administrative boundaries. Together, these changes and
                         developments suggest a basis for reexamining the processes and structures
                         under which the federal land management agencies operate.

                         Two basic strategies have been proposed to improve federal land
                         management: (1) streamlining the existing structure by coordinating and
                         integrating functions, systems, activities, programs, and field locations and
                         (2) reorganizing the structure by combining agencies. The two strategies
                         are not mutually exclusive and some prior proposals have encompassed
                         both.

                         Over the last several years, the Forest Service and BLM have colocated
                         some offices or shared space with other federal agencies. They have also
                         pursued other means of streamlining, sharing resources, and saving rental
                         costs. However, no significant legislation has been enacted to streamline or
                         reorganize federal land management agencies and the four major federal
                         land management agencies have not, to date, developed a strategy to
                         coordinate and integrate their functions, systems, activities, and programs.



                         Page 78                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                In the past, CBO was unable to estimate savings without a specific
                                restructuring proposal that would eliminate certain programs or revise how
                                the land is managed, due to shared resources among the four major land
                                management agencies. Savings would depend on the extent of a workforce
                                restructuring and implementation proposal.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Wildland Fires: Better Information Needed on Effectiveness of
                                Emergency Stabilization and Rehabilitation Treatments. GAO-03-430.
                                Washington, D.C.: April 4, 2003.

                                Severe Wildland Fires: Leadership and Accountability Needed to Reduce
                                Risks to Communities and Resources. GAO-02-259. Washington, D.C.:
                                January 31, 2002.

                                The National Fire Plan: Federal Agencies Are Not Organized to
                                Effectively and Efficiently Implement the Plan. GAO-01-1022T.
                                Washington, D.C.: July 31, 2001.

                                Land Management Agencies: Ongoing Initiative to Share Activities and
                                Facilities Needs Management Attention. GAO-01-50. Washington, D.C.:
                                November 21, 2000.

                                Federal Wildfire Activities: Current Strategy and Issues Needing
                                Attention. GAO/RCED-99-223. Washington, D.C.: August 13, 1999.

                                Land Management: The Forest Service’s and BLM’s Organizational
                                Structures and Responsibilities. GAO/RCED-99-227. Washington, D.C.:
                                July 29, 1999.

                                Ecosystem Planning: Northwest Forest and Interior Columbia River
                                Basin Plans Demonstrate Improvements in Land-Use Planning.
                                GAO/RCED-99-64. Washington, D.C.: May 26, 1999.

                                Land Management Agencies: Revenue Sharing Payments to States and
                                Counties. GAO/RCED-98-261. Washington, D.C.: September 17, 1998.

                                Federal Land Management: Streamlining and Reorganization Issues.
                                GAO/T-RCED-96-209. Washington, D.C.: June 27, 1996.



                                Page 79                                    GAO-03-1006 Opportunities for Oversight
               Appendix I
               Opportunities to Improve the Economy,
               Efficiency, and Effectiveness of Federal
               Programs




               National Park Service: Better Management and Broader Restructuring
               Efforts Are Needed. GAO/T-RCED-95-101. Washington, D.C.: February 9,
               1995.

               Forestry Functions: Unresolved Issues Affect Forest Service and BLM
               Organizations in Western Oregon. GAO/RCED-94-124. Washington, D.C.:
               May 17, 1994.

               Forest Service Management: Issues to Be Considered in Developing a
               New Stewardship Strategy. GAO/T-RCED-94-116. Washington, D.C.:
               February 1, 1994.

GAO Contacts   Bob Robinson, (202) 512-3841
               Barry Hill, (202) 512-3841




               Page 80                                    GAO-03-1006 Opportunities for Oversight
                  Appendix I
                  Opportunities to Improve the Economy,
                  Efficiency, and Effectiveness of Federal
                  Programs




350 Agriculture   Examples from Selected GAO Work

                  Terminate or Significantly Reduce the U.S. Department of Agriculture’s
                  Market Access Program

                  Consolidate Common Administrative Functions at the U.S. Department of
                  Agriculture

                  Further Consolidate the U.S. Department of Agriculture’s County Offices




                  Page 81                                    GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Examples from
Selected GAO Work

Terminate or Significantly
Reduce the U.S. Department
of Agriculture’s Market
Access Program               Primary agency                             Department of Agriculture
                             Account                                    Commodity Credit Corporation (12-4336)
                             Spending type                              Mandatory
                             Budget subfunction                         351/Farm income stabilization

                             The Market Access Program is an export promotion program operated by
                             the Foreign Agricultural Service of the Department of Agriculture. The
                             program subsidizes the promotion of U.S. agricultural products in overseas
                             markets. Through a cost-sharing arrangement, the program helps fund
                             overseas promotions conducted by U.S. agricultural producers,
                             cooperatives, exporters, and trade associations. Under the Farm Security
                             and Rural Development Act of 2002, authorized funding for the program
                             has increased from $100 million in fiscal year 2002 to $110 million in fiscal
                             year 2003, $125 million in fiscal year 2004, $140 million in fiscal year 2005,
                             and rising to $200 million in fiscal years 2006 and 2007. About three-
                             quarters of the program budget supports generic promotions, with the
                             remaining funds supporting brand-name promotions.

                             Beginning in fiscal year 1993, the Congress directed that changes be made
                             to the program in order to increase the emphasis on small businesses,
                             establish a graduation limit, and certify that program funds supplement, not
                             supplant, private sector expenditures. From fiscal year 1994 through fiscal
                             year 1997, program reforms resulted in increases to the number of small
                             businesses participating in the program as well as small businesses’ share
                             of program funds. In addition, in 1998, the Foreign Agricultural Service
                             prohibited direct and indirect assistance to large companies for brand-
                             name promotions unless the assistance was provided through cooperatives
                             and certain associations. The Service also implemented a 5-year graduation
                             requirement for brand-name promotional activities but waived this
                             requirement for cooperatives. As a result, promotional activities by
                             cooperatives for brand-name products remained eligible for program
                             funding.




                             Page 82                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                Questions remain about the overall economic benefits derived from the
                                Market Access Program. Estimates of the program’s macroeconomic
                                impact developed by the Foreign Agricultural Service are overstated and
                                rely on a methodology that is inconsistent with Office of Management and
                                Budget cost/benefit guidelines. In addition, the evidence from market-level
                                studies is inconclusive regarding program impact on specific commodities
                                in specific markets. Furthermore, it is difficult to ensure that funds for
                                promotional activities are in addition to private sector expenditures
                                because it is hard to determine what would have been spent in the absence
                                of program funds.

                                The Conference Report on the Omnibus Consolidated and Emergency
                                Supplemental Appropriations Act of 1999 directed the Secretary of
                                Agriculture to submit a report that, among other things, estimates the
                                economic impact of the Market Access Program, analyzes the costs and
                                benefits of the program in a manner consistent with government
                                cost/benefit guidelines, and evaluates the additional spending of
                                participants and additional exports resulting from the program. The
                                Foreign Agricultural Service has not completed this report. Absent
                                convincing evidence that the program has a positive economic impact,
                                results in increased exports that would not have occurred without the
                                program, and supplements and does not supplant private sector
                                expenditures, the Congress might choose to terminate the program or
                                significantly reduce its funding. In the past, CBO estimated that savings
                                could be achieved if the Market Access Program was eliminated.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Agricultural Trade: Changes Made to Market Access Program, but
                                Questions Remain on Economic Impact. GAO/NSIAD-99-38. Washington,
                                D.C.: April 5, 1999.

                                U.S. Agricultural Exports: Strong Growth Likely, but U.S. Export
                                Assistance Programs’ Contribution Uncertain. GAO/NSIAD-97-260.
                                Washington, D.C.: September 30, 1997.

                                Farm Bill Export Options. GAO/GGD-96-39R. Washington, D.C.:
                                December 15, 1995.




                                Page 83                                    GAO-03-1006 Opportunities for Oversight
               Appendix I
               Opportunities to Improve the Economy,
               Efficiency, and Effectiveness of Federal
               Programs




               Agricultural Trade: Competitor Countries’ Foreign Market Development
               Program. GAO/T-GGD-95-184. Washington, D.C.: June 14, 1995.

               International Trade: Changes Needed to Improve Effectiveness of the
               Market Promotion Program. GAO/GGD-93-125. Washington, D.C.: July 7,
               1993.

               U.S. Department of Agriculture: Improvements Needed in Market
               Promotion Program. GAO/T-GGD-93-17. Washington, D.C.: March 25, 1993.

GAO Contacts   Bob Robinson, (202) 512-3841
               Lawrence J. Dyckman, (202) 512-3841




               Page 84                                    GAO-03-1006 Opportunities for Oversight
                              Appendix I
                              Opportunities to Improve the Economy,
                              Efficiency, and Effectiveness of Federal
                              Programs




Consolidate Common
Administrative Functions at
the U.S. Department of
Agriculture                   Primary agency                             Department of Agriculture
                              Accounts                                   Multiple
                              Spending types                             Discretionary/Direct
                              Budget subfunction                         352/Agricultural research and services

                              In accordance with the Federal Crop Insurance Reform and Department of
                              Agriculture Reorganization Act of 1994, the U.S. Department of Agriculture
                              (USDA) has engaged in a reorganization and modernization effort targeted
                              at achieving greater economy and efficiency and better customer service by
                              the Farm Service Agency, the Natural Resources and Conservation Service,
                              and the agencies in the Rural Development mission. USDA’s efforts consist
                              of five interrelated initiatives: (1) colocating the agencies’ county and state
                              offices, (2) merging the agencies’ administrative functions at the state and
                              headquarters level under a single support organization, (3) redesigning
                              agencies’ business processes, (4) modernizing information technology, and
                              (5) changing the agencies’ cultures to improve customer services.

                              USDA’s progress in these initiatives has been mixed. For example, despite
                              the agencies’ colocation of county offices, little has changed in how the
                              three agencies serve their customers. Each of its agencies emphasizes a
                              different client base and the delivery of different programs. Consequently,
                              little has changed in how the three agencies work together to serve their
                              customers, particularly in terms of cross-servicing and sharing of
                              information. On the other hand, USDA has made substantial progress in
                              deploying personal computers and a telecommunications network to link
                              its service centers, and deployed a shared network server. However, the
                              full range of service delivery efficiencies has not yet been realized because
                              the agencies’ program applications are not fully integrated and all service
                              center employees have not been trained to use the system.

                              In terms of merging and streamlining administrative functions, some
                              progress has been made in sharing space and equipment and agreeing upon
                              some common human capital practices. However, to further streamline its
                              organization, increase efficiency, and reduce overhead costs associated
                              with running separate offices, USDA could do more to combine agencies’
                              support functions, such as legislative and legal affairs and public
                              information, into a single office serving the needs of all mission component
                              agencies. In addition, even though USDA has developed a plan to converge



                              Page 85                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                administrative functions for county-based agencies, a number of obstacles
                                need to be overcome if the plan is to be successfully implemented,
                                including the selection of a strong leadership team to implement the
                                convergence plan. In the past, CBO agreed that this option could
                                potentially yield savings, but did not develop a savings estimate due to
                                uncertainty of the extent to which improved efficiencies actually could lead
                                to budgetary savings.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Major Management Challenges and Program Risks: Department of
                                Agriculture. GAO/00-96. Washington, D.C.: January 2003.

                                U.S. Department of Agriculture: State Office Collocation. GAO/RCED-00-
                                208R. Washington, D.C.: June 30, 2000.

                                USDA Reorganization: Progress Mixed in Modernizing the Delivery of
                                Services. GAO/RCED-00-43. Washington, D.C.: February 3, 2000.

                                U.S. Department of Agriculture: Administrative Streamlining is
                                Expected to Continue Through 2002. GAO/RCED-99-34. Washington, D.C.:
                                December 11, 1998.

                                U.S. Department of Agriculture: Update on Reorganization and
                                Streamlining Efforts. GAO/RCED-97-186R. Washington, D.C.: June 24,
                                1997.

GAO Contacts                    Bob Robinson, (202) 512-3841
                                Lawrence J. Dyckman, (202) 512-3841




                                Page 86                                    GAO-03-1006 Opportunities for Oversight
                               Appendix I
                               Opportunities to Improve the Economy,
                               Efficiency, and Effectiveness of Federal
                               Programs




Further Consolidate the U.S.
Department of Agriculture’s
County Offices
                               Primary agency                             Department of Agriculture
                               Accounts                                   Multiple
                               Spending type                              Discretionary
                               Budget subfunction                         351/Farm income stabilization

                               The U.S. Department of Agriculture (USDA) maintains a field office
                               structure that dates back to the 1930s when transportation and
                               communication systems limited the geographic boundaries covered by a
                               single field office and when there were a greater number of small, widely
                               disbursed, family-owned farms. In 1933, the United States had more than 6
                               million farmers; today the number of farms in the United States is less than
                               2 million and a small fraction of these produce more than 70 percent of the
                               nation’s agricultural output. About one-third of USDA’s over 100,000
                               employees are involved in delivering the $55 billion a year farm program.
                               As the client base for the USDA programs changes and as technology offers
                               opportunities for program delivery efficiencies, USDA needs to consider
                               alternative program delivery approaches. In this regard, the service center
                               agencies need to reassess the types of services they now provide and how
                               they can work more efficiently to deliver these services in the future with
                               fewer office locations.

                               At various times, the Congress has attempted to reduce the number of
                               county offices serving farmers and/or reduce county office staffing. The
                               Federal Crop Insurance Reform and Department of Agriculture
                               Reorganization Act of 1994 (P.L. 103-354, Oct. 13, 1994) directed the
                               Secretary of Agriculture to streamline departmental operations by
                               consolidating county offices. In response to the Agriculture
                               Reorganization Act, USDA has closed over 1,000 county office locations
                               and reduced staffing at its county offices. However, as the agency states in
                               its September 2001 Food and Agricultural Policy: Taking Stock for the
                               New Century, “Further actions are necessary to ensure that the USDA farm
                               service structure is appropriately sized, configured, and located for
                               efficient provision of the new services demanded by a rapidly evolving food
                               and agriculture system.”

                               USDA could further consolidate its county office field structure, for
                               example, by closing more of its small county offices. Criteria for
                               determining which small county offices to close could include the



                               Page 87                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                (1) distance from another county office, (2) time spent on administrative
                                duties, and (3) number of farmers who receive USDA financial benefits.
                                Although in the past CBO agreed that closing offices that serve few farmers
                                would produce savings, it could not develop a savings estimate without a
                                specific proposal.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Major Management Challenges and Program Risks: Department of
                                Agriculture. GAO-03-96. Washington, D.C.: January 2003.

                                USDA Reorganization: Progress Mixed in Modernizing the Delivery of
                                Services. GAO/RCED-00-43. Washington, D.C.: February 3, 2000.

                                Farm Service Agency: Characteristics of Small County Offices.
                                GAO/RCED-99-102. Washington, D.C.: May 28, 1999.

                                U.S. Department of Agriculture: Status of Closing and Consolidating
                                County Offices. GAO/T-RCED-98-250. Washington, D.C.: July 29, 1998.

                                Farm Programs: Service to Farmers Will Likely Change as Farm Service
                                Agency Continues to Reduce Staff and Close Offices. GAO/RCED-98-136.
                                Washington, D.C.: May 1, 1998.

                                Farm Programs: Administrative Requirements Reduced and Further
                                Program Delivery Changes Possible. GAO/RCED-98-98. Washington, D.C.:
                                April 20, 1998.

                                Farm Programs: Impact of the 1996 Farm Act on County Office
                                Workload. GAO/RCED-97-214. Washington, D.C.: August 19, 1997.

GAO Contacts                    Bob Robinson, (202) 512-3841
                                Lawrence J. Dyckman, (202) 512-3841




                                Page 88                                    GAO-03-1006 Opportunities for Oversight
                   Appendix I
                   Opportunities to Improve the Economy,
                   Efficiency, and Effectiveness of Federal
                   Programs




370 Commerce and   Examples from Selected GAO Work

Housing Credit     Recapture Interest on Rural Housing Loans

                   Require Self-Financing of Mission Oversight by Fannie Mae and Freddie
                   Mac

                   Reduce Federal Housing Administration’s Insurance Coverage

                   Merging U.S. Department of Agriculture and Department of Housing and
                   Urban Development Single-Family Insured Lending Programs and
                   Multifamily Portfolio Management Programs

                   Consolidate Homeless Assistance Programs

                   Reorganize and Consolidate Small Business Administration’s
                   Administrative Structure

                   Improve Reviews of Small Business Administration’s Preferred Lenders

                   CBO Options Where Related GAO Work Is Identified

                   370-01 End the Credit Subsidy for the Small Business Administration’s
                   Major Business Loan Guarantee Programs

                   370-05 Charge All Banks and Thrifts Deposit Insurance Premiums




                   Page 89                                    GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Examples from
Selected GAO Work

Recapture Interest on Rural
Housing Loans

                                Primary agency                             Department of Agriculture
                                Account                                    Rural Housing Insurance Fund (12-2081)
                                Spending type                              Direct
                                Budget subfunction                         371/Mortgage credit

                                The Housing Act of 1949, as amended, requires U.S. Department of
                                Agriculture’s (USDA) Rural Housing Service (RHS) to recapture a portion
                                of the subsidy provided over the life of direct housing loans it makes when
                                the borrower sells or vacates a property. The rationale is that because
                                taxpayers paid a portion of the mortgage, they are entitled to a portion of
                                the property’s appreciation. Because recapture is not mandated when
                                homes are refinanced, RHS’s policy allows borrowers who pay off direct
                                RHS loans but continue to occupy the properties to defer the payments for
                                recapturing the subsidies. As of July 31, 1999, RHS’s records showed that
                                about $140 million was owed by borrowers who had refinanced their
                                mortgages but continued to occupy the properties. RHS does not charge
                                interest on the amounts owed by these borrowers.

                                Legislative changes could be made to allow RHS to charge market rate
                                interest on recapture amounts owed by borrowers to help recoup the
                                government’s administrative and borrowing costs. Actual savings could
                                differ depending on how this proposal would affect the rate at which
                                homes are sold.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Rural Housing Programs: Opportunities Exist for Cost Savings and
                                Management Improvement. GAO/RCED-96-11. Washington, D.C.:
                                November 16, 1995.




                                Page 90                                        GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




GAO Contact   Thomas J. McCool, (202) 512-8678




              Page 91                                    GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Require Self-Financing of
Mission Oversight by Fannie
Mae and Freddie Mac
                                Primary agency                             Department of Housing and Urban
                                                                           Development
                                Account                                    Office of Federal Housing Enterprise
                                                                           Oversight, Salaries and Expenses (86-
                                                                           5272)
                                Spending type                              Direct
                                Budget subfunction                         371/Mortgage credit

                                The Congress established and chartered the Federal National Mortgage
                                Association (Fannie Mae) and the Federal Home Loan Mortgage
                                Corporation (Freddie Mac) as government-sponsored enterprises. These
                                enterprises are privately-owned corporations chartered to enhance the
                                availability of mortgage credit across the nation. The Congress also
                                charged the Department of Housing and Urban Development (HUD) with
                                mission oversight responsibility for the enterprises, which includes
                                ensuring that housing goals established by HUD result in enhanced housing
                                opportunities for certain groups of borrowers.

                                Other federal organizations responsible for regulating government-
                                sponsored enterprises are financed by assessments on the regulated
                                entities. However, HUD’s mission oversight expenditures are funded with
                                taxpayer dollars from HUD’s appropriations. Accordingly, HUD’s capability
                                to strengthen its enterprise housing mission oversight may be limited
                                because resources that could be used for that purpose must compete with
                                other priorities. For example, HUD’s capacity to implement a program to
                                verify housing goal data, which would necessarily involve a commitment of
                                additional resources, may be limited.

                                Requiring Fannie Mae and Freddie Mac to reimburse HUD for mission
                                oversight expenditures would not only result in budgetary savings but
                                would also enable HUD to strengthen its oversight activities.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report




                                Page 92                                        GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




Related GAO Products   Housing Enterprises: The Roles of Fannie Mae and Freddie Mac in the
                       U.S. Housing Finance System. T-GGD-00-182. Washington, D.C.: July 25,
                       2000.

                       Federal Housing Enterprises: HUD’s Mission Oversight Needs to Be
                       Strengthened. GAO/GGD-98-173. Washington, D.C.: July 28, 1998.

                       Government-Sponsored Enterprises: Advantages and Disadvantages of
                       Creating a Single Housing GSE Regulator. GAO/GGD-97-139. Washington,
                       D.C.: July 9, 1997.

                       Government-Sponsored Enterprises: A Framework for Limiting the
                       Government’s Exposure to Risks. GAO/GGD-91-90. Washington, D.C.:
                       May 22, 1991.

GAO Contact            Thomas J. McCool, (202) 512-8678




                       Page 93                                    GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Reduce Federal Housing
Administration’s Insurance
Coverage
                             Primary agency                             Department of Housing and Urban
                                                                        Development
                             Account                                    FHA-Mutual Mortgage Insurance Program
                                                                        Account (86-0183)
                             Spending types                             Discretionary/Direct
                             Budget subfunction                         371/Mortgage credit

                             Through its Federal Housing Administration (FHA), the Department of
                             Housing and Urban Development (HUD) insures private lenders against
                             nearly all losses resulting from foreclosures on single-family homes insured
                             under its Mutual Mortgage Insurance Fund. The Department of Veterans
                             Affairs (VA) also operates a single-family mortgage guaranty program.
                             However, unlike FHA, VA covers only 25 to 50 percent of the original loan
                             amount against losses incurred when borrowers default on loans, leaving
                             lenders responsible for any remaining losses.

                             In May 1997, GAO reported that reducing FHA’s insurance coverage to the
                             level permitted for VA home loans would likely reduce the Fund’s exposure
                             to financial losses, thereby improving its financial health. As a result, the
                             Fund’s ability to maintain financial self-sufficiency in an uncertain future
                             would be enhanced. For example, if insurance coverage on FHA’s 1995
                             loans was reduced to VA’s levels and a 14 percent volume reduction in
                             lending was assumed, GAO estimated that the economic value of the loans
                             would increase by $52 million to $79 million. Economic value provides an
                             estimate of the profitability of FHA loans, which is important because
                             estimated increases in economic value due to legislative changes allow
                             additional mandatory spending authorizations to be made, other revenues
                             to be reduced, or projected savings in the federal budget to be realized.
                             Reducing FHA’s insurance coverage would likely improve the financial
                             health of the Fund because the reduction in claim payments resulting from
                             lowered insurance coverage would more than offset the decrease in
                             premium income resulting from reduced lending volume.

                             Legislative changes could be made to reduce FHA’s insurance coverage.
                             Savings under this option would depend on future economic conditions,
                             the volume of loans made, how higher risk and lower risk borrowers would
                             be identified for exclusion from the program, and whether some losses may
                             be shifted from FHA to the Government National Mortgage Association. In



                             Page 94                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                addition, reducing FHA’s insurance coverage does pose trade-offs affecting
                                lenders, borrowers, and FHA’s role, such as diminishing the federal role in
                                stabilizing markets. Low-income, first-time, and minority home buyers and
                                those individuals purchasing older homes are most likely to experience
                                greater difficulty in obtaining a home mortgage.

                                In the past, CBO could not provide a savings estimate for this option
                                because the amount of potential savings would depend on the reaction of
                                lenders and the resulting demand for FHA’s products.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Mortgage Financing: Changes in the Performance of FHA-Insured Loans.
                                GAO-02-773. Washington, D.C.: July 10, 2002.

                                Mortgage Financing: FHA’s Fund Has Grown, but Options for Drawing
                                on the Fund Have Uncertain Outcomes. GAO-01-460. Washington, D.C.:
                                February 28, 2001.

                                Homeownership: Potential Effects of Reducing FHA’s Insurance Coverage
                                for Home Mortgages. GAO/RCED-97-93. Washington, D.C.: May 1, 1997.

GAO Contact                     Thomas J. McCool, (202) 512-8678




                                Page 95                                    GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Merging U.S. Department of
Agriculture and Department
of Housing and Urban
Development Single-Family    Primary agencies                           Department of Agriculture
                                                                        Department of Housing and Urban
Insured Lending Programs                                                Development
and Multifamily Portfolio    Accounts                                   Multiple
Management Programs          Spending types                             Direct/Discretionary
                             Budget subfunction                         371/Mortgage credit

                             The U.S. Department of Agriculture (USDA), primarily through its Rural
                             Housing Service (RHS), has jurisdiction over most federal rural housing
                             programs. HUD, primarily through its Federal Housing Administration
                             (FHA), has jurisdiction over the major nationwide federal housing
                             programs. As the distinctions between rural and urban life have blurred
                             and federal budgets have tightened, the need for the separate rural housing
                             programs, first created in the mid-1930s to stimulate the rural economy and
                             assist needy rural families, is questionable.

                             Similarities exist between the RHS and FHA programs for delivering rural
                             housing, and efficiencies could be achieved by merging the two programs.
                             For instance, RHS’s single-family guaranteed loan program and FHA’s
                             single-family insured loan program both primarily target low- and
                             moderate-income households, use the same qualifying ratios, and operate
                             in the same markets. Even though RHS’s program offers more attractive
                             terms for the borrower and is available only in rural areas, whereas FHA’s
                             program is available nationwide, both programs could be offered through
                             the same network of lenders. Adapting each one’s best practices for use by
                             the other and eliminating inconsistencies in the rules applicable to private
                             owners under the current programs would improve the efficiency with
                             which the federal government delivers rural housing programs.

                             As we reported, to optimize the federal role in rural housing, the Congress
                             may wish to consider requiring USDA and HUD to examine the benefits and
                             costs of merging those programs that serve similar markets and provide
                             similar products. As a first step, the Congress could consider requiring RHS
                             and HUD to explore merging their single-family insured lending programs
                             and multifamily portfolio management programs, taking advantage of the
                             best practices of each and ensuring that targeted populations are not
                             adversely affected. In the past, CBO could not estimate savings for this
                             option without a more specific proposal.



                             Page 96                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Rural Housing: Options for Optimizing the Federal Role in Rural
                                Housing Development. GAO/RCED-00-241. Washington, D.C.:
                                September 15, 2000.

GAO Contact                     Thomas J. McCool, (202) 512-8678




                                Page 97                                    GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




Consolidate Homeless
Assistance Programs

                       Primary agency                             Department of Housing and Urban
                                                                  Development
                       Accounts                                   Multiple
                       Spending types                             Direct/Discretionary
                       Budget subfunctions                        Multiple

                       In 1987, the Congress passed the Stewart B. McKinney Act (P.L. 100-77) to
                       provide a comprehensive federal response to address the multiple needs of
                       homeless people. The act encompassed both existing and new programs,
                       including those providing emergency food and shelter, those offering long-
                       term housing and supportive services, and those designed to demonstrate
                       effective approaches for providing homeless people with services. Over the
                       years, some of the original McKinney programs have been consolidated or
                       eliminated, and some new programs have been added. Today homeless
                       people receive assistance through these programs as well as other federal
                       programs that are not authorized under the McKinney Act but are
                       nevertheless specifically targeted to serve the homeless population. In
                       February 1999, we reported that seven federal agencies administer 16
                       programs that are targeted to serve the homeless population. In fiscal year
                       1997, these agencies obligated over $1.2 billion for homeless assistance
                       programs, and the programs administered by the Department of Housing
                       and Urban Development (HUD) accounted for about 70 percent of this
                       total.

                       While these federal programs offer a wide range of services to the homeless
                       population, some of these services appear similar. For example, food and
                       nutrition services can be provided to homeless people through eight
                       different programs administered by five different agencies. Moreover, our
                       work at the state and local level has found that state and local government
                       officials generally believe that the federal government has not done a good
                       job of coordinating its various homeless assistance programs. This
                       perceived lack of coordination could adversely affect the ability of states
                       and localities to integrate their own programs. Also, we reported that,
                       because different homeless assistance programs have varying sets of
                       eligibility and funding requirements, they can cause coordination
                       difficulties for the federal agencies administering them as well as
                       administrative and coordination burdens for the states and communities
                       that have to apply for and use these funds.



                       Page 98                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                The Congress may wish to consider consolidating all homeless assistance
                                programs under HUD because HUD (1) has taken a leadership role in the
                                area of homelessness, (2) has developed a well-respected approach for
                                delivering homeless assistance programs called the Continuum of Care,
                                and (3) is responsible for administering most of the funds for programs
                                targeted to the homeless. Consolidating all of the homeless assistance
                                programs under HUD should result in administrative and operational
                                efficiencies at the federal level as well as reduce the administrative and
                                coordination burdens of state and local governments. In the past, CBO was
                                unable to estimate the potential savings for this option without a specific
                                legislative proposal.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Homelessness: Improving Program Coordination and Client Access to
                                Program. GAO-02-485T. Washington, D.C.: March 6, 2002.

                                Homelessness: Consolidating HUD’s McKinney Programs. GAO/T-RCED-
                                00-187. Washington, D.C.: May 23, 2000.

                                Homelessness: State and Local Efforts to Integrate and Evaluate
                                Homeless Assistance Programs. GAO/RCED-99-178. Washington, D.C.:
                                June 29, 1999.

                                Homelessness: Coordination and Evaluation of Programs Are Essential.
                                GAO/RCED-99-49. Washington, D.C.: February 26, 1999.

                                Homelessness: McKinney Act Programs Provide Assistance but Are Not
                                Designed to Be the Solution. GAO/RCED-94-37. Washington, D.C.: May 31,
                                1994.

GAO Contact                     Thomas J. McCool, (202) 512-8678




                                Page 99                                    GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Reorganize and Consolidate
Small Business
Administration’s
Administrative Structure     Primary agency                             Small Business Administration
                             Accounts                                   Multiple
                             Spending type                              Discretionary
                             Budget subfunction                         376/Other advancement of commerce

                             The Small Business Administration’s (SBA) complicated and overlapping
                             organizational relationships and a field structure that does not consistently
                             match mission requirements have combined to impede staff efforts to
                             deliver services effectively. Some of the complex organizational
                             relationships stem from legislative requirement. Others result from past
                             SBA realignment efforts that changed how the agency performs its
                             functions but left aspects of the previous structure intact.

                             For example, district staff working on SBA loan programs report to their
                             district management, while loan processing and servicing center staff
                             report directly to the Office of Capital Access in headquarters. Yet, district
                             office loan program staffs sometimes need to work with the loan
                             processing and servicing centers to get information or to expedite loans for
                             lenders in their district. Because loan processing and servicing centers
                             report directly to the Office of Capital Access, requests that are directed to
                             the centers sometimes must go from the district through the Office of
                             Capital Access then back to the centers. District managers and staff said
                             that sometimes they cannot get answers to questions when lenders call and
                             that they have trouble expediting loans because they lack authority to
                             direct the centers to take any action. Lender association representatives
                             said that the lines of authority between headquarters and the field can be
                             confusing and that practices vary from district to district.

                             In 2002, GAO reported that SBA drafted a 5-year workforce transformation
                             plan. The draft plan recognizes SBA’s need to restructure its workforce,
                             privatize noncore functions, adjust incentives and goals, and streamline its
                             headquarters’ operation. Improvements in SBA’s organizational structure
                             could lead to savings in human capital and office space costs.

                             Some options that the Congress could consider to assist SBA in its
                             transformation effort include




                             Page 100                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                • rescinding or combining some of the legislatively mandated offices,
                                  programs, or aspects of existing programs,

                                • rescinding some of the reporting relationships, grades, or types of
                                  appointments for senior SBA officials, and

                                • giving the agency the ability to close or consolidate some of its
                                  inefficiently located field offices.

CBO 5-Year Cost Estimate        No, this is a new example. CBO could not develop an estimate for this
Included in GAO’s 2002          example.
Budgetary Implications Report

Related GAO Products            Small Business Administration: Workforce Transformation Plan Is
                                Evolving. GAO-02-931T. Washington, D.C.: July 16, 2002.

                                Small Business Administration: Current Structure Presents Challenges
                                for Service Delivery. GAO-02-17. Washington, D.C.: October 26, 2001.

GAO Contact                     Davi D’Agostino, (202) 512-8678




                                Page 101                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Improve Reviews of Small
Business Administration’s
Preferred Lenders
                            Primary agency                              Small Business Administration
                            Account                                     Business Loans Program Account (73-
                                                                        1154)
                            Spending types                              Direct/Discretionary
                            Budget subfunction                          376/Other advancement of commerce

                            The Small Business Administration’s (SBA) largest business loan program,
                            the “7(a) program,” is intended to serve small business borrowers who
                            cannot otherwise obtain financing under reasonable terms and conditions
                            from the private sector. As of September 30, 2002, SBA had a total portfolio
                            of about $46 billion, including $42 billion in direct and guaranteed small
                            business loans and other guarantees. SBA delegates full authority to
                            preferred lenders to make loans without prior SBA approval. In fiscal year
                            2002, preferred lenders approved 55 percent of the dollar value of all 7(a)
                            loans—about $7 billion. Because SBA guarantees up to 85 percent of the
                            7(a) loans made by its lending partners, there is risk to SBA if the loans are
                            not repaid. The default rate for each of the last 3 fiscal years has been
                            around 14 percent.

                            SBA is required by law to review preferred lenders at least annually. SBA
                            has made progress in developing its lender oversight program, but it has
                            not fully developed effective oversight programs that assess lenders’
                            decisions on borrowers’ creditworthiness and eligibility and the impact of
                            lenders’ decisions regarding risk posed to SBA’s portfolio.

                            SBA should incorporate strategies into its reviews of preferred lenders to
                            adequately measure the financial risk lenders pose to SBA, develop specific
                            criteria to apply to the “credit elsewhere” standard,12 and perform
                            qualitative assessments of lenders’ performance and lending decisions.
                            Implementation of these recommendations could lead to lower defaults on
                            7(a) loans and/or a smaller 7(a) loan program.




                            12
                             The “credit elsewhere” standard is a test to determine whether the borrower can obtain
                            credit without the SBA guarantee.




                            Page 102                                         GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




CBO 5-Year Cost Estimate        No, this is a new example. CBO could not develop an estimate for this
Included in GAO’s 2002          example.
Budgetary Implications Report

Related GAO Product             Small Business Administration: Progress Made but Improvements
                                Needed in Lender Oversight. GAO-03-90. Washington, D.C.: December 9,
                                2002.

GAO Contact                     Davi D’Agostino, (202) 512-8678




                                Page 103                                   GAO-03-1006 Opportunities for Oversight
                              Appendix I
                              Opportunities to Improve the Economy,
                              Efficiency, and Effectiveness of Federal
                              Programs




CBO Options Where
Related GAO Work Is
Identified13

370-01 End the Credit
Subsidy for the Small
Business Administration’s
Major Business Loan
Guarantee Programs

Related GAO Products          Small Business Administration: Progress Made but Improvements
                              Needed in Lender Oversight. GAO-03-90. Washington, D.C.: December 9,
                              2002.

                              Small Business Administration: Section 7(a) General Business Loans
                              Credit Subsidy Estimates. GAO-01-1095R. Washington, D.C.: August 21,
                              2001.13

GAO Contacts                  Davi D’Agostino, (202) 512-8678
                              Linda Calbom, (202) 512-8341



370-05 Charge All Banks and
Thrifts Deposit Insurance
Premiums

Related GAO Product           Deposit Insurance Funds: Analysis of Insurance Premium Disparity
                              Between Banks and Thrifts. GAO/AIMD-95-84. Washington, D.C.: March 3,
                              1995.




                              13
                               We list GAO reports identified as relating to options included in the CBO March 2003
                              Budget Options report. Only those CBO options for which we identified related GAO
                              products are included. We included GAO reports if they related to the topic of the CBO
                              option, regardless of whether our work supported the option or not.




                              Page 104                                         GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




GAO Contact   Thomas J. McCool, (202) 512-8678




              Page 105                                   GAO-03-1006 Opportunities for Oversight
                     Appendix I
                     Opportunities to Improve the Economy,
                     Efficiency, and Effectiveness of Federal
                     Programs




400 Transportation   Examples from Selected GAO Work

                     Eliminate the Pulsed Fast Neutron Analysis Inspection System

                     Develop a Passenger Intercity Rail Policy to Meet National Goals

                     Eliminate Cargo Preference Laws to Reduce Federal Transportation Costs

                     Increase Aircraft Registration Fees to Enable the Federal Aviation
                     Administration to Recover Actual Costs

                     Apply Cost-Benefit Analysis to Replacement Plans for Airport Surveillance
                     Radars

                     Close, Consolidate, or Privatize Some Coast Guard Operating and Training
                     Facilities

                     Convert Some Support Officer Positions to Civilian Status

                     CBO Options Where Related GAO Work Is Identified

                     400-01 Reduce Federal Subsidies for Amtrak

                     400-02 Eliminate the Essential Air Service Program

                     400-03 Eliminate Grants to Large and Medium-Sized Hub Airports

                     400-04 Increase Fees for Certificates and Registrations Issued by the
                     Federal Aviation Administration

                     400-08 Eliminate Funding for the “New Starts” Transit Program




                     Page 106                                   GAO-03-1006 Opportunities for Oversight
                              Appendix I
                              Opportunities to Improve the Economy,
                              Efficiency, and Effectiveness of Federal
                              Programs




Examples from
Selected GAO Work

Eliminate the Pulsed Fast
Neutron Analysis Inspection
System
                              Primary agency                              Multiple
                              Account                                     FAA—Research, Engineering and
                                                                          Development (69-8108)
                              Spending type                               Discretionary
                              Budget subfunction                          402/Air transportation

                              One type of technology under development for detecting explosives and
                              narcotics is a pulsed fast neutron analysis (PFNA) inspection system.
                              PFNA is designed to directly and automatically detect and measure the
                              presence of specific materials (e.g., cocaine) by exposing their constituent
                              chemical elements to short bursts of subatomic particles called neutrons.
                              As we reported in our April 1999 report, officials from the government
                              agencies responsible for developing PFNA still do not believe that the
                              current PFNA system would meet their operational requirements because
                              it is too expensive (estimated at between $10 million to $15 million per unit
                              to acquire) and too large for operational use in most ports of entry or other
                              sites. Those responsible agencies are the Bureau of Customs and Border
                              Protection (CBP), Transportation Security Administration (TSA), and
                              Department of Defense (DOD).14 However, at the direction of the
                              Congress,15 DOD is currently leading a joint effort with CBP and TSA to
                              conduct an operational evaluation of PFNA at the Ysleta border crossing in
                              El Paso, Texas. This evaluation will test PFNA’s ability to detect drugs,


                              14
                               Previously we included the views of U.S. Customs Service and Federal Aviation
                              Administration (FAA) officials. However, since our last budgetary implications report in
                              April 2002, Customs and its responsibilities were transferred to CBP and TSA assumed the
                              PFNA program from FAA. CBP and TSA are part of the Department of Homeland Security,
                              which was established in November 2002. In addition, the DOD Counterdrug Technology
                              Development Program Office assumed responsibility for the PFNA program from the Office
                              of the Assistant Secretary of Defense for Special Operations and Low Intensity Conflict.
                              15
                               Senate Report 107-109, Department of Defense Appropriation Bill, 2002, and
                              Supplemental Appropriations, 2002, December 5, 2001, page 155.




                              Page 107                                        GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                explosives, chemical warfare agents, currency, and nuclear materials. It is
                                currently scheduled for completion by June 2004 and estimated to cost
                                $13.9 million to the government, which includes $8.5 million for a firm,
                                fixed-price contract with PFNA’s manufacturer, The Ancore Corporation, to
                                deliver a system to Ysleta and provide support and maintenance for the
                                test. The $13.9 million total consists of $5.4 million from DOD, $3.5 million
                                from TSA, and $5 million from CBP.

                                DOD officials stated that its lead role in the joint Ysleta operational test is
                                as an independent evaluator and does not indicate an endorsement of the
                                system for use by DOD. CBP officials question whether PFNA will be a
                                viable and affordable technology for widespread use but stated that PFNA
                                shows enough promise that CBP agreed to help fund the joint operational
                                test. Similarly, while TSA officials do not believe the current PFNA system
                                will meet operational requirements for maritime and land applications,
                                they stated that a definitive assessment would be made at the completion
                                of the joint test. For aviation applications, TSA has decided to pursue a
                                cooperative agreement with The Ancore Corporation to test a PFNA
                                system design in the laboratory, which could lead to an operational test at
                                an airport if the system meets specific detection criteria. TSA officials
                                stated that dates and costs for this separate effort would not be available
                                until after The Ancore Corporation completes its systems development.

                                One option is for the Congress to eliminate the PFNA. In the past, CBO
                                estimated that savings could be achieved if the PFNA was eliminated.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Terrorism and Drug Trafficking: Testing Status and Views on
                                Operational Viability of Pulsed Fast Neutron Analysis Technology.
                                GAO/GGD-99-54. Washington, D.C.: April 13, 1999.

GAO Contact                     Laurie E. Ekstrand, (202) 512-8777




                                Page 108                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Develop a Passenger
Intercity Rail Policy to Meet
National Goals
                                Primary agency                             National Railroad Passenger Corporation
                                Accounts                                   Multiple
                                Spending type                              Discretionary
                                Budget subfunction                         401/Ground transportation

                                The National Railroad Passenger Corporation (Amtrak) operates the
                                nation’s intercity passenger rail service. As a private corporation, it
                                operates trains in 46 states, serving about 23.4 million riders (about 64,000
                                per day). Amtrak plays only a small part in the nation’s overall
                                transportation system with the exception of some short-distance routes. It
                                has sizeable market shares (compared to travel by air) between certain
                                relatively close cities. However, by far, the automobile dominates most
                                intercity travel. Like major national intercity passenger rail systems
                                outside the United States, Amtrak receives government support. Since
                                Amtrak’s creation in 1970, the federal government has provided Amtrak
                                with operating and capital assistance and in the past 5 years, it has
                                provided Amtrak an average of about $1 billion each year.

                                Throughout its existence, Amtrak’s financial condition has never been
                                strong and the corporation has been on the edge of bankruptcy several
                                times, most recently in 2002. Current levels of federal funding are not
                                sufficient to support the existing level of intercity passenger rail service
                                being provided by Amtrak. Amtrak has indicated that it will need about
                                $2 billion annually—about twice the amount provided in recent years—in
                                federal operating and capital assistance over the next few years to stabilize
                                its system and to cover operating losses. Additional assistance would be
                                needed to expand or enhance service or develop high-speed rail corridors.

                                Amtrak and the administration have offered differing views on Amtrak and
                                the future of intercity passenger rail service in America. Amtrak focuses
                                primarily on the importance of Amtrak’s receiving the funding it needs to
                                improve the condition of its equipment, its reliability and utilization, and its
                                infrastructure. In contrast, the administration is looking toward a
                                fundamental restructuring of the manner in which federal assistance is
                                provided for intercity passenger rail service that it argues will create a rail
                                service driven by sound economics, competition, and a long-term
                                partnership between states and the federal government to sustain an
                                economically viable system.



                                Page 109                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                An evaluation framework could be useful to help the Congress consider
                                intercity passenger rail policy. Based on extensive analyses of federal
                                investment approaches across a broad stratum of national activities, we
                                have found that the key components of a framework for evaluating federal
                                investments include (1) establishing clear, nonconflicting goals,
                                (2) establishing the roles of governmental and private entities, (3)
                                establishing funding approaches that focus on and provide incentives for
                                results and accountability, and (4) ensuring that the strategies developed
                                address diverse stakeholder interests and limit unintended consequences.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Intercity Passenger Rail: Issues for Consideration in Developing an
                                Intercity Passenger Rail Policy. GAO-03-712T. Washington, D.C.: April 30,
                                2003.

                                Intercity Passenger Rail: Potential Financial Issues in the Event That
                                Amtrak Undergoes Liquidation. GAO-02-871. Washington, D.C.:
                                September 20, 2002.

                                Intercity Passenger Rail: Amtrak Needs to Improve Its Decisionmaking
                                Process for Its Route and Service Proposals. GAO-02-398. Washington,
                                D.C.: April 12, 2002.

                                Intercity Passenger Rail: Congress Faces Critical Decisions in
                                Developing a National Policy. GAO-02-522T. Washington, D.C.: April 11,
                                2002.

GAO Contact                     JayEtta Z. Hecker, (202) 512-8984




                                Page 110                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Eliminate Cargo Preference
Laws to Reduce Federal
Transportation Costs
                                Primary agencies                           Multiple
                                Accounts                                   Multiple
                                Spending type                              Discretionary
                                Budget subfunction                         403/Water transportation

                                Cargo preference laws require that certain government-owned or financed
                                cargo shipped internationally be carried on U.S.-flagged vessels. Cargo
                                preference laws are intended to guarantee a minimum amount of business
                                for the U.S.-flagged vessels. These vessels are required by law to be crewed
                                by U.S. mariners, are generally required to be built in U.S. shipyards, and
                                are encouraged to be maintained and repaired in U.S. shipyards. In
                                addition, U.S.-flag carriers commit to providing capacity in times of
                                national emergencies.

                                The effect of cargo preference laws has been mixed. These laws appear to
                                have had a substantial impact on the U.S. merchant marine industry by
                                providing an incentive for vessels to remain in the U.S. fleet. However,
                                because U.S.-flagged vessels often charge higher rates to transport cargo
                                than foreign-flagged vessels, cargo preference laws increase the
                                government’s transportation costs. For fiscal years 1989 through 1993, four
                                federal agencies—the Departments of Defense, Agriculture, Energy, and
                                the Agency for International Development—were responsible for more
                                than 99 percent of the government cargo subject to cargo preference laws.
                                Cargo preference laws increased these federal agencies’ transportation
                                costs by an estimated $578 million per year in fiscal years 1989 through
                                1993 over the cost of using foreign-flagged vessels. If the laws were
                                eliminated, savings could be achieved.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Management Reform: Implementation of the National Performance
                                Review’s Recommendations. GAO/OCG-95-1. Washington, D.C.:
                                December 5, 1994.




                                Page 111                                       GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Maritime Industry: Cargo Preference Laws—Their Estimated Costs and
              Effects. GAO/RCED-95-34. Washington, D.C.: November 30, 1994.

              Cargo Preference: Effects of U.S. Export-Import Cargo Preference Laws
              on Exporters. GAO/GGD-95-2BR. Washington, D.C.: October 31, 1994.

              Cargo Preference Requirements: Objectives Not Significantly Advanced
              When Used in U.S. Food Aid Programs. GAO/GGD-94-215. Washington,
              D.C.: September 29, 1994.

GAO Contact   JayEtta Z. Hecker, (202) 512-8984




              Page 112                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Increase Aircraft
Registration Fees to Enable
the Federal Aviation
Administration to Recover       Primary agency                             Department of Transportation
Actual Costs                    Spending type                              Direct

                                In 1977, the Congress amended the Federal Aviation Act and identified
                                three categories of aircraft owners—U.S. citizens, resident aliens, and U.S.-
                                based foreign companies—that may register aircraft in the United States.
                                To register an aircraft, an eligible owner submits a $5 fee. As of the end of
                                fiscal year 1999, 355,518 aircraft were registered in the United States. In
                                fiscal year 1999, 54,329 certificate registrations were issued.

                                In 1993, we reported that the Federal Aviation Administration (FAA) was
                                not fully recovering the cost of processing aircraft registration applications
                                and estimated that, by not increasing fees since 1968 to recover costs, FAA
                                had foregone about $6.5 million in additional revenue. To recover the costs
                                of services provided to aircraft registrants, we have recommended that
                                FAA increase its aircraft registration fees to more accurately reflect actual
                                costs. FAA plans to coordinate aircraft registration changes with the Drug
                                Enforcement Agency and the U.S. Customs Service by the end of 2004. If
                                those two agencies approve the proposed changes, FAA will prepare
                                legislation for congressional approval for a rate increase for registration
                                fees. FAA plans to complete changes to its aircraft registration system by
                                mid-2005.

                                If the FAA recovers the full cost of processing aircraft registration
                                applications, additional revenue could be achieved.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Aviation Safety: Unresolved Issues Involving U.S.-Registered Aircraft.
                                GAO/RCED-93-135. Washington, D.C.: June 18, 1993.

GAO Contact                     Gerald Dillingham, (202) 512-4803




                                Page 113                                       GAO-03-1006 Opportunities for Oversight
                              Appendix I
                              Opportunities to Improve the Economy,
                              Efficiency, and Effectiveness of Federal
                              Programs




Apply Cost-Benefit Analysis
to Replacement Plans for
Airport Surveillance Radars
                              Primary agency                             Department of Transportation
                              Account                                    Facilities and Equipment (69-8107)
                              Spending type                              Discretionary
                              Budget subfunction                         402/Air transportation

                              Before installing an airport surveillance radar (ASR), the Federal Aviation
                              Administration (FAA) typically conducts cost-benefit studies to determine
                              whether it will be cost effective. In addition to the $5 million cost of the
                              new radars, other costs may be incurred for auxiliary equipment and
                              infrastructure modifications. Benefits of these improvements include
                              travelers’ time saved through potential reductions in aircraft delays and
                              lives saved and injuries avoided through reduced risk of midair and terrain
                              collisions. Because there is a direct correlation between projected air
                              traffic operations and the potential benefits associated with radar
                              installation, airports with higher air traffic projections would receive more
                              benefit from a radar than those with lower projections.

                              In 1999, FAA had planned to install technologically advanced ASR-11 radars
                              to replace its model ASR-7 and ASR-8 radars at 101 airports, without
                              applying its cost-benefit criteria. FAA’s rationale for not applying its cost-
                              benefit criteria to these 101 airports was its belief that discontinuing radar
                              operations at airports that no longer qualify could lead to public
                              perceptions that safety was being reduced, even if safety was not
                              compromised. However, some of these airports may no longer qualify for a
                              radar based on FAA’s cost-benefit criteria and 75 of them have less air
                              traffic than an airport whose radar request FAA has denied using its cost-
                              benefit criteria. Furthermore, at some of these airports, the circumstances
                              that originally justified a radar no longer exist.

                              GAO recommended that FAA apply its cost-benefit criteria to all 101
                              airports where it plans to replace the ASR-7 and ASR-8 radars and
                              determine whether those airports had a continuing operational need for
                              radar. In response to GAO’s recommendation, FAA asked its regional
                              offices to verify the operational need for radars at the 75 airports that had
                              less traffic than the airport whose radar was denied. As of May 2003, FAA
                              was still planning to replace aging ASR-7/8 systems with ASR-11 radar
                              without the cost-benefit analysis. FAA said the analysis was used to
                              determine the siting of eight other new ASR-11 radar systems. We continue



                              Page 114                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                to believe that savings may result if FAA were to perform the cost-benefit
                                studies at the 101 airports.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Air Traffic Control: Surveillance Radar Request for the Cherry Capital
                                Airport. GAO/RCED-98-118. Washington, D.C.: May 28, 1998.

GAO Contact                     Gerald Dillingham, (202) 512-4803




                                Page 115                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Close, Consolidate, or
Privatize Some Coast Guard
Operating and Training
Facilities                      Primary agency                             Department of Homeland Security
                                Account                                    United States Coast Guard (70-0600)
                                Spending type                              Discretionary
                                Budget subfunctions                        Multiple

                                The Coast Guard could achieve budget savings by downsizing its facilities.
                                The Coast Guard abandoned plans to close its Curtis Bay facility in 1988,
                                when GAO reported that it lacked supporting data. While the cost
                                effectiveness of this facility had been questioned, the Coast Guard had not
                                conducted a detailed study to compare the facility’s cost effectiveness with
                                that of commercial shipyards. In fiscal year 1996, GAO testified that the
                                Coast Guard could save $6 million by closing or consolidating over 20 small
                                boat stations. Also in 1996, GAO recommended that the Coast Guard
                                consider other alternatives—such as privatization—to operate its vessel
                                traffic service centers, which cost $20.2 million to operate in fiscal year
                                1999. Furthermore, in fiscal 1995, GAO recommended that the Coast Guard
                                close one of its large training centers in Petaluma, Cal.—at a savings of
                                $9 million annually. The Coast Guard agreed that this may be possible but
                                did not close it largely because of public opposition.

                                Given the serious budget constraints the Coast Guard now faces and the
                                fundamental challenges in being able to accomplish new homeland security
                                responsibilities it has been given while maintaining levels of effort in its
                                traditional missions, it will need to achieve significant budgetary savings to
                                offset the increased budgetary needs of the future. Closing, consolidating,
                                or privatizing training and operating facilities, including the Curtis Bay
                                facility, 20 small boat stations, the vessel traffic service centers, and one of
                                its training centers in Petaluma, Cal., would help the Coast Guard to
                                achieve these required savings. While in the past, CBO agreed that closing,
                                consolidating, or privatizing Coast Guard facilities could yield savings, it
                                could not develop an estimate without specific proposals.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report




                                Page 116                                       GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




Related GAO Products   Coast Guard: Challenges During the Transition to the Department of
                       Homeland Security. GAO-03-594T. Washington, D.C.: April 1, 2003.

                       Coast Guard: Comprehensive Blueprint Needed to Balance and Monitor
                       Resource Use and Measure Performance for All Missions. GAO-03-544T.
                       Washington, D.C.: March 12, 2003.

                       Coast Guard: Strategy Needed for Setting and Monitoring Levels of Effort
                       for All Missions. GAO-03-155. Washington, D.C.: November 12, 2002.

                       Coast Guard: Budget Challenges for 2001 and Beyond. GAO/T-RCED-00-
                       103. Washington, D.C.: March 15, 2000.

                       Coast Guard: Review of Administrative and Support Functions.
                       GAO/RCED-99-62R. Washington, D.C.: March 10, 1999.

                       Coast Guard: Challenges for Addressing Budget Constraints. GAO/RCED-
                       97-110. Washington, D.C.: May 14, 1997.

                       Marine Safety: Coast Guard Should Address Alternatives as It Proceeds
                       With VTS 2000. GAO/RCED-96-83. Washington, D.C.: April 22, 1996.

                       Coast Guard: Issues Related to the Fiscal Year 1996 Budget Request.
                       GAO/T-RCED-95-130. Washington, D.C.: March 13, 1995.

                       Coast Guard: Improved Process Exists to Evaluate Changes to Small Boat
                       Stations. GAO/RCED-94-147. Washington, D.C.: April 1, 1994.

GAO Contact            JayEtta Z. Hecker, (202) 512-8984




                       Page 117                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Convert Some Support
Officer Positions to Civilian
Status
                                Primary agency                             Department of Homeland Security
                                Account                                    United States Coast Guard (70-0600)
                                Spending type                              Discretionary
                                Budget subfunctions                        Multiple

                                The Coast Guard uses officers in operational positions—to command
                                boats, ships, and aircraft that can be deployed during times of war—and in
                                support positions, such as personnel, public affairs, data processing, and
                                financial management. Military standard personnel costs are paid out of the
                                Coast Guard’s discretionary budget and include all pay and allowances,
                                permanent change of station costs, training costs, and active-duty medical
                                costs associated with each pay grade. Certain allowances—housing and
                                subsistence—are provided to military personnel tax free. Additionally,
                                military retirement costs are funded by an annual permanent appropriation
                                separate from the Coast Guard’s discretionary budget. Civilian standard
                                personnel costs are also paid out of the Coast Guard’s discretionary budget
                                and include basic, locality, overtime, and special pay as well as the costs
                                associated with permanent change of station, training, health insurance,
                                life insurance, and the accrued cost of civilian retirement.

                                Of 5,760 commissioned officer positions in the Coast Guard’s workforce (as
                                of the end of fiscal year 1999), GAO selectively evaluated nearly 1,000 in 75
                                units likely to have support positions. Of these positions, GAO found about
                                800 in which officers were performing duties that offered opportunities for
                                conversion to civilian positions. Such positions include those in, among
                                other things, personnel, public affairs, civil rights, and data processing. In
                                comparing all of the relevant costs associated with military and civilian
                                positions, GAO found that employing active-duty commissioned officers in
                                the positions we reviewed is, on average, 21 percent more costly than filling
                                the same positions with comparable civilian employees. The cost
                                differential is based on a comparison of average annual pay, benefits, and
                                expenses associated with the Coast Guard’s commissioned officers at
                                different military ranks and federal civilian employees at comparable
                                civilian grades for fiscal year 1999.

                                From July 31, 2001 through February 28, 2003, the Coast Guard had
                                converted 68 commissioned officer positions to civilian positions.
                                Converting support positions currently filled by military officers to civilian



                                Page 118                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                status would reduce costs associated with delivering these services with no
                                apparent impact on performance. By converting commissioned officer
                                positions to civilian positions, savings would accrue to the federal
                                government in the form of retirement savings, tax advantage savings, and
                                savings to the Coast Guard’s discretionary budget. In the past, CBO agreed
                                that this option would lead to savings, but that those savings would
                                primarily result from differences between military and civilian retirement
                                plans. Consequently, the budgetary savings resulting from this shift would
                                not begin until “new” civilian employees began to retire, which will occur
                                after the 5-year projection period.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Coast Guard Workforce Mix: Phased-In Conversion of Some Support
                                Officer Positions Would Produce Savings. GAO/RCED-00-60. Washington,
                                D.C.: March 1, 2000.

GAO Contact                     JayEtta Z. Hecker, (202) 512-8984




                                Page 119                                   GAO-03-1006 Opportunities for Oversight
                        Appendix I
                        Opportunities to Improve the Economy,
                        Efficiency, and Effectiveness of Federal
                        Programs




CBO Options Where
Related GAO Work Is
Identified16

400-01 Reduce Federal
Subsidies for Amtrak

Related GAO Products    Intercity Passenger Rail: Potential Financial Issues in the Event That
                        Amtrak Undergoes Liquidation. GAO-02-871. Washington, D.C.:
                        September 20, 2002.16

                        Intercity Passenger Rail: Amtrak Needs to Improve Its Decisionmaking
                        Process for Its Route and Service Proposals. GAO-02-398. Washington,
                        D.C.: April 12, 2002.

                        Intercity Passenger Rail: The Congress Faces Critical Decisions About
                        the Role of and Funding for Intercity Passenger Rail Systems. GAO-01-
                        820T. Washington, D.C.: July 25, 2001.

                        High-Speed Rail Investment Act of 2001. GAO-01-756R. Washington, D.C.:
                        June 25, 2001.

                        Intercity Passenger Rail: Amtrak Will Continue to Have Difficulty
                        Controlling Its Costs and Meeting Capital Needs. GAO/RCED-00-138.
                        Washington, D.C.: May 31, 2000.

GAO Contact             JayEtta Z. Hecker, (202) 512-8984




                        16
                         We list GAO reports identified as relating to options included in the CBO March 2003
                        Budget Options report. Only those CBO options for which we identified related GAO
                        products are included. We included GAO reports if they related to the topic of the CBO
                        option, regardless of whether our work supported the option or not.




                        Page 120                                         GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




400-02 Eliminate the
Essential Air Service
Program

Related GAO Products         Commercial Aviation: Issues Regarding Federal Assistance for
                             Enhancing Air Service to Small Communities. GAO-03-540T. Washington,
                             D.C.: March 11, 2003.

                             Commercial Aviation: Factors Affecting Efforts to Improve Air Service
                             at Small Community Airports. GAO-03-330. Washington, D.C.: January 17,
                             2003.

                             Options to Enhance the Long-Term Viability of the Essential Air Service
                             Program. GAO-02-997R. Washington, D.C.: August 30, 2002.

GAO Contact                  JayEtta Z. Hecker, (202) 512-8984



400-03 Eliminate Grants to
Large and Medium-Sized
Hub Airports

Related GAO Products         Airport Finance: Past Funding Levels May Not Be Sufficient to Cover
                             Airports’ Planned Capital Development. GAO-03-497T. Washington, D.C.:
                             February 25, 2003.

                             Aviation Finance: Implementation of General Aviation Entitlement
                             Grants. GAO-03-347. Washington, D.C.: February 11, 2003.

                             Aviation Infrastructure: Challenges Related to Building Runways and
                             Actions to Address Them. GAO-03-164. Washington, D.C.: January 30, 2003.

                             Airport Finance: Using Airport Grant Funds for Security Projects Has
                             Affected Some Development Projects. GAO-03-27. Washington, D.C.:
                             October 15, 2002.

                             Aviation Finance: Distribution of Airport Grant Funds Complied with
                             Statutory Requirements. GAO-02-283. Washington, D.C.: April 30, 2002.




                             Page 121                                   GAO-03-1006 Opportunities for Oversight
                               Appendix I
                               Opportunities to Improve the Economy,
                               Efficiency, and Effectiveness of Federal
                               Programs




GAO Contact                    JayEtta Z. Hecker, (202) 512-8984



400-04 Increase Fees for
Certificates and
Registrations Issued by the
Federal Aviation
Administration

Related GAO Product            Aviation Safety: Unresolved Issues Involving U.S.-Registered Aircraft.
                               GAO/RCED-93-135. Washington, D.C.: June 18, 1993.

GAO Contact                    Gerald Dillingham, (202) 512-4803



400-08 Eliminate Funding
for the “New Starts” Transit
Program

Related GAO Products           Mass Transit: Status of New Starts Program and Potential for Bus Rapid
                               Transit Projects. GAO-02-840T. Washington, D.C.: June 20, 2002.

                               Mass Transit: FTA’s New Starts Commitments for Fiscal Year 2003. GAO-
                               02-603. Washington, D.C.: April 30, 2002.

GAO Contact                    Katherine Siggerud, (202) 512-6570




                               Page 122                                   GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




450 Community and      Examples from Selected GAO Work

Regional Development   Limit Eligibility for Federal Emergency Management Agency Public
                       Assistance

                       Eliminate the Flood Insurance Subsidy on Properties That Suffer the
                       Greatest Flood Loss

                       Eliminate Flood Insurance for Certain Repeatedly Flooded Properties

                       Consolidate or Terminate the Department of Commerce’s Trade
                       Adjustment Assistance for Firms Program

                       Improve Federal Foreclosure and Property Sales Processes

                       CBO Options Where Related GAO Work Is Identified

                       450-02 Eliminate Region-Specific Development Agencies

                       450-05 Drop Flood Insurance for Certain Repeatedly Flooded Properties




                       Page 123                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Examples from
Selected GAO Work

Limit Eligibility for Federal
Emergency Management
Agency Public Assistance
                                Primary agency                               Department of Homeland Security
                                Account                                      Emergency Preparedness and Response
                                                                             (70-0700)
                                Spending type                                Discretionary
                                Budget subfunctions                          Multiple

                                The Federal Emergency Management Agency’s (FEMA) Public Assistance
                                Program helps pay state and local governments’ costs of repairing and
                                replacing eligible public facilities and equipment damaged by natural
                                disasters. Many private nonprofit organizations, such as schools, hospitals,
                                and utilities, are also eligible for assistance. From 1990 through 2001,
                                FEMA has expended over $39 billion (in fiscal year 2001 dollars) in disaster
                                assistance, over half of which was spent for public assistance projects such
                                as repairs of roads, government buildings, utilities, and hospitals damaged
                                in declared disasters.

                                A number of options identified by program officials in FEMA’s 10 regional
                                offices, if implemented, could reduce program costs. The agency has acted
                                to address some of these options. However, FEMA has not addressed some
                                other identified options, stating that congressional direction would be
                                needed for the agency to change policies. These include eliminating the
                                eligibility for facilities not actively used to deliver government services,
                                postdisaster beach renourishment, as well as increasing the damage
                                threshold for replacing a facility.17 In addition, program costs could be
                                reduced by policy changes such as eliminating eligibility for all private
                                nonprofit organizations—many of which are revenue-generating facilities
                                such as utilities, hospitals, and universities—or eliminating funding for
                                publicly owned recreational facilities (e.g., boat docks, piers, and golf


                                17
                                 FEMA will now pay to replace rather than repair buildings if the repair costs would be
                                more than 50 percent of the estimated replacement cost.




                                Page 124                                          GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                courses) which generate portions of their operational revenue through user
                                fees, rents, admission charges, or similar fees. In the past, CBO estimated
                                that eliminating eligibility for all private nonprofit organizations would
                                yield budgetary savings.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Disaster Assistance: Improvement Needed in Disaster Declaration
                                Criteria and Eligibility Assurance Procedures. GAO-01-837. Washington,
                                D.C.: August 31, 2001.

                                Disaster Assistance: Information on Federal Costs and Approaches for
                                Reducing Them. GAO/T-RCED-98-139. Washington, D.C.: March 26, 1998.

                                Disaster Assistance: Improvements Needed in Determining Eligibility
                                for Public Assistance. GAO/RCED-96-113. Washington, D.C.: May 23, 1996.

                                Disaster Assistance: Improvements Needed in Determining Eligibility
                                for Public Assistance. GAO/T-RCED-96-166. Washington, D.C.: April 30,
                                1996.

GAO Contact                     JayEtta Z. Hecker, (202) 512-8984




                                Page 125                                   GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Eliminate the Flood
Insurance Subsidy on
Properties That Suffer the
Greatest Flood Loss          Primary agency                             Department of Homeland Security
                             Account                                    National Flood Insurance (70-4236)
                             Spending type                              Mandatory
                             Budget subfunction                         453/Disaster relief and insurance

                             The National Flood Insurance Program is not actuarially sound because
                             approximately 30 percent of the 4.3 million policies in force are subsidized.
                             Federal Insurance Administration officials estimate that total premium
                             income from subsidized policyholders is about $500 million less than it
                             would be if these rates had been actuarially based and participation had
                             remained the same. According to a Federal Insurance Administration
                             official, if true actuarial rates were charged, insurance rates on currently
                             subsidized policies would need to rise, on average, slightly more than
                             twofold (to an annual average premium of about $1,500 to $1,600).
                             Significant rate increases for subsidized policies, including charging
                             actuarial rates, would likely cause some owners of properties built before
                             the publication of the Flood Insurance Rate Map to cancel their flood
                             insurance. However, the ultimate cost or savings to the federal government
                             would depend on the actions of property owners. If these property owners,
                             who suffer the greatest flood loss, canceled their insurance and
                             subsequently suffered losses due to future floods, they could apply for low-
                             interest loans from the Small Business Administration or grants from
                             FEMA, which would increase the overall cost to the federal government.

                             FEMA received a May 1999 contractor’s study concerning the economic
                             effects of eliminating subsidized rates, and in June 2000 the agency
                             transmitted the study to the Congress with recommendations for reducing
                             the subsidy. According to FEMA, it is analyzing the impacts of specific
                             alternatives for carrying out the recommendations, as well as working with
                             stakeholders to refine and develop a comprehensive strategy to help it
                             decide how to implement the study’s recommendations. Some of the
                             recommendations for reducing the subsidy depend on legislative change. In
                             light of the potential savings associated with addressing this issue, FEMA
                             should develop and advance legislative options for eliminating the National
                             Flood Insurance Program’s subsidy for properties that are more likely to
                             suffer losses.




                             Page 126                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Flood Insurance: Information on Financial Aspects of the National Flood
                                Insurance Program. GAO/T-RCED-00-23. Washington, D.C.: October 27,
                                1999.

                                Flood Insurance: Information on Financial Aspects of the National Flood
                                Insurance Program. GAO/T-RCED-99-280. Washington, D.C.: August 25,
                                1999.

                                Flood Insurance: Financial Resources May Not Be Sufficient to Meet
                                Future Expected Losses. GAO/RCED-94-80. Washington, D.C.: March 21,
                                1994.

GAO Contact                     JayEtta Z. Hecker, (202) 512-8984




                                Page 127                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Eliminate Flood Insurance
for Certain Repeatedly
Flooded Properties
                                Primary agency                             Department of Homeland Security
                                Account                                    National Flood Insurance (70-4236)
                                Spending type                              Mandatory
                                Budget subfunction                         453/Disaster relief and insurance

                                Repetitive flood losses are one of the major factors contributing to the
                                financial difficulties facing the National Flood Insurance Program (NFIP).
                                A repetitive-loss property is one that has two or more losses greater than
                                $1,000 each within any 10-year period. In 2002, approximately 45,000
                                buildings insured under the NFIP have been flooded on more than one
                                occasion and have received flood insurance claims payments of $1,000 or
                                more for each loss. As we reported in July 2001, these repetitive losses
                                account for about 38 percent of all program claims historically (about $200
                                million annually) even though repetitive-loss structures make up a very
                                small portion of the total number of insured properties—at any one time,
                                from 1 to 2 percent. The cost of these multiple-loss properties over the
                                years to the program has been $3.8 billion. Under its repetitive-loss
                                strategy, the Federal Insurance Administration intends to target for
                                mitigation the most flood-prone repetitive-loss properties, such as those
                                that are currently insured and have had four or more losses, by acquiring,
                                relocating, or elevating them. The Federal Emergency Management Agency
                                (FEMA) reports NFIP paid out over $800 million in claims for the most
                                vulnerable repetitive loss properties (about 10,000) over the last 21 years.

                                One option that would increase savings would be for FEMA to consider
                                eliminating flood insurance for certain repeatedly flooded properties. In its
                                fiscal year 2002 budget proposal, FEMA requested to transfer $20 million in
                                fees from the NFIP to increase the number of buyouts of properties that
                                suffer repetitive losses.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Flood Insurance: Information on the Financial Condition of the National
                                Flood Insurance Program. GAO-01-992T. Washington, D.C.: July 19, 2001.




                                Page 128                                       GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Flood Insurance: Information on Financial Aspects of the National Flood
              Insurance Program. GAO/T-RCED-00-23. Washington, D.C.: October 27,
              1999.

              Flood Insurance: Information on Financial Aspects of the National Flood
              Insurance Program. GAO/T-RCED-99-280. Washington, D.C.: August 25,
              1999.

GAO Contact   JayEtta Z. Hecker, (202) 512-8984




              Page 129                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Consolidate or Terminate
the Department of
Commerce’s Trade
Adjustment Assistance for   Primary agency                             Department of Commerce
Firms Program               Account                                    Economic Development Assistance
                                                                       Programs (13-2050)
                            Spending type                              Discretionary
                            Budget subfunction                         452/Area and regional development

                            The Trade Adjustment Assistance (TAA) for firms program is administered
                            by the Department of Commerce’s Economic Development Administration.
                            This $11 million program (obligations in fiscal year 2002) is designed to
                            assist domestic firms that have been adversely affected by imports. Twelve
                            regional centers help firms become certified for benefits, assess their
                            economic viability, and develop business recovery plans.

                            For fiscal years 1995 through 1999, an average of 157 firms were annually
                            certified as eligible for assistance and 127 (an average of 11 for each
                            regional center) had certified recovery plans. During this period, however,
                            most of the program funding—61 percent—was used to fund operational
                            and administrative costs at the 12 regional centers, including helping firms
                            become certified for assistance and developing firm-specific recovery
                            plans. The remainder—an annual average of $3.8 million, or approximately
                            39 percent of the total—was used to fund direct technical assistance. The
                            Economic Development Administration added performance measures in
                            fiscal year 2002 to better track outcomes of the assistance provided by the
                            regional centers. However, we have not evaluated whether these new data
                            are sufficient to assess how the program is helping firms adjust to import
                            competition.

                            Given the lack of information on the impact of the program, the Congress
                            may wish to consider several options for this program. First, the Congress
                            may wish to have the Department of Commerce consolidate the regional
                            centers and therefore reduce administrative and overhead costs. Another
                            alternative would be to colocate the TAA centers with an existing program
                            such as the Department of Commerce’s Manufacturing Extension
                            Partnership, reducing overhead and perhaps providing some synergy with
                            other government efforts to assist firms. In the past, CBO estimtated that
                            budgetary savings would occur if the Congress chooses to terminate the
                            TAA for Firms Program.




                            Page 130                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Trade Adjustment Assistance: Impact of Federal Assistance to Firms Is
                                Unclear. GAO-01-12. Washington, D.C.: December 15, 2000.

GAO Contact                     Loren Yager, (202) 512-4128




                                Page 131                                   GAO-03-1006 Opportunities for Oversight
                           Appendix I
                           Opportunities to Improve the Economy,
                           Efficiency, and Effectiveness of Federal
                           Programs




Improve Federal
Foreclosure and Property
Sales Processes
                           Primary agencies                                Department of Housing and Urban
                                                                           Development
                                                                           Department of Veterans Affairs
                           Accounts                                        Multiple
                           Spending types                                  Direct/Discretionary
                           Budget subfunctions                             Multiple

                           Opportunities exist to reduce the time necessary to sell foreclosed
                           properties and minimize costs to the federal government. Federal
                           programs in the Department of Housing and Urban Development’s Federal
                           Housing Administration (FHA), the Department of Veterans Affairs (VA),
                           and the Department of Agriculture’s Rural Housing Service (RHS) promote
                           mortgage financing for, among other groups, low-income, first-time,
                           minority, veteran, and rural home buyers. Fannie Mae and Freddie Mac are
                           private corporations chartered by the Congress that also promote mortgage
                           financing and home ownership opportunities. Although these programs
                           have expanded home ownership opportunities, many home owners fall
                           behind in their mortgage payments each year due to unemployment, health
                           problems, or the death of a provider. When mortgage lenders cannot assist
                           home owners in meeting their payments, FHA, VA, RHS, Fannie Mae, and
                           Freddie Mac (the organizations) may instruct the lenders to begin
                           foreclosure proceedings. Once foreclosure proceedings have been
                           initiated, it is generally in the best interests of the organizations and
                           communities that foreclosed properties are adequately maintained and
                           resold as quickly as feasible. Otherwise, property conditions can
                           deteriorate, thereby resulting in lower sales prices, which could limit the
                           government’s ability to recover the costs that it incurs.18 In addition, vacant
                           and poorly maintained properties that are on the market for extended
                           periods contribute to neighborhood decay.

                           FHA procedures can delay the initiation of critical steps necessary to
                           preserve the value of foreclosed properties and to sell them quickly. While


                           18
                             Generally, FHA, VA, and RHS pay claims to mortgage servicers to cover the outstanding
                           loan balances on foreclosed mortgages and interest and other expenses. If foreclosed
                           properties are resold at relatively low prices, then the organizations’ ability to recover their
                           claim payments may be limited.




                           Page 132                                             GAO-03-1006 Opportunities for Oversight
Appendix I
Opportunities to Improve the Economy,
Efficiency, and Effectiveness of Federal
Programs




Fannie Mae, Freddie Mac, VA, and RHS designate one entity as responsible
for the custody, maintenance, and sale of foreclosed properties, FHA
divides these responsibilities between its mortgage servicers and
management and marketing contractors. We found that FHA’s divided
approach to foreclosed property custody can prevent the initiation of
critical maintenance necessary to make properties attractive to potential
buyers, such as the timely removal of all exterior and interior debris, and
results in disputes between servicers and contractors. Because FHA’s
divided approach delays maintenance and other steps necessary to
preserve the value and marketability of foreclosed properties, the
properties may be sold at lower prices than would otherwise be the case.
In fact, we estimated that FHA takes about 55 to 110 days longer to sell
foreclosed properties than the other organizations. In a June 2003
conversation, an FHA official said that the agency continues to consider
unified custody as the best means of managing its inventory of foreclosed
properties. Given legal and other complexities associated with changing its
approach to selling foreclosed properties, FHA does not expect to
complete its ongoing review of the best means of implementing unified
custody until October 2004.

FHA and VA together spent about $31.5 million in 2000 on new title
insurance policies to help establish that they had clear title to foreclosed
properties, while Fannie Mae, Freddie Mac, and RHS generally did not
purchase new title insurance policies. Neither FHA nor VA collects data to
determine the need for these expenditures, and available information
suggests they are not cost effective. In 1995, VA’s Office of Inspector
General (OIG) issued a report that questioned whether VA’s title insurance
expenditures offered value to the government, and VA has not implemented
recommendations contained in the report to assess the expenditures’ cost
effectiveness. In addition, Fannie Mae, Freddie Mac, and RHS report few
title-related problems when they sell foreclosed properties. We make
recommendations that FHA and VA collect additional data and reevaluate
the cost effectiveness of their title insurance expenditures. In a June 2003
conversation, an FHA official said that FHA expects to complete its review
of purchasing title insurance during the foreclosure process by October
2004. In a June 2003 conversation, a VA official said that the department
expects to complete its review during the fall of 2003.

As an option, Congress may wish to consider enacting legislation to
establish unified custody as a priority for the sale of foreclosed properties
that FHA takes into its inventory and directing the agency to complete its




Page 133                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                review of the best means of implementing unified custody by the close of
                                fiscal year 2004.

                                As an option, Congress may wish to consider enacting legislation directing
                                FHA and VA to complete their ongoing reviews of the cost effectiveness of
                                purchasing new title insurance policies during the foreclosure process by
                                the close of fiscal year 2004.

CBO 5-Year Cost Estimate        No, this is a new example. CBO could not develop an estimate for this
Included in GAO’s 2002          example.
Budgetary Implications Report

Related GAO Product             Single-Family Housing: Opportunities to Improve Federal Foreclosure
                                and Property Sales Processes. GAO-02-305. Washington, D.C.: April 17,
                                2002.

GAO Contact                     Thomas J. McCool, (202) 512-8678




                                Page 134                                   GAO-03-1006 Opportunities for Oversight
                           Appendix I
                           Opportunities to Improve the Economy,
                           Efficiency, and Effectiveness of Federal
                           Programs




CBO Options Where
Related GAO Work Is
Identified19

450-02 Eliminate Region-
Specific Development
Agencies

Related GAO Products       Economic Development: Multiple Federal Programs Fund Similar
                           Economic Development Activities. GAO/RCED/GGD-00-220. Washington,
                           D.C.: September 29, 2000.19

                           Budget Issues: Effective Oversight and Budget Discipline Are Essential—
                           Even in a Time of Surplus. GAO/T-AIMD-00-73. Washington, D.C.:
                           February 1, 2000.

GAO Contact                Thomas J. McCool, (202) 512-8678



450-05 Drop Flood
Insurance for Certain
Repeatedly Flooded
Properties

Related GAO Products       Flood Insurance: Challenges Facing the National Flood Insurance
                           Program, Statement for the Record. GAO-03-606T. Washington, D.C.:
                           April 1, 2003.

                           Flood Insurance: Extent of Noncompliance with Purchase Requirements
                           Is Unknown. GAO-02-396. Washington, D.C.: June 21, 2002.



                           19
                            We list GAO reports identified as relating to options included in the CBO March 2003
                           Budget Options report. Only those CBO options for which we identified related GAO
                           products are included. We included GAO reports if they related to the topic of the CBO
                           option, regardless of whether our work supported the option or not.




                           Page 135                                         GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Flood Insurance: Information on Financial Aspects of the National Flood
              Insurance Program. GAO/T-RCED-00-23. Washington, D.C.: October 27,
              1999.

              Flood Insurance: Information on Financial Aspects of the National Flood
              Insurance Program. GAO/T-RCED-99-280. Washington, D.C.: August 25,
              1999.

              Flood Insurance: Financial Resources May Not Be Sufficient to Meet
              Future Expected Losses. GAO/RCED-94-80. Washington, D.C.: March 21,
              1994.

GAO Contact   JayEtta Z. Hecker, (202) 512-8984




              Page 136                                   GAO-03-1006 Opportunities for Oversight
                        Appendix I
                        Opportunities to Improve the Economy,
                        Efficiency, and Effectiveness of Federal
                        Programs




500 Education,          CBO Options Where Related GAO Work Is Identified

Training, Employment,   500-02 Repeal the Safe and Drug-Free Schools and Communities Act
and Social Services
                        500-11 Eliminate the Senior Community Service Employment Program




                        Page 137                                   GAO-03-1006 Opportunities for Oversight
                              Appendix I
                              Opportunities to Improve the Economy,
                              Efficiency, and Effectiveness of Federal
                              Programs




CBO Options Where
Related GAO Work Is
Identified20

500-02 Repeal the Safe and
Drug-Free Schools and
Communities Act

Related GAO Product           Safe and Drug-Free Schools: Balancing Accountability With State and
                              Local Flexibility. GAO/HEHS-98-3. Washington, D.C.: October 10, 1997.20

GAO Contact                   Marnie S. Shaul, (202) 512-6778



500-11 Eliminate the Senior
Community Service
Employment Program

Related GAO Product           Older Workers: Employment Assistance Focuses on Subsidized Jobs and
                              Job Search, but Revised Performance Measures Could Improve Access to
                              Other Services. GAO-03-350. Washington, D.C.: January 24, 2003.

GAO Contact                   Sigurd R. Nilsen, (202) 512-7033




                              20
                               We list GAO reports identified as relating to options included in the CBO March 2003
                              Budget Options report. Only those CBO options for which we identified related GAO
                              products are included. We included GAO reports if they related to the topic of the CBO
                              option, regardless of whether our work supported the option or not.




                              Page 138                                         GAO-03-1006 Opportunities for Oversight
             Appendix I
             Opportunities to Improve the Economy,
             Efficiency, and Effectiveness of Federal
             Programs




550 Health   Examples from Selected GAO Work

             Improve Fairness of Medicaid Matching Formula

             Charge Beneficiaries for Food Inspection Costs

             Implement Risk-Based Meat and Poultry Inspections at USDA

             Prevent States from Using Illusory Approaches to Shift Medicaid Program
             Costs to the Federal Government

             Create a Uniform Federal Mechanism for Food Safety

             Control Provider Enrollment Fraud in Medicaid

             Eliminate Federal Funding for SCHIP Covering Adults without Children

             CBO Option Where Related GAO Work Is Identified

             550-06 Require All States to Comply with New Rules About Medicaid’s
             Upper Payment Limit by 2004




             Page 139                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Examples from
Selected GAO Work

Improve Fairness of
Medicaid Matching Formula

                                Primary agency                             Department of Health and Human Services
                                Account                                    Grant to States for Medicaid (75-0512)
                                Spending type                              Direct
                                Budget subfunction                         551/Health care services

                                The Medicaid program provides medical assistance to low-income, aged,
                                blind, or disabled individuals. The federal government and the states share
                                the financing of the program through an open-ended matching grant
                                whereby federal outlays rise with the cost and use of Medicaid services.
                                The federal share of the program costs varies inversely with state per
                                capita income. Consequently, high-income states pay a larger share of the
                                benefits than low-income states. By law, the federal share can be no less
                                than 50 percent and no more than 83 percent.

                                Since 1986, we have issued numerous reports and testimonies that identify
                                ways in which the fairness of federal grant formulas could be improved.
                                With respect to Medicaid, we believe that the fairness of the matching
                                formula in the open-ended program could be improved by replacing the per
                                capita income factor with four factors—the number of people living below
                                the official poverty line, the total taxable resources of the state, cost
                                differences associated with the demographic composition of state
                                caseloads, and differences in health care costs across states. These
                                changes could redirect federal funding to states with the highest
                                concentration of people in poverty and the least capability of funding these
                                needs from state resources.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Medicaid Formula: Effects of Proposed Formula on Federal Shares of
                                State Spending. GAO/HEHS-99-29R. Washington, D.C.: February 19, 1999.



                                Page 140                                       GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Medicaid Matching Formula: Effects of Need Indicators on New York’s
              Funding. GAO/HEHS-97-152R. Washington, D.C.: June 9, 1997.

              Medicaid: Matching Formula’s Performance and Potential Modifications.
              GAO/T-HEHS-95-226. Washington, D.C.: July 27, 1995.

              Medicaid Formula: Fairness Could Be Improved. GAO/T-HRD-91-5.
              Washington, D.C.: December 7, 1990.

GAO Contact   William J. Scanlon, (202) 512-7114




              Page 141                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Charge Beneficiaries for
Food Inspection Costs

                                Primary agency                             Department of Agriculture
                                Accounts                                   Multiple
                                Spending type                              Discretionary
                                Budget subfunction                         554/Consumer and occupational health and
                                                                           safety

                                User fees—charges individuals or firms pay for services they receive from
                                the federal government—are not new but play an increasingly important
                                role in financing federal programs, particularly since the Balanced Budget
                                Act of 1985. In general, federal food inspection agencies have charged user
                                fees only to beneficiaries of premarket reviews, such as the grading of grain
                                and other commodities for quality. Federal food inspection agencies
                                generally do not charge user fees or fully cover the cost of services
                                provided for (1) compliance inspections of meat, poultry, domestic foods,
                                and processing facilities to ensure adherence to safety regulations,
                                (2) import inspections and export certifications to ensure that food
                                products in international trade meet specified standards, and (3) standards
                                setting and other support services essential to these functions. Office of
                                Management and Budget (OMB) Circular A-25, User Charges, states that
                                user fees should be charged to cover the full cost of federal services when
                                the service recipient receives special benefits beyond those received by the
                                general public. The U.S. Department of Agriculture (USDA) Food Safety
                                and Inspection Service (FSIS) provides a special benefit to meat and
                                poultry slaughter and processing plants that incidentally benefits the
                                general public.

                                USDA inspection agencies recovered through user fees only about
                                $403 million of the $1.3 billion they spent in 2002 to inspect, test, grade, and
                                approve agricultural commodities and products. Federal appropriations
                                have traditionally funded the agencies’ remaining inspection expenses.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report




                                Page 142                                       GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




Related GAO Products   Food Safety: Opportunities to Redirect Federal Resources and Funds Can
                       Enhance Effectiveness. GAO/RCED-98-224. Washington, D.C.: August 6,
                       1998.

                       Food-Related Services: Opportunities Exist to Recover Costs by Charging
                       Beneficiaries. GAO/RCED-97-57. Washington, D.C.: March 20, 1997.

                       Food Safety and Quality: Uniform Risk-based Inspection System Needed
                       to Ensure Safe Food Supply. GAO/RCED-92-152. Washington, D.C.:
                       June 26, 1992.

GAO Contacts           Bob Robinson, (202) 512-3841
                       Lawrence J. Dyckman, (202) 512-3841




                       Page 143                                   GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Implement Risk-Based Meat
and Poultry Inspections at
USDA
                             Primary agency                             Department of Agriculture
                             Account                                    Food Safety and Inspection Service
                                                                        (12-3700)
                             Spending type                              Discretionary
                             Budget subfunction                         554/Consumer and occupational health and
                                                                        safety

                             Foodborne illness in the United States is extensive and expensive.
                             Foodborne diseases cause about 76 million illnesses, 325,000
                             hospitalizations, and 5,200 deaths annually. In terms of medical costs and
                             productivity losses, illness from just the five principal foodborne pathogens
                             alone costs the nation about $7 billion annually, according to U.S.
                             Department of Agriculture (USDA) estimates.

                             USDA’s meat and poultry inspection system does not efficiently and
                             effectively use its resources to protect the public from foodborne illness.
                             USDA’s system is hampered by inflexible legal requirements and relies on
                             outdated, labor-intensive inspection methods. Under current law, each of
                             the over 8 billion livestock and bird carcasses slaughtered annually must be
                             inspected. Further, USDA’s Food Safety and Inspection Service (FSIS)
                             states that current law requires it to inspect each of the approximately
                             6,000 processing plants at least once during each operating shift. While
                             these inspections consume most of FSIS’s budget ($730 million in 2002),
                             they are unable to detect microbial contamination, such as listeria, E. coli,
                             and salmonella. While USDA has increased its microbial testing, it has not
                             been successful in implementing regulatory changes in inspection
                             practices—inspectors still rely on their sense of sight, smell, and touch to
                             make judgments about disease conditions, contamination, and sanitation.

                             Legislative revisions could allow FSIS to emphasize risk-based inspections.
                             Much of the funding used to fulfill current meat and poultry inspection
                             activities could be redirected to support more effective food safety
                             initiatives, such as increasing the frequency of inspections at high-risk food
                             plants. In the past, CBO agreed that this option could potentially yield
                             savings, but could not develop an estimate without specific proposals.




                             Page 144                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Food Safety: Overview of Federal and State Expenditures. GAO-01-177.
                                Washington, D.C.: February 20, 2001.

                                Food Safety: Opportunities to Redirect Federal Resources and Funds Can
                                Enhance Effectiveness. GAO/RCED-98-224. Washington, D.C.: August 6,
                                1998.

                                Food Safety: Risk-Based Inspections and Microbial Monitoring Needed
                                for Meat and Poultry. GAO/RCED-94-192. Washington, D.C.: September 26,
                                1994.

                                Food Safety and Quality: Uniform Risk-Based Inspection System Needed
                                to Ensure Safe Food Supply. GAO/RCED-92-152. Washington, D.C.:
                                June 26, 1992.

GAO Contacts                    Bob Robinson, (202) 512-3841
                                Lawrence J. Dyckman, (202) 512-3841




                                Page 145                                   GAO-03-1006 Opportunities for Oversight
                               Appendix I
                               Opportunities to Improve the Economy,
                               Efficiency, and Effectiveness of Federal
                               Programs




Prevent States from Using
Illusory Approaches to Shift
Medicaid Program Costs to
the Federal Government         Primary agency                                  Department of Health and Human Services
                               Account                                         Grants to States for Medicaid
                                                                               (75-0512)
                               Spending type                                   Direct
                               Budget subfunction                              551/Health care services

                               Since 1993, we have reported on a number of state financing schemes that
                               inappropriately shift Medicaid costs to the federal government. In an early
                               report, we documented that Michigan, Texas, and Tennessee used illusory
                               financing approaches to obtain about $800 million in federal Medicaid
                               funds without effectively committing their share of matching funds. Under
                               these approaches, facilities that received increased Medicaid payments
                               from the states, in turn, paid the states almost as much as they received.
                               Consequently, the states realized increased revenue that was used to
                               reduce their state Medicaid contributions, fund other health care needs,
                               and supplement general revenue funding. For the period from fiscal year
                               1991 to fiscal year 1995, Michigan alone reduced its share of Medicaid costs
                               by almost $1.8 billion through financing partnerships with medical
                               providers and local units of government. Our analysis of Michigan’s
                               transactions showed that even though legislation curtailed certain creative
                               financing practices, the state was able to reduce its share of Medicaid costs
                               at the expense of the federal government by $428 million through other
                               mechanisms. We subsequently reported on similar schemes involving state
                               psychiatric hospitals and local government facilities, such as county
                               nursing homes.

                               The state schemes that involve excessive federal payments have been
                               restricted by (1) the Omnibus Budget Reconciliation Act of 1993 that limits
                               such payments to unreimbursed Medicaid and uninsured costs for state-
                               owned facilities, (2) the Balanced Budget Act of 1997 that further limits
                               Medicaid payments to state psychiatric hospitals, and (3) the Medicare,
                               Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000,21
                               which mandated that the Health Care Financing Administration (HCFA)




                               21
                                    SCHIP is the State Children’s Health Insurance Program.




                               Page 146                                            GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                issue regulations to curtail financing schemes involving excessive
                                payments to local government providers.

                                Despite these legislative and regulatory restrictions, states continue to
                                develop schemes to draw down federal Medicaid payments that grossly
                                exceed costs. Moreover, the Centers for Medicare & Medicaid Services
                                (formerly HCFA) do not verify that such moneys are used for the purposes
                                for which they were obtained.

                                We believe that the Medicaid program should not allow states to benefit
                                from illusory arrangements and that Medicaid funds should only be used to
                                help cover the costs of medical care incurred by those medical facilities
                                that provide care to Medicaid beneficiaries. We believe the Congress
                                should continue its legislative efforts to minimize the likelihood that states
                                can develop arrangements that claim excessive federal Medicaid payments
                                and that inappropriately shift Medicaid costs to the federal government.
                                Specifically, the Congress should consider legislation that would prohibit
                                Medicaid payments that exceed costs to any government-owned facility.

                                Savings are difficult to estimate for this option because national data on
                                these practices are not readily available. In addition, Medicaid spending is
                                influenced by the use of waivers from federal requirements, which allows
                                states to alter Medicaid financing formulas. Future requests and use of
                                waivers by states are uncertain.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Major Management Challenges and Program Risks: Department of Health
                                and Human Services. GAO-03-101. Washington, D.C.: January 2003.

                                Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver
                                Projects Raise Concerns. GAO-02-817. Washington, D.C.: July 12, 2002.

                                Medicaid: HCFA Reversed Its Position and Approved Additional State
                                Financing Schemes. GAO-02-147. Washington, D.C.: October 30, 2001.

                                Medicaid: State Financing Schemes Again Drive Up Federal Payments.
                                GAO/T-HEHS-00-193. Washington, D.C.: September 6, 2000.




                                Page 147                                   GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Medicaid: Managed Care and Individual Hospital Limits for
              Disproportionate Share Hospital Payments. GAO/HEHS-98-73R.
              Washington, D.C.: January 28, 1998.

              Medicaid: Disproportionate Share Payments to State Psychiatric
              Hospitals. GAO/HEHS-98-52. Washington, D.C.: January 23, 1998.

              Medicaid: Disproportionate Share Hospital Payments to Institutions for
              Mental Disease. GAO/HEHS-97-181R. Washington, D.C.: July 15, 1997.

              State Medicaid Financing Practices. GAO/HEHS-96-76R. Washington,
              D.C.: January 23, 1996.

              Michigan Financing Arrangements. GAO/HEHS-95-146R. Washington,
              D.C.: May 5, 1995.

              Medicaid: States Use Illusory Approaches to Shift Program Costs to the
              Federal Government. GAO/HEHS-94-133. Washington, D.C.: August 1, 1994.

              Medicaid: The Texas Disproportionate Share Program Favors Public
              Hospitals. GAO/HRD-93-86. Washington, D.C.: March 30, 1993.

GAO Contact   William J. Scanlon, (202) 512-7114




              Page 148                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Create a Uniform Federal
Mechanism for Food Safety

                            Primary agency                             Department of Agriculture
                            Accounts                                   Multiple
                            Spending type                              Discretionary
                            Budget subfunction                         554/Consumer and occupational health and
                                                                       safety

                            A multitude of agencies oversee food safety, with two agencies accounting
                            for most federal spending on, and regulatory responsibilities for, food
                            safety. The Food Safety and Inspection Service (FSIS), under the U.S.
                            Department of Agriculture (USDA), is responsible for the safety of meat,
                            poultry, eggs, and some egg products, while the Food and Drug
                            Administration (FDA), under the Department of Health and Human
                            Services (HHS), is responsible for the safety of most other foods.

                            The current food safety system emerged from a patchwork of often archaic
                            laws and grew into a structure that actually hampers efforts to address
                            existing and emerging food safety risks. Moreover, the current regulatory
                            framework addresses only a segment—primarily food processing—of the
                            continuum of activities that bring food from the farm to the table. Finally,
                            scientific and technical advances in the production of food, such as the
                            development of genetically modified foods, have further complicated the
                            responsibilities of the existing federal food safety structure. Indeed, the
                            food safety system suffers from gaps, overlapping and duplicative
                            inspections, poor coordination, and inefficient allocation of resources.

                            The Congress could consider the following options to improve the
                            effectiveness and efficiency of the federal food safety system and ensure a
                            comprehensive farm-to-table approach—one that starts with growers and
                            extends to retailers. One option would be to consolidate federal food safety
                            agencies and activities under a single, independent, risk-based food safety
                            agency responsible for administering a uniform set of laws. A second
                            option would be to consolidate food safety activities in an existing
                            department, such as USDA or HHS. In the past, CBO agreed that these
                            options could potentially yield savings, but could not develop savings
                            estimates due to the uncertainty of the extent to which improved
                            efficiencies could actually lead to budgetary savings.




                            Page 149                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Food Safety: CDC Is Working to Address Limitations in Several of Its
                                Foodborne Surveillance Systems. GAO-01-973. Washington, D.C.:
                                September 7, 2001.

                                Food Safety: Federal Oversight of Shellfish Safety Needs Improvement.
                                GAO-01-702. Washington, D.C.: July 9, 2001.

                                Food Safety: Overview of Federal and State Expenditures. GAO-01-177.
                                Washington, D.C.: February 20, 2001.

                                Food Safety: Federal Oversight of Seafood Does Not Sufficiently Protect
                                Consumers. GAO-01-204. Washington, D.C.: January 31, 2001.

                                Food Safety: Actions Needed by USDA and FDA to Ensure That
                                Companies Promptly Carry Out Recalls. GAO/RCED-00-195. Washington,
                                D.C.: August 17, 2000.

                                Food Safety: Improvements Needed in Overseeing the Safety of Dietary
                                Supplements and “Functional Foods.” GAO/RCED-00-156. Washington,
                                D.C.: July 11, 2000.

                                Meat and Poultry: Improved Oversight and Training Will Strengthen New
                                Food Safety System. GAO/RCED-00-16. Washington, D.C.: December 8,
                                1999.

                                Food Safety: Agencies Should Further Test Plans for Responding to
                                Deliberate Contamination. GAO/RCED-00-3. Washington, D.C.:
                                October 27, 1999.

                                Food Safety: U.S. Needs a Single Agency to Administer a Unified, Risk-
                                Based Inspection System. GAO/T-RCED-99-256. Washington, D.C.:
                                August 4, 1999.

                                Food Safety: Opportunities to Redirect Federal Resources and Funds Can
                                Enhance Effectiveness. GAO/RCED-98-224. Washington, D.C.: August 6,
                                1998.




                                Page 150                                   GAO-03-1006 Opportunities for Oversight
               Appendix I
               Opportunities to Improve the Economy,
               Efficiency, and Effectiveness of Federal
               Programs




               Food Safety: Federal Efforts to Ensure the Safety of Imported Foods Are
               Inconsistent and Unreliable. GAO/RCED-98-103. Washington, D.C.:
               April 30, 1998.

               Food Safety: Changes Needed to Minimize Unsafe Chemicals in Food.
               GAO/RCED-94-192. Washington, D.C.: September 26, 1994.

               Food Safety and Quality: Uniform Risk-Based Inspection System Needed
               to Ensure Safe Food Supply. GAO/RCED-92-152. Washington, D.C.:
               June 26, 1992.

GAO Contacts   Bob Robinson, (202) 512-3841
               Lawrence J. Dyckman, (202) 512-3841




               Page 151                                   GAO-03-1006 Opportunities for Oversight
                      Appendix I
                      Opportunities to Improve the Economy,
                      Efficiency, and Effectiveness of Federal
                      Programs




Control Provider
Enrollment Fraud in
Medicaid
                      Primary agency                             Department of Health and Human Services
                      Account                                    Grants to States for Medicaid (75-0512)
                      Spending type                              Direct
                      Budget subfunction                         551/Health care services

                      Recent investigations of fraud in the California Medicaid program, which
                      could exceed $1 billion in program losses, involve cases in which closer
                      scrutiny would have raised questions about the legitimacy of the providers
                      involved. State Medicaid programs are responsible for processing millions
                      of providers’ claims each year, making it impossible to perform detailed
                      checks on a significant portion of them. While most providers bill
                      appropriately, states need enrollment procedures to help prevent entry into
                      Medicaid by providers intent on committing fraud. Preventing such
                      providers from billing the program is more efficient than attempted
                      recovery once payments have already been made.

                      Our July 2000 testimony highlighted several Medicaid programs that have
                      comprehensive procedures to check the legitimacy of providers before
                      they can bill the program. These states check that a provider has a valid
                      license (if required) and no criminal record, has not been excluded from
                      other federal health programs, and practices from a legitimate business
                      location. However, only nine states report that they conduct all of these
                      checks. In addition, we found that many states poorly control provider
                      billing numbers. They either allow providers to bill indefinitely or fail to
                      cancel inactive numbers. Since billing numbers are necessary to submit
                      claims, poor control of them may allow fraudulent providers to obtain
                      other providers’ numbers and bill the program inappropriately.

                      At present, the federal government has no uniform or minimum
                      requirements in approving providers’ applications. As a result, we believe
                      that it would be beneficial for the Centers for Medicare and Medicaid
                      Services (CMS)—the agency formerly called the Health Care Financing
                      Administration (HCFA)—to assist states in developing effective provider
                      enrollment procedures. If states could limit entrance of even a small
                      percentage of dishonest providers by adopting such procedures, future
                      Medicaid costs would be reduced substantially. CMS has a work group that
                      is considering options for a limited pilot project to study coordinating
                      aspects of Medicaid and Medicare provider enrollment activities. However,



                      Page 152                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                in the past CBO could not develop an estimate of the savings for this option
                                without specific strategies. Moreover, savings would be net of the
                                additional resources required to implement such procedures.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Medicaid: State Efforts to Control Improper Payment Vary. GAO-01-662.
                                Washington, D.C.: June 7, 2001.

                                Medicaid: HCFA and States Could Work Together to Better Ensure the
                                Integrity of Providers. GAO/T-HEHS-00-159. Washington, D.C.: July 18,
                                2000.

                                Medicaid: Federal and State Leadership Needed to Control Fraud and
                                Abuse. GAO/T-HEHS-00-30. Washington, D.C.: November 9, 1999.

                                Health Care: Fraud Schemes Committed by Career Criminals and
                                Organized Criminal Groups and Impact on Consumers and Legitimate
                                Health Care Providers. GAO/OSI-00-1R. Washington, D.C.: October 5, 1999.

                                Medicaid Fraud and Abuse: Stronger Action Needed to Remove Excluded
                                Providers From Federal Health Programs. GAO/HEHS-97-63. Washington,
                                D.C.: March 31, 1997.

                                Fraud and Abuse: Providers Excluded From Medicaid Continue to
                                Participate in Federal Health Programs. GAO/T-HEHS-96-205.
                                Washington, D.C.: September 5, 1996.

                                Prescription Drugs and Medicaid: Automated Review Systems Can Help
                                Promote Safety, Save Money. GAO/AIMD-96-72. Washington, D.C.: June 11,
                                1996.

GAO Contact                     William J. Scanlon, (202) 512-7114




                                Page 153                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Eliminate Federal Funding
for SCHIP Covering Adults
without Children
                                Primary agency                             Department of Health and Human Services
                                Account                                    State Children’s Health Insurance Fund (75-
                                                                           0515)
                                Spending type                              Mandatory
                                Budget subfunction                         551/Health care service

                                In July 2002, we reported both legal and policy concerns about the extent
                                to which the Department of Health and Human Services (HHS) has ensured
                                that approved demonstration waivers, authorized under Section 1115 of the
                                Social Security Act, were consistent with the goals and fiscal integrity of
                                the Medicaid and State Children’s Health Insurance Program (SCHIP). The
                                legal concern was that HHS approved a waiver to allow a state to use
                                unspent SCHIP funding to cover adults without children, despite the
                                program’s statutory objective of expanding health coverage to low-income
                                children. We also reported policy concerns that approved waivers may
                                increase the federal liability for program expenditures. Specifically,
                                despite HHS’s oversight responsibilities for ensuring that states’
                                demonstration programs do not put the federal government at risk for
                                spending more on Medicaid than it would have without such programs, two
                                of the four approved waivers we reviewed could potentially cost the federal
                                government at least $330 million more than if they had not been approved.
                                We recommended that the Congress consider amending title XXI of the
                                Social Security Act to specify that SCHIP funds are not available to provide
                                health insurance coverage for childless adults. We also recommended that
                                the Secretary of HHS better ensure that valid methods are used to
                                demonstrate budget neutrality and appropriately adjust the federal
                                obligation for the reviewed waivers.

CBO 5-Year Cost Estimate        No, this is a new example. However, CBO indicated it could probably make
Included in GAO’s 2002          an estimate for this example.
Budgetary Implications Report

Related GAO Product             Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver
                                Projects Raise Concerns. GAO-02-817. Washington, D.C.: July 12, 2002.

GAO Contact                     Kathryn G. Allen, (202) 512-7114




                                Page 154                                       GAO-03-1006 Opportunities for Oversight
                               Appendix I
                               Opportunities to Improve the Economy,
                               Efficiency, and Effectiveness of Federal
                               Programs




CBO Option Where
Related GAO Work Is
Identified22

550-06 Require All States to
Comply with New Rules
About Medicaid’s Upper
Payment Limit by 2004

Related GAO Products           Major Management Challenges and Program Risks: Department of Health
                               and Human Services. GAO-03-101. Washington, D.C.: January 2003.22

                               Medicaid: HCFA Reversed Its Position and Approved Additional State
                               Financing Schemes. GAO-02-147. Washington, D.C.: October 30, 2001.

                               Medicaid: State Financing Schemes Again Drive Up Federal Payments.
                               GAO/T-HEHS-00-193. Washington, D.C.: September 6, 2000.

GAO Contacts                   Kathryn G. Allen, (202) 512-7114
                               Katherine Iritani, (206) 287-4820




                               22
                                We list GAO reports identified as relating to options included in the CBO March 2003
                               Budget Options report. Only those CBO options for which we identified related GAO
                               products are included. We included GAO reports if they related to the topic of the CBO
                               option, regardless of whether our work supported the option or not.




                               Page 155                                         GAO-03-1006 Opportunities for Oversight
               Appendix I
               Opportunities to Improve the Economy,
               Efficiency, and Effectiveness of Federal
               Programs




570 Medicare   Examples from Selected GAO Work

               Reassess Medicare Incentive Payments in Health Care Shortage Areas

               Adjust Medicare Payment Rates to Reflect Changing Technology, Costs,
               and Market Prices

               Increase Medicare Program Safeguard Funding

               Modify the Skilled Nursing Facility Payment Method to Ensure Appropriate
               Payments

               Implement Risk-Sharing in Conjunction with Medicare Home Health
               Agency Prospective Payment System

               Eliminate Medicare Competitive Sourcing Restrictions

               Change Pricing Formula for Medicare-Covered Drugs and Biologicals

               CBO Options Where Related GAO Work Is Identified

               570-10 Reduce Medicare Payments for Currently Covered Prescription
               Drugs

               570-11 Require Competitive Bidding for High-Volume Items of Durable
               Medical Equipment

               570-15 Simplify and Limit Medicare’s Cost-Sharing Requirements

               570-19 Reduce Medicare Payments for Home Health Care




               Page 156                                   GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Examples from
Selected GAO Work

Reassess Medicare
Incentive Payments in
Health Care Shortage Areas
                             Primary agency                             Department of Health and Human Services
                             Account                                    Federal Supplemental Insurance Trust Fund
                                                                        Account (20-8004)
                             Spending type                              Direct
                             Budget subfunction                         571/Medicare

                             The Medicare Incentive Payment program was established in 1987 amid
                             concerns that low Medicare reimbursement rates for primary care services
                             cause access problems for Medicare beneficiaries in underserved areas.
                             The program pays physicians a 10-percent bonus payment for Medicare
                             services they provide in areas identified by the Department of Health and
                             Human Services (HHS) as having a shortage of primary care physicians. In
                             1997, bonus payments paid from the Medicare Supplemental Medical
                             Insurance trust fund amounted to over $90 million.

                             This program, however, may not be the most appropriate means of
                             addressing medical underservice.

                             • The need for this program may have changed; since 1987 the Congress
                               generally increased reimbursement rates for primary care services and
                               reduced the geographic variation in physician reimbursement rates. In
                               addition, surveys of Medicare beneficiaries who have access problems,
                               including those who may live in underserved areas, generally cite
                               reasons other than the unavailability of a physician—such as the cost of
                               services not paid by Medicare—for their access problems.

                             • The relatively small bonus payments most physicians receive—a median
                               payment of $341 for the year in 1996—are unlikely to have a significant
                               impact on physician recruitment and retention.

                             • Specialists receive most of the program dollars, even though primary
                               care physicians have been identified as being in short supply, while
                               shortages of specialists, if any, have not been determined.



                             Page 157                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                • The program provides no incentives or assurances that physicians
                                  receiving bonuses will actually treat people who have problems
                                  obtaining health care.

                                • Centers for Medicare & Medicaid Services––formerly the Health Care
                                  Financing Administration––oversight of the program also has
                                  limitations that allow physicians and other providers to receive and
                                  retain bonus payments claimed in error.

                                HHS has acknowledged problems in the program and agrees that making
                                incentive payments to specialists in urban areas appears to be unnecessary.
                                The department has stated that it is clear that certain structural changes to
                                this program are necessary to better target incentive payments to rural
                                areas with the highest degree of shortage.

                                If the Congress determines that this program is not an appropriate vehicle
                                for addressing medical underservice, then termination is a reasonable
                                option. However, if it is decided to continue the program, then the
                                Congress could consider reforms that clarify the program’s goals and better
                                structure the program to link limited federal funds to intended outcomes.
                                For example, if the program’s goal is to improve access to primary care
                                services in underserved rural areas, the bonus payments should be limited
                                to physicians providing primary care services to underserved populations
                                in rural areas with the greatest need. Better targeting of the payments and
                                evaluations would also be needed to provide assurances that the payments
                                are achieving their intended outcomes.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Physician Shortage Areas: Medicare Incentive Payments Not an Effective
                                Approach to Improve Access. GAO/HEHS-99-36. Washington, D.C.:
                                February 26, 1999.

                                Health Care Shortage Areas: Designations Not a Useful Tool for Directing
                                Resources to the Underserved. GAO/HEHS-95-200. Washington, D.C.:
                                September 8, 1995.

GAO Contact                     William J. Scanlon, (202) 512-7114




                                Page 158                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Adjust Medicare Payment
Rates to Reflect Changing
Technology, Costs, and
Market Prices               Primary agency                             Department of Health and Human Services
                            Account                                    Federal Supplementary Medical Insurance
                                                                       Trust Fund (20-8004)
                            Spending type                              Direct
                            Budget subfunction                         571/Medicare

                            Medicare’s supplementary medical insurance program (Medicare Part B)
                            spent almost $7 billion for durable medical equipment, prosthetics,
                            orthotics, and supplies in 2002 on behalf of its beneficiaries. For most
                            medical equipment and supplies, Medicare payments are primarily based
                            on historical charges, indexed forward, rather than current costs or market
                            prices.

                            We have reported that Medicare payments for some medical equipment and
                            supplies are out of line with actual market prices. This can occur when
                            providers’ costs for some procedures, equipment, and supplies have
                            declined over time as competition and efficiencies increased. For example,
                            when Medicare sets its payment rates for new items, the rates typically are
                            based on the high initial unit costs. Over time, providers’ unit costs decline
                            as the equipment improves, utilization increases, and experience in using
                            the equipment results in efficiencies. In other cases, medical innovations
                            and advances have increased the cost of some procedures and products.
                            However, Medicare did not have a process to routinely and systematically
                            review these factors and make timely adjustments to the Medicare payment
                            rates. In fact, through the years, the Congress has legislatively adjusted
                            Medicare rates for some products and services, such as home oxygen,
                            clinical laboratory tests, intraocular lenses, computed tomography scans,
                            and magnetic resonance imaging scans.

                            To address problems with excessive payments, the Balanced Budget Act of
                            1997 provided the Health Care Financing Administration (HCFA)—the
                            agency now called the Centers for Medicare & Medicaid Services (CMS)—
                            the authority to use a streamlined process for adjusting Medicare Part B
                            payments by up to 15 percent per year. (This revised authority does not
                            extend to adjusting Medicare payments for physician services.) The agency
                            issued an interim final rule to implement its authority in December 2002.
                            However, in the rule, the agency severely limited its ability to use its new
                            authority to bring its payment rates into line with market prices by



                            Page 159                                       GAO-03-1006 Opportunities for Oversight
Appendix I
Opportunities to Improve the Economy,
Efficiency, and Effectiveness of Federal
Programs




indicating that it would adjust Medicare payment rates only when they
were at least 15 percent above or below a realistic and equitable amount.

An additional limitation to effectively using this new authority is that CMS
frequently does not know specifically what Medicare is paying for. CMS
does not require suppliers to identify on Medicare claims the specific items
billed. Instead, suppliers are required to use CMS billing codes, most of
which cover a broad range of products of various types, qualities, and
market prices. For example, one Medicare billing code is used for more
than 200 different urological catheters, even though some of these
catheters sell at a fraction of the price of others billed under the same code.
Unless Medicare claims contain more product-specific information, CMS
cannot track what items are billed to ensure that each billing code is used
for products of comparable quality and price. Although the health care
industry is increasingly using more specific universal product numbers and
bar codes for inventory control, CMS does not currently require suppliers
to use these identifiers on Medicare claims.

Several options could help to better align Medicare fees with actual costs
and market prices. One option would be for the Congress to give CMS the
authority to implement competitive bidding for durable medical equipment,
prosthetics, orthotics, and supplies. Competitive bidding uses the
dynamics of the marketplace to create incentives for providers to provide
items and services efficiently. In the Balanced Budget Act of 1997, the
Congress required the agency to test competitive bidding for Part B
services and supplies (except for physician services) through a
demonstration. In the spring of 1999, HCFA selected competing suppliers to
provide oxygen supplies and other supplies and equipment to beneficiaries
in Polk County, Fla. In 2000, HCFA began competitive bidding in a second
site—three counties near San Antonio, Tex.—for oxygen supplies,
nebulizer inhalation drugs, and other equipment. The new payment rates
for the items bid averaged 17 to 22 percent below existing Medicare rates
for those states. Despite this reduction in the amount paid, the
demonstration’s evaluators found little evidence of problems with
beneficiary access to products. In addition, the demonstration required
bidders to meet more stringent quality standards than are customary in the
Medicare program. CMS’s authority to conduct these competitive bidding
demonstrations ended December 31, 2002. Without new legislative
authority, the agency cannot use a competitive bidding approach.

A second option for paying more appropriately for medical equipment and
supplies would be to base Medicare payments on the lower of the fee



Page 160                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                schedule allowance or the lowest amount a provider has agreed to accept
                                from other payers. CMS would also need legislative authority to pursue this
                                option. Yet another approach would be to develop separate fee schedules
                                that distinguish between wholesale and retail acquisition to ensure that
                                large suppliers do not receive inappropriately large Medicare
                                reimbursements. Although none of these options specifically targets
                                expensive, evolving technologies, we believe significant program savings
                                would result from an ongoing, systematic process for evaluating the
                                reasonableness of Medicare payment rates for new medical technologies as
                                those technologies mature.

                                In 2002, CBO agreed that aligning Medicare payment rates with costs and
                                market prices could yield savings and estimated that giving CMS authority
                                to conduct competitive bidding for durable medical equipment, prosthetics,
                                orthotics and supplies could result in a net reduction of Medicare spending
                                of $5.8 billion from fiscal years 2003 through 2012.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Medicare: Challenges Remain in Setting Payments for Medical
                                Equipment and Supplies and Covered Drugs. GAO-02-833T. Washington,
                                D.C.: June 12, 2002.

                                Medicare Payments: Use of Revised “Inherent Reasonableness” Process
                                Generally Appropriate. GAO/HEHS-00-79. Washington, D.C.: July 5, 2000.

                                Medicare: Access to Home Oxygen Largely Unchanged; Closer HCFA
                                Monitoring Needed. GAO/HEHS-99-56. Washington, D.C.: April 5, 1999.

                                Medicare: Progress to Date in Implementing Certain Major Balanced
                                Budget Act Reforms. GAO/T-HEHS-99-87. Washington, D.C.: March 17,
                                1999.

                                Medicare: Need to Overhaul Costly Payment System for Medical
                                Equipment and Supplies. GAO/HEHS-98-102. Washington, D.C.: May 12,
                                1998.

                                Medicare: Home Oxygen Program Warrants Continued HCFA Attention.
                                GAO/HEHS-98-17. Washington, D.C.: November 7, 1997.




                                Page 161                                   GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Medicare: Problems Affecting HCFA’s Ability to Set Appropriate
              Reimbursement Rates for Medical Equipment and Supplies. GAO/HEHS-
              97-157R. Washington, D.C.: June 17, 1997.

              Medicare: Comparison of Medicare and VA Payment Rates for Home
              Oxygen. GAO/HEHS-97-120R. Washington, D.C.: May 15, 1997.

              Medicare Spending: Modern Management Strategies Needed to Curb
              Billions in Unnecessary Payments. GAO/HEHS-95-210. Washington, D.C.:
              September 19, 1995.

              Medicare High Spending Growth Calls for Aggressive Action. GAO/T-
              HEHS-95-75. Washington, D.C.: February 6, 1995.

              Medicare: Excessive Payments Support the Proliferation of Costly
              Technology. GAO/HRD-92-59. Washington, D.C.: May 27, 1992.

GAO Contact   William J. Scanlon, (202) 512-7114




              Page 162                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Increase Medicare Program
Safeguard Funding

                            Primary agency                             Department of Health and Human Services
                            Accounts                                   Multiple
                            Spending type                              Discretionary/Direct
                            Budget subfunction                         571/Medicare

                            Medicare program safeguard activities designed to combat fraud, waste,
                            and abuse have historically returned about $10 in savings for each dollar
                            spent, and Centers for Medicare & Medicaid Services (CMS) reported a
                            return of $16 for each dollar spent in fiscal year 2002. These types of
                            activities include pre- and post-payment medical review of claims to
                            determine if services are medically necessary and appropriate, audits, and
                            fraud unit investigations. The Health Insurance Portability and
                            Accountability Act of 1996 established the Medicare Integrity Program
                            (MIP) and provided the agency now called CMS with increased funding for
                            program safeguard activities. CMS has taken a number of actions under
                            MIP to promote more efficient and effective contractor safeguard
                            operations.

                            While funding has increased, in 2002 it remained below program safeguard
                            funding levels in the previous decade, adjusted for inflation. Comparing
                            program safeguard expenditures from fiscal years 1995 through 1998—2
                            years before and after MIP implementation—shows that expenditures
                            increased by more than one-quarter to $544.6 million. However, in constant
                            1998 dollars, the amount spent on program safeguards per claim processed
                            is still almost one-third less than was spent in fiscal year 1989. Further, the
                            combined effects of increased claims volume of 3 to 5 percent annually in
                            recent years and inflation will erode part of the benefits of increased
                            funding authorized for future years. In response to reduced resources,
                            contractors apply fewer or less stringent payment controls resulting in
                            payment of claims that otherwise would not be paid.

                            We believe that additional program safeguard funding might better protect
                            Medicare from erroneous payments and yield net savings. As a result, we
                            have suggested that the Congress consider increasing the agency’s MIP
                            funds to allow an expansion of postpayment medical review and other
                            effective program safeguard activities. However, CMS needs a better
                            understanding of costs and savings from particular activities—such as desk
                            reviews and cost audits. It also needs to consistently code savings from



                            Page 163                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                different activities to understand their relative value, as well as determine
                                which contractors are realizing the highest return on investment from their
                                program safeguard activities. Therefore, we also recommended that CMS
                                evaluate the effectiveness of prepayment and postpayment activities to
                                determine the relative benefits of various safeguards.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Major Management Challenges and Program Risks: Department of Health
                                and Human Services. GAO-03-101. Washington, D.C.: January 2003.

                                Medicare: Opportunities and Challenges in Contracting for Program
                                Safeguards. GAO-01-616. Washington, D.C.: May 18, 2001.

                                Major Management Challenges and Program Risks: Department of Health
                                and Human Services. GAO-01-247. Washington, D.C.: January 2001.

                                Medicare: HCFA Could Do More to Identify and Collect Overpayments.
                                GAO/HEHS/AIMD-00-304. Washington, D.C.: September 7, 2000.

                                Medicare: Health Care Fraud and Abuse Control Program Financial
                                Reports for Fiscal Years 1998 and 1999. GAO/AIMD-00-257R. Washington,
                                D.C.: July 31, 2000.

                                Medicare Contractors: Further Improvement Needed in Headquarters
                                and Regional Office Oversight. GAO/HEHS-00-46. Washington, D.C.:
                                March 23, 2000.

                                Medicare: Program Safeguard Activities Expand, but Results Difficult to
                                Measure. GAO/HEHS-99-165. Washington, D.C.: August 4, 1999.

                                Medicare Contractors: Despite Its Efforts, HCFA Cannot Assure Their
                                Effectiveness or Integrity. GAO/HEHS-99-115. Washington, D.C.: July 14,
                                1999.

                                Medicare: Improprieties by Contractors Compromised Medicare
                                Program Integrity. GAO/OSI-99-7. Washington, D.C.: July 14, 1999.

                                Medicare: Fraud and Abuse Control Pose a Continuing Challenge.
                                GAO/HEHS-98-215R. Washington, D.C.: July 15, 1998.



                                Page 164                                   GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Medicare: Health Care Fraud and Abuse Control Program Financial
              Report for Fiscal Year 1997. GAO/AIMD-98-157. Washington, D.C.: June 1,
              1998.

              Medicare: HCFA’s Use of Anti-Fraud-and-Abuse Funding and
              Authorities. GAO/HEHS-98-160. Washington, D.C.: June 1, 1998.

              Medicare: Improper Activities by Mid-Delta Home Health. GAO/OSI-98-5.
              Washington, D.C.: March 12, 1998.

              Medicare Home Health: Success of Balanced Budget Act Cost Controls
              Depends on Effective and Timely Implementation. GAO/T-HEHS-98-41.
              Washington, D.C.: October 29, 1997.

              Medicare: Recent Legislation to Minimize Fraud and Abuse Requires
              Effective Implementation. GAO/T-HEHS-98-9. Washington, D.C.:
              October 9, 1997.

              Medicare Fraud and Abuse: Summary and Analysis of Reform in the
              Health Insurance Portability and Accountability Act of 1996 and the
              Balanced Budget Act of 1997. GAO/HEHS-98-18R. Washington, D.C.:
              October 9, 1997.

              Medicare: Control Over Fraud and Abuse Remains Elusive. GAO/T-HEHS-
              97-165. Washington, D.C.: June 26, 1997.

              Nursing Homes: Too Early to Assess New Efforts to Control Fraud and
              Abuse. GAO/T-HEHS-97-114. Washington, D.C.: April 16, 1997.

              Medicare: Inherent Program Risks and Management Challenges Require
              Continued Federal Attention. GAO/T-HEHS-97-89. Washington, D.C.:
              March 4, 1997.

              Medicare. GAO/HR-97-10. Washington, D.C.: February 1, 1997.

GAO Contact   William J. Scanlon, (202) 512-7114




              Page 165                                   GAO-03-1006 Opportunities for Oversight
                           Appendix I
                           Opportunities to Improve the Economy,
                           Efficiency, and Effectiveness of Federal
                           Programs




Modify the New Skilled
Nursing Facility Payment
Method to Ensure
Appropriate Payments       Primary agency                             Department of Health and Human Services
                           Account                                    Federal Hospital Insurance Trust Fund (20-
                                                                      8005)
                           Spending type                              Direct
                           Budget subfunction                         571/Medicare

                           The Balanced Budget Act of 1997 mandated the implementation of a
                           prospective payment system (PPS) for skilled nursing facilities (SNF) to
                           help address concerns about dramatic growth in Medicare spending for
                           these services. A PPS provides incentives to deliver services efficiently by
                           paying providers—regardless of their costs—fixed, predetermined rates
                           that vary according to expected patient service needs. The Health Care
                           Financing Administration (HCFA), now called the Centers for Medicare &
                           Medicaid Services (CMS), began phasing in such a system for SNFs in July
                           1998.

                           However, problems with the design of the PPS, the services excluded from
                           the daily rate, and inadequate data used to establish rates could
                           compromise Medicare’s ability to stem spending growth while maintaining
                           beneficiary access. We are concerned that the PPS preserves the
                           opportunity for providers to increase their compensation by supplying
                           unnecessary services, such as additional therapy services, and by changing
                           their patient assessment practices to qualify patients into higher paying
                           payment categories. Consistent with the PPS incentives to minimize costs,
                           SNFs have provided fewer therapy services to patients categorized into
                           rehabilitation payment groups. Without adequate adjustments, this could
                           result in payments for some categories of patients that are higher relative
                           to service costs than payments for other groups of patients. We are also
                           concerned that increases in payments intended to encourage SNFs to
                           increase their nursing staff appear to have been ineffective in increasing
                           staffing ratios. In addition, excluding certain services from the daily rate,
                           and paying for them separately, may encourage service provision and
                           unnecessarily increase Medicare spending. For example, some services are
                           excluded only when provided in hospital outpatient departments, which
                           may encourage providers to use this setting when other, less costly
                           ambulatory settings could be appropriate. Furthermore, the payment rates
                           were computed using data that may overstate the reasonable cost of




                           Page 166                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                providing care and may not appropriately reflect the differences in costs
                                for patients with different care needs.

                                Changes in beneficiary eligibility and inadequate planned oversight of
                                claims for payment may undermine efforts to control Medicare spending on
                                SNF services. As part of the PPS, Medicare appears to have changed the
                                process for determining eligibility for the Medicare SNF benefit.
                                Beneficiaries with certain care needs are automatically eligible for the SNF
                                benefit, while other beneficiaries with different care needs are required to
                                be reviewed to ensure that they meet the eligibility criteria. This could
                                expand the number of beneficiaries who will be covered. The planned
                                oversight of claims to determine if a beneficiary is entitled to Medicare
                                coverage and how much payment a SNF should receive is insufficient,
                                increasing the potential to compromise expected savings.

                                We believe that CMS should modify the SNF PPS regulations to address
                                these concerns. Medicare needs to ensure that the payment rates reflect
                                only necessary services that the facilities actually provide. It also needs to
                                establish a process to review the services that are included and excluded
                                from the PPS. CMS should also increase its vigilance over claims review
                                and provider oversight so that payments are appropriate and made only for
                                eligible beneficiaries.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Skilled Nursing Facilities: Available Data Show Average Nursing Staff
                                Time Changed Little after Medicare Payment Increase. GAO-03-176.
                                Washington, D.C.: November 13, 2002.

                                Skilled Nursing Facilities: Providers Have Responded to Medicare
                                Payment System By Changing Practices. GAO-02-841. Washington, D.C.:
                                August 23, 2002.

                                Skilled Nursing Facilities: Services Excluded From Medicare’s Daily Rate
                                Need to be Reevaluated. GAO-01-816. Washington, D.C.: August 22, 2001.

                                Nursing Homes: Aggregate Medicare Payments Are Adequate Despite
                                Bankruptcies. GAO/T-HEHS-00-192. Washington, D.C.: September 5, 2000.




                                Page 167                                   GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Skilled Nursing Facilities: Medicare Payments Changes Require Provider
              Adjustments But Maintain Access. GAO/HEHS-00-23. Washington, D.C.:
              December 14, 1999.

              Medicare: Better Information Can Help Ensure That Refinements to BBA
              Reforms Lead to Appropriate Payments. GAO/T-HEHS-00-14. Washington,
              D.C.: October 1, 1999.

              Skilled Nursing Facilities: Medicare Payments Need to Better Account for
              Nontherapy Ancillary Cost Variation. GAO/HEHS-99-185. Washington,
              D.C.: September 30, 1999.

              Medicare Post-Acute Care: Better Information Needed Before Modifying
              BBA Reforms. GAO/T-HEHS-99-192. Washington, D.C.: September 15, 1999.

              Balanced Budget Act: Any Proposed Fee-for-Service Payment
              Modifications Need Thorough Evaluation. GAO/T-HEHS-99-139.
              Washington, D.C.: June 10, 1999.

              Medicare: Progress to Date in Implementing Certain Major Balanced
              Budget Act Reforms. GAO/T-HEHS-99-87. Washington, D.C.: March 17,
              1999.

              Balanced Budget Act: Implementation of Key Medicare Mandates Must
              Evolve to Fulfill Congressional Objectives. GAO/T-HEHS-98-214.
              Washington, D.C.: July 16, 1998.

              Long-Term Care: Baby Boom Generation Presents Financing Challenges.
              GAO/T-HEHS-98-107. Washington, D.C.: March 9, 1998.

              Medicare Post-Acute Care: Home Health and Skilled Nursing Facility
              Cost Growth and Proposals for Prospective Payment. GAO/T-HEHS-97-90.
              Washington, D.C.: March 4, 1997.

GAO Contact   William J. Scanlon, (202) 512-7114




              Page 168                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Implement Risk-Sharing in
Conjunction with Medicare
Home Health Agency
Prospective Payment         Primary agency                             Department of Health and Human Services
System                      Account                                    Federal Supplementary Medical Insurance
                                                                       Trust Fund (20-8004)
                            Spending type                              Direct
                            Budget subfunction                         571/Medicare

                            Medicare spending for home health care rose from $3.7 billion in 1990 to
                            $17.8 billion in 1997—an annual growth rate of over 25 percent—making it
                            one of the fastest growing components of the Medicare program. This
                            spending growth was primarily due to more beneficiaries receiving services
                            and more visits provided per user, because Medicare’s cost-based payment
                            method reimbursed home health agencies (HHA) for each visit provided.
                            To control spending, the Balanced Budget Act of 1997 (BBA) required the
                            implementation of a prospective payment system (PPS) for home health
                            agencies. Beginning October 1, 2000, Medicare paid a fixed, predetermined
                            amount for each 60-day episode of care, adjusted for patient characteristics
                            that affect the costs of providing care. Under this system, agencies will be
                            rewarded financially for keeping their per-episode costs below the payment
                            rate and thus will have a strong incentive to reduce the number of visits
                            provided during an episode and to shift to a less costly mix of visits.

                            However, under an episode-based payment system, HHAs will have an
                            incentive to provide the minimum number of visits necessary to receive a
                            full episode payment, or to lower the number of visits provided below that
                            used to develop the episode payment, thereby increasing their profits.
                            While the episode payment was set based on the assumption that about 32
                            visits would be provided, agencies can provide as few as 5 visits. In fact,
                            since the PPS, agencies have reduced the number of visits provided to
                            beneficiaries and furnished on average about 22 visits per episode by the
                            first half of 2001. As a result, the Medicare program is paying HHAs for
                            services that beneficiaries did not receive and on average considerably
                            more than the estimated costs of care beneficiaries are receiving. Some
                            HHAs that face extraordinary costs not accounted for by the payment
                            groups, however, may be financially disadvantaged.

                            In order to reduce these incentives, the Congress could require CMS to
                            implement a risk-sharing arrangement, in which total Medicare PPS
                            payments to an HHA are adjusted at year-end in light of the provider’s



                            Page 169                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                actual costs, to mitigate any unintended consequences of the payment
                                change. Such an arrangement could moderate the incentive to manipulate
                                services to maximize profits and the uncertainties associated with payment
                                rates that are based on averages when so little is known about appropriate
                                patterns of home health care. Limiting an HHA’s losses or gains would help
                                protect the industry, the Medicare program, and beneficiaries from possible
                                negative effects of the PPS until more is known about how best to design
                                the PPS and the most appropriate home health treatment patterns.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Medicare Home Health Care: Payments to Home Health Agencies Are
                                Considerably Higher than Costs. GAO-02-663. Washington, D.C.: May 6,
                                2002.

                                Medicare Home Health Care: Prospective Payment System Could Reverse
                                Recent Declines in Spending. GAO/HEHS-00-176. Washington, D.C.:
                                September 8, 2000.

                                Medicare Home Health Care: Prospective Payment System Will Need
                                Refinement as Data Become Available. GAO/HEHS-00-9. Washington, D.C.:
                                April 7, 2000.

GAO Contact                     William J. Scanlon, (202) 512-7114




                                Page 170                                   GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




Eliminate Medicare
Competitive Sourcing
Restrictions
                       Primary agency                             Department of Health and Human Services
                       Account                                    Program Management (75-0511)
                       Spending type                              Discretionary
                       Budget subfunction                         571/Medicare

                       Medicare is a federal health insurance program designed to assist elderly
                       and disabled beneficiaries. Hospital insurance, or Part A, covers inpatient
                       hospital, skilled nursing facility, hospice care, and certain home health
                       services. Supplemental medical insurance, or Part B, covers physician and
                       outpatient hospital services, laboratory and other services. Claims are paid
                       by a network of 49 claims administration contractors called fiscal
                       intermediaries and carriers. Fiscal intermediaries process claims from
                       hospitals and other institutional providers, generally for Part A services,
                       while carriers process Part B claims. The fiscal intermediaries’ and
                       carriers’ responsibilities include reviewing and paying claims, maintaining
                       program safeguards to prevent inappropriate payment, and educating and
                       responding to provider and beneficiary concerns.

                       Medicare contracting for fiscal intermediaries and carriers differs from that
                       of most federal programs. Most federal agencies, under the Competition in
                       Contracting Act and its implementing regulations known as the Federal
                       Acquisition Regulation (FAR), generally may contract with any qualified
                       entity for any authorized purpose so long as that entity is not debarred from
                       government contracting and the contract is not for what is essentially a
                       government function. The FAR generally requires agencies to conduct full
                       and open competition for contracts, allows contractors to earn profits, and
                       requires contractors to perform until the end of the contract term.

                       The Secretary of the Department of Health and Human Services (HHS),
                       however, is authorized to enter into contracts with fiscal intermediaries
                       and carriers without regard to federal procurement statutes under Social
                       Security Act provisions that originated when Medicare was established.
                       There is no full and open competition for fiscal intermediary or carrier
                       contracts. Rather, fiscal intermediaries are selected in a process called
                       nomination by provider associations, such as the American Hospital
                       Association. Because the statutory language authorizing Medicare claims
                       administration contracting described a set of functions to be performed,
                       claims administration contractors have generally been expected to perform



                       Page 171                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                the full set of functions, except when the Congress gave specific authority
                                to contract separately for a function. The Social Security Act also generally
                                calls for the use of cost-based reimbursement contracts under which
                                contractors are reimbursed for necessary and proper costs of carrying out
                                Medicare activities, but the act does not expressly provide for profit.
                                Furthermore, the Medicare statute limits the government’s ability to
                                terminate these contracts at its convenience, while allowing the claims
                                administration contractors to terminate their contracts without penalty by
                                providing the government with 180 days notice.

                                Freeing the Medicare program to directly choose contractors on a
                                competitive basis from a broader array of entities able to perform needed
                                tasks would enable Medicare to benefit from efficiency and performance
                                improvements related to competition. Allowing Medicare to have
                                contractors specialize in specific functions rather than assume all claims-
                                related activities, as is the case now, also could lead to greater efficiency
                                and better performance.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Major Management Challenges and Program Risks: Department of Health
                                and Human Services. GAO-03-101. Washington, D.C.: January 2003.

                                Medicare: Improvements Needed in Provider Communications and
                                Contracting Procedures. GAO-01-1141T. Washington, D.C.: September 25,
                                2001.

                                Medicare: Comments on HHS’ Claims Administration Contracting
                                Reform Proposal. GAO-01-1046R. Washington, D.C.: August 17, 2001.

                                Medicare Contracting Reform: Opportunities and Challenges in
                                Contracting for Claims Administration Services. GAO-01-918T.
                                Washington, D.C.: June 28, 2001.

                                Medicare Contractors: Despite Its Efforts, HCFA Cannot Ensure Their
                                Effectiveness or Integrity. GAO/HEHS-99-115. Washington, D.C.: July 14,
                                1999.

GAO Contact                     Leslie G. Aronovitz, (312) 220-7600



                                Page 172                                   GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Change Pricing Formula for
Medicare-Covered Drugs
and Biologicals
                             Primary agency                             Department of Health and Human Services
                             Account                                    Federal Supplementary Medical Insurance
                                                                        Trust Fund (20-8004)
                             Spending type                              Direct
                             Budget subfunction                         571/Medicare

                             While Medicare does not have a comprehensive outpatient drug benefit,
                             certain drugs and biologicals are covered under Part B of the program. In
                             general, drugs are covered if they cannot be self-administered and are
                             related to a physician’s services, such as cancer chemotherapy, or are
                             provided in conjunction with covered durable medical equipment. In
                             addition, Medicare covers selected immunizations and certain drugs that
                             can be self-administered, such as blood clotting factors.

                             Medicare spending for drugs and biologicals—by the program and its
                             beneficiaries through their copayments—has been increasing rapidly.
                             Between 1997 and 2001, spending more than doubled—from $2.76 billion to
                             $6.41 billion.

                             Medicare bases its reimbursement to physicians and other providers of
                             drugs on average wholesale price (AWP). Manufacturers periodically report
                             AWPs to publishers of drug pricing data. Medicare carriers, the contractors
                             responsible for paying Part B claims, use published AWPs to determine the
                             Medicare-allowed payment level, which is 95 percent of the AWP.

                             Physicians and other providers of Medicare-covered drugs are able to
                             obtain thesed drugs at prices significantly below current Medicare
                             payments. We reported in 2001 that the difference between widely available
                             prices and AWP for physician-administered drugs in a GAO sample study
                             varied from 13 percent to 34 percent. For a sample of pharmacy-supplier-
                             provided drugs, prices ranged from 14 percent to 85 percent. In 2003, we
                             reported that the two main types of suppliers of blood clotting factor to
                             beneficiaries also were able to obtain the product at prices considerably
                             below the Medicare payment.

                             Medicare could achieve significant savings on Part B drug benefits if it
                             reimbursed providers at levels that reflected actual acquisition costs.




                             Page 173                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Medicare: Payment for Blood Clotting Factor Exceeds Providers’
                                Acquisition Cost. GAO-03-184. Washington, D.C.: January 10, 2003.

                                Major Management Challenges and Program Risks: Department of Health
                                and Human Services. GAO-03-101. Washington, D.C.: January 2003.

                                Medicare: Challenges Remain in Setting Payments for Medical
                                Equipment and Supplies and Covered Drugs. GAO-02-833T. Washington,
                                D.C.: June 12, 2002.

                                Medicare Outpatient Drugs: Program Payments Should Better Reflect
                                Market Prices. GAO-02-531T. Washington, D.C.: March 14, 2002.

                                Medicare: Payments for Covered Outpatient Drugs Exceed Providers’
                                Cost. GAO-01-1118. Washington, D.C.: September 21, 2001.

                                Medicare Part B Drugs: Program Payments Should Reflect Market Prices.
                                GAO-01-1142T. Washington, D.C.: September 21, 2001.

GAO Contact                     William J. Scanlon, (202) 512-7114




                                Page 174                                   GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




CBO Options Where
Related GAO Work Is
Identified23

570-10 Reduce Medicare
Payments for Currently
Covered Prescription Drugs

Related GAO Products         Medicare: Payment for Blood Clotting Factor Exceeds Providers’
                             Acquisition Cost. GAO-03-184. Washington, D.C.: January 10, 2003..23

                             Medicare: Challenges Remain in Setting Payments for Medical
                             Equipment and Supplies and Covered Drugs. GAO-02-833T. Washington,
                             D.C.: June 12, 2002.

                             Medicare Outpatient Drugs: Program Payments Should Better Reflect
                             Market Prices. GAO-02-531T. Washington, D.C.: March 14, 2002.

                             Medicare: Payments for Covered Outpatient Drugs Exceed Providers’
                             Cost. GAO-01-1118. September 21, 2001.

GAO Contact                  Laura A. Dummit, (202) 512-7119




                             23
                              We list GAO reports identified as relating to options included in the CBO March 2003
                             Budget Options report. Only those CBO options for which we identified related GAO
                             products are included. We included GAO reports if they related to the topic of the CBO
                             option, regardless of whether our work supported the option or not.




                             Page 175                                         GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




570-11 Require Competitive
Bidding for High-Volume
Items of Durable Medical
Equipment

Related GAO Product          Medicare: Challenges Remain in Setting Payments for Medical
                             Equipment and Supplies and Covered Drugs. GAO-02-833T. Washington,
                             D.C.: June 12, 2002.

GAO Contacts                 Leslie G. Aronovitz, (312) 220-7600
                             Sheila Avruch, (202) 512-7277



570-15 Simplify and Limit
Medicare’s Cost-Sharing
Requirements

Related GAO Products         Medicare Reform: Modernization Requires Comprehensive Program
                             View. GAO-01-862T. Washington, D.C.: June 14, 2001.

                             Medicare: Cost-Sharing Policies Problematic for Beneficiaries and
                             Program. GAO-01-713T. Washington, D.C.: May 9, 2001.

GAO Contact                  Laura A. Dummit, (202) 512-7119



570-19 Reduce Medicare
Payments for Home Health
Care

Related GAO Products         Medicare: Utilization of Home Health Care by State. GAO-02-782R.
                             Washington, D.C.: May 23, 2002.

                             Medicare Home Health Care: Payments to Home Health Agencies Are
                             Considerably Higher than Costs. GAO-02-663. Washington, D.C.: May 6,
                             2002.




                             Page 176                                   GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Medicare Home Health Care: Prospective Payment System Could Reverse
              Recent Declines in Spending. GAO/HEHS-00-176. Washington, D.C.:
              September 8, 2000.

GAO Contact   Laura A. Dummit, (202) 512-7119




              Page 177                                   GAO-03-1006 Opportunities for Oversight
                      Appendix I
                      Opportunities to Improve the Economy,
                      Efficiency, and Effectiveness of Federal
                      Programs




600 Income Security   Examples from Selected GAO Work

                      Develop Comprehensive Return-to-Work Strategies for People with
                      Disabilities

                      Revise Benefit Payments under the Federal Employees’ Compensation Act

                      Increase Congressional Oversight of PBGC’s Budget

                      Share the Savings from Bond Refundings

                      Implement a Service Fee for Successful Non-Temporary Assistance for
                      Needy Families Child Support Enforcement Collections

                      Improve Reporting of DOD Reserve Employee Payroll Data to State
                      Unemployment Insurance Programs

                      Improve Social Security Benefit Payment Controls

                      Simplify Supplemental Security Income Recipient Living Arrangements

                      Reduce Federal Funding Participation Rate for Automated Child Support
                      Enforcement Systems

                      Obtain and Share Information on Medical Providers and Middlemen to
                      Reduce Improper Payments to Supplemental Security Income Recipients

                      Sustain/Expand Range of SSI Program Integrity Activities

                      Revise Government Pension Offset (GPO) Exemption

                      Better Congressional Oversight of PRWORA’s Fugitive Felon Provisions

                      Improve the Administrative Oversight of Food Assistance Programs

                      CBO Option Where Related GAO Work Is Identified

                      600-07 Reduce the Federal Matching Rate for Administrative and Training
                      Costs in the Foster Care and Adoption Assistance Programs




                      Page 178                                   GAO-03-1006 Opportunities for Oversight
                               Appendix I
                               Opportunities to Improve the Economy,
                               Efficiency, and Effectiveness of Federal
                               Programs




Examples from
Selected GAO Work

Develop Comprehensive
Return-to-Work Strategies
for People with Disabilities
                               Primary agency                             Social Security Administration
                               Accounts                                   Multiple
                               Spending type                              Direct
                               Budget subfunctions                        Multiple

                               The Social Security Administration (SSA) operates the Disability Insurance
                               (DI) and Supplemental Security Income (SSI) programs—the nation’s two
                               largest federal programs providing cash benefits to people with disabilities.
                               For fiscal year 2002, DI benefits paid to disabled workers totaled about
                               $59.9 billion and SSI benefits paid to beneficiaries with disabilities
                               amounted to about $26.2 billion. SSA data show that over the past 10 years,
                               the size of the working-age disabled beneficiary population increased 38
                               percent, from about 6.0 million to 8.2 million. Such growth has raised
                               concerns that are compounded by the fact that few DI beneficiaries ever
                               leave the disability rolls by returning to work.

                               We found that return-to-work strategies and practices may hold potential
                               for improving federal disability programs by helping people with
                               disabilities return to productive activity in the workplace and, at the same
                               time, reducing benefit payments. Our analysis of practices advocated and
                               implemented by the private sector in the United States and by social
                               insurance programs in Germany and Sweden revealed three common
                               strategies in the design of their return-to-work programs: intervene as soon
                               as possible after an actual or potentially disabling event to promote and
                               facilitate return-to-work, identify and provide necessary return-to-work
                               assistance and manage cases to achieve return-to-work goals, and structure
                               cash and medical benefits to encourage people with disabilities to return to
                               work.

                               In line with placing greater emphasis on return-to-work, we recommended
                               that the Commissioner of SSA develop a comprehensive return-to-work
                               strategy that integrates, as appropriate, earlier intervention, earlier




                               Page 179                                       GAO-03-1006 Opportunities for Oversight
Appendix I
Opportunities to Improve the Economy,
Efficiency, and Effectiveness of Federal
Programs




identification and provision of necessary return-to-work assistance for
applicants and beneficiaries, and cash and medical benefits that make
work more financially advantageous. SSA has stepped up its return-to-work
efforts, in part, in response to mandates from the Ticket to Work and Work
Incentives Improvement Act of 1999, which contains provisions to
safeguard medical coverage for workers with disabilities, enhance
vocational rehabilitation services for beneficiaries, and demonstrate the
effectiveness of allowing working beneficiaries to keep more of their
earnings. For example, SSA has (1) recruited more than 400 public or
private entities to provide vocational rehabilitation, employment, and other
support services to beneficiaries under the Ticket to Work Program;
(2) raised and indexed to a measure of wage growth the limit on the
amount a DI beneficiary can earn from work and still receive benefits to
encourage people with disabilities to work; (3) funded 12 state partnership
agreements that are intended to help the states develop services to increase
beneficiary employment; (4) provided funding to more than 100
community-based organizations to help provide work incentives planning
and assistance to beneficiaries; and (5) completed a pilot study on the
deployment of work incentive specialists to SSA field offices and is
determining how to best implement the position nationally. Further, SSA
has progressed in researching issues related to return-to-work through its
Disability Research Institute. Research that is underway includes
(1) designing a demonstration to provide earlier return-to-work services to
DI applicants who are likely to be found eligible; (2) exploring the paths DI
applicants and beneficiaries took to the benefit program to determine
whether SSA might be able to redirect some applicants to work rather than
a prolonged stay on the benefit rolls; (3) examining how the onset of
disability early in life affects later employment outcomes; and (4) analyzing
and facilitating the transition to employment of youths with disabilities.

While these efforts represent positive steps in trying to return people with
disabilities to work, SSA still needs to move forward in developing a
comprehensive return-to-work strategy. Such a strategy is likely to require
improvements to staff skill levels and areas of expertise, as well as changes
to the disability determination process. It will also require fundamental
changes to the underlying philosophy and direction of the DI and SSI
programs, as well as legislative changes in some cases. Policymakers will
need to carefully weigh the implications of such changes. Nevertheless, we
remain concerned that the absence of such a strategy may hinder SSA’s
efforts to make significant strides in the return-to-work area. An improved
return-to-work strategy could benefit both the beneficiaries who want to
work and the American taxpayer.



Page 180                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            SSA Disability: SGA Levels Appear to Affect the Work Behavior of
                                Relatively Few Beneficiaries, but More Data Needed. GAO-02-224.
                                Washington, D.C.: January 16, 2002.

                                SSA Disability: Other Programs May Provide Lessons for Improving
                                Return-to-Work Efforts. GAO-01-153. Washington, D.C.: January 12, 2001.

                                Social Security Disability: Other Programs May Provide Lessons for
                                Improving Return-to-Work Efforts. GAO/T-HEHS-00-151. Washington,
                                D.C.: July 13, 2000.

                                Social Security Disability: Multiple Factors Affect Return to Work.
                                GAO/T-HEHS-99-82. Washington, D.C.: March 11, 1999.

                                Social Security Disability Insurance: Multiple Factors Affect
                                Beneficiaries’ Ability to Return to Work. GAO/HEHS-98-39. Washington,
                                D.C.: January 12, 1998.

                                Social Security: Disability Programs Lag in Promoting Return to Work.
                                GAO/HEHS-97-46. Washington, D.C.: March 17, 1997.

                                People With Disabilities: Federal Programs Could Work Together More
                                Efficiently to Promote Employment. GAO/HEHS-96-126. Washington, D.C.:
                                September 3, 1996.

                                SSA Disability: Return-to-Work Strategies From Other Systems May
                                Improve Federal Programs. GAO/HEHS-96-133. Washington, D.C.: July 11,
                                1996.

                                SSA Disability: Program Redesign Necessary to Encourage Return to
                                Work. GAO/HEHS-96-62. Washington, D.C.: April 24, 1996.

GAO Contact                     Robert E. Robertson, (202) 512-7215




                                Page 181                                   GAO-03-1006 Opportunities for Oversight
                              Appendix I
                              Opportunities to Improve the Economy,
                              Efficiency, and Effectiveness of Federal
                              Programs




Revise Benefit Payments
under the Federal
Employees’ Compensation
Act                           Primary agency                             Department of Labor
                              Accounts                                   Multiple
                              Spending types                             Direct/Discretionary
                              Budget subfunction                         609/Other income security

                              Federal workers who are disabled as a result of a work-related injury are
                              entitled to tax-free workers’ compensation benefits under the Federal
                              Employees’ Compensation Act (FECA). Several GAO reviews have
                              identified ways in which benefit payment policies can be revised to better
                              address eligibility and/or need or to bring FECA benefits more in line with
                              other federal and state workers’ compensation laws.

Basing FECA Compensation on   For almost all totally disabled individuals, FECA benefits are 66 and two
Spendable Earnings            thirds percent of gross pay for beneficiaries without dependents and 75
                              percent of gross pay for beneficiaries with at least one dependent. We
                              reported that nearly 30 percent of the more than 23,000 beneficiaries
                              included in our analyses received FECA compensation benefits that
                              replaced more than 100 percent of their estimated take-home pay. Another
                              40 percent of these beneficiaries received FECA benefits that were from 90
                              to 99 percent of their take-home pay. Benefit replacement rates tended to
                              be higher for beneficiaries who (1) received higher amounts of pay before
                              they were injured, (2) were injured before 1980, (3) received the FECA
                              dependent benefit, and (4) lived in states that had an income tax.

                              Workers’ compensation program analysts are reluctant to take a position
                              on what the “correct” level of workers’ compensation benefits should be,
                              leaving that matter to the judgment of legislators. According to a 1985
                              Workers Compensation Research Institute report, legislators in many
                              states must walk a fine line between benefits that are high enough to
                              provide adequate income, but not so high as to discourage an employee’s
                              return-to-work when he or she is no longer disabled. The 1972 Report of the
                              National Commission on State Workmen’s Compensation Laws
                              recommended that workers’ weekly benefits should replace at least 80
                              percent of their spendable weekly earnings, subject to a state’s maximum
                              weekly benefit. Six states use a percentage of spendable weekly earnings
                              (ranging from 75 to 80 percent) rather than a percentage of gross wages as
                              the basis for computing compensation benefits. Spendable earnings (take-
                              home pay) are computed by taking an employee’s gross pay at the time of


                              Page 182                                       GAO-03-1006 Opportunities for Oversight
                                    Appendix I
                                    Opportunities to Improve the Economy,
                                    Efficiency, and Effectiveness of Federal
                                    Programs




                                    injury and subtracting Social Security taxes and federal and state income
                                    taxes. Taxes are based on published tax withholding tables, given an
                                    employee’s actual exemptions and a standard deduction.

                                    If the Congress judges that current FECA benefits are so high as to
                                    discourage employees from returning to work, it could consider changing
                                    the current FECA benefit structure from one that bases compensation on
                                    gross pay to one that bases compensation on spendable earnings. In the
                                    past, CBO estimated the savings that would occur, assuming that the new
                                    FECA benefit formula would equal 80 percent of spendable earnings and
                                    that changes in benefits would be made prospectively. Additional savings
                                    could be achieved if changes were made to affect individuals who were
                                    already receiving FECA benefits. Fewer savings would be achieved if a
                                    higher percentage of spendable earnings were used as the basis for
                                    computing FECA benefits.

Revising Benefits for Retirement-   Retirement-eligible federal workers who continue to be disabled as a result
Eligible Beneficiaries              of work-related injuries could receive tax-free workers’ compensation
                                    benefits under FECA for the remainder of their lives that would generally
                                    be greater than amounts these workers would receive as retirement
                                    benefits. FECA benefits are 75 percent of salary for a disabled employee
                                    with a dependent; Civil Service Retirement System benefits for a 55-year
                                    old employee with 30 years of service are 56 percent of salary. We reported
                                    that 60 percent of the approximately 44,000 long-term FECA beneficiaries
                                    were at least age 55, the age at which some federal employees are eligible
                                    for optional retirement with unreduced retirement benefits. Proponents for
                                    changing FECA benefits for older beneficiaries argue that an inequity is
                                    created between federal workers who retire normally and those who, in
                                    effect, “retire” on FECA benefits. Opponents of such a change argue that
                                    reducing benefits would break the implicit promise that injured workers
                                    have exchanged their right to tort claims for a given level of future benefits.

                                    We identified two prior proposals for reducing FECA benefits to those who
                                    become eligible for retirement. One would convert compensation benefits
                                    received by retirement-eligible disabled workers to retirement benefits.
                                    However, this approach raises complex issues related to the tax-free nature
                                    of workers’ compensation benefits and to the individual’s entitlement to
                                    retirement benefits. The second proposal would convert FECA benefits to
                                    a newly established FECA annuity, thus avoiding the complexity of shifting
                                    from one benefit program to another.




                                    Page 183                                   GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




                             To reduce benefits for retirement-eligible FECA beneficiaries, the Congress
                             could consider converting from the current FECA benefit structure to a
                             FECA annuity. In the past, CBO estimated that savings would occur,
                             assuming that such an annuity would equal two-thirds of the previously
                             provided FECA compensation benefit, and that the annuity would begin
                             following the disabled individual’s eligibility for retirement benefits.
                             Assuming that changes in benefits would be made prospectively, additional
                             savings could be achieved if changes were made to affect individuals who
                             were already receiving FECA benefits.

FECA Cases Involving Third   FECA authorizes federal agencies to continue paying employees their
Parties                      regular salaries for up to 45 days when they are absent from work due to
                             work-related traumatic injuries. In cases in which third parties are
                             responsible for employees’ on-the-job injuries (e.g., dog bites or
                             automobile-related injuries), the Department of Labor may require that
                             employees pursue collection actions against these parties. However, based
                             on current interpretations of FECA by the Employees’ Compensation
                             Appeals Board and a federal appeals court, the federal government has no
                             legal basis to obtain refunds from third parties for the first 45 days of
                             absence from work (called the continuation-of-pay (COP) period).
                             Recoveries from third parties continue to be allowed for payments of
                             compensation benefits following the COP period and for medical benefits.

                             Based on the current interpretation of FECA, employees can receive
                             regular salary payments from their employing agencies and
                             reimbursements from third parties—in effect, a double recovery of income
                             for their first 45 days of absence from work due to injuries for which third
                             parties were responsible. We recommended that the Congress amend
                             FECA to expressly provide for refunds of amounts paid as COP when
                             employees receive third-party recoveries. In the past, CBO estimated that
                             savings would occur if the Congress redefined COP so that it could be
                             included in amounts employees are required to reimburse the government
                             when they recover damages from third parties.

Comparability of FECA and    We identified three major ways in which FECA differs from other federal
Other Compensation Laws      and state workers’ compensation laws, each of which results in relatively
                             greater benefits under FECA. First, FECA authorizes maximum weekly
                             benefit amounts that are greater than those authorized by other federal and
                             state workers’ compensation laws. As of January 1, 2003, maximum
                             authorized weekly FECA benefits were equal to $1,596, 75 percent of the
                             base salary of a GS-15, step 10. FECA also authorizes additional benefits for
                             one or more dependents equal to 8.33 percent of salary. Only six states



                             Page 184                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                authorize additional benefits for dependents (about $5-$10) benefit
                                amounts per week per dependent. However, one state authorizes an
                                additional flat rate of $25 per week for dependents, regardless of the
                                number of dependents. In all cases, the total benefits are not to exceed
                                maximum authorized benefit amounts. Finally, FECA provides eligible
                                workers who suffer traumatic injuries with their regular salary for a period
                                not to exceed 45 days. Compensation benefits for wage loss begin on the
                                48th day, after a 3-day waiting period. All other federal and state workers’
                                compensation laws provide for a 3- to 7-day waiting period following the
                                injury before paying compensation benefits. In either case, if employees
                                continue to be out of work for extended periods ranging from 5 to 42 days,
                                depending on the jurisdiction, retroactive benefits to cover the waiting
                                period would be paid.

                                Reducing FECA’s authorized maximum weekly benefit to make it
                                comparable to other compensation laws would have little effect on
                                compensation costs because very few federal workers receive maximum
                                benefits. However, in the past, CBO estimated that savings would occur by
                                eliminating augmented compensation benefits for dependents and
                                establishing a 5-day waiting period immediately following the injury, and
                                before the continuation of pay period.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Federal Employees’ Compensation Act: Percentages of Take-Home Pay
                                Replaced by Compensation Benefits. GAO/GGD-98-174. Washington, D.C.:
                                August 17, 1998.

                                Federal Employees’ Compensation Act: Issues Associated with Changing
                                Benefits for Older Beneficiaries. GAO/GGD-96-138BR. Washington, D.C.:
                                August 14, 1996.

                                Workers’ Compensation: Selected Comparisons of Federal and State
                                Laws. GAO/GGD-96-76. Washington, D.C.: April 3, 1996.

                                Federal Employees’ Compensation Act: Redefining Continuation of Pay
                                Could Result in Additional Refunds to the Government. GAO/GGD-95-135.
                                Washington, D.C.: June 8, 1995.




                                Page 185                                   GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




GAO Contact   Robert E. Robertson, (202) 512-7215




              Page 186                                   GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Increase Congressional
Oversight of PBGC’s Budget

                             Primary agency                             Department of Labor
                             Account                                    Pension Benefit Guaranty Corporation fund
                                                                        (16-4204)
                             Spending types                             Direct/Discretionary
                             Budget subfunction                         601/General retirement and disability
                                                                        insurance

                             The Pension Benefit Guaranty Corporation (PBGC) insures the benefits of
                             about 44 million participants against default of their employer-sponsored
                             defined benefit pension plans. Established in 1974 as a self-financing
                             government corporation, PBGC’s primary responsibility is to assume
                             administration of underfunded plans that either terminate or become
                             insolvent. In 2002, about 345,000 retirees received more than $1.5 billion in
                             benefit payments from PBGC. To carry out its operations, PBGC relies
                             heavily on the services of contractors whose headquarters and field
                             employees account for almost half of its workforce.

                             PBGC is self-financing in that it receives no general revenues. Its operating
                             budget of $227 million is financed with funds from two sources:
                             (1) insurance premiums paid by plan sponsors and (2) trust assets.
                             However, the portion of its budget allocated to administrative expenses has
                             been subject to a statutory limitation since 1985. The Congress revised this
                             limitation on two occasions to provide PBGC more flexibility to address
                             workload increases that followed several large pension plan failures. These
                             revisions exempted from any limitation all expenses incurred in connection
                             with the termination and management of pension plans and provided PBGC
                             with discretion to determine which functions and activities qualified as
                             such. Over time, PBGC has expanded the range of activities and functions
                             classified as nonlimitation expenses and uses these resources to fund
                             nearly all of its operations. This has resulted in a steep increase in PBGC’s
                             nonlimitation budget from $29 million in fiscal year 1989 to $215.5 million
                             in fiscal year 2002. During this period, PBGC’s limitation budget decreased
                             from $40 million to $11.7 million.

                             In 2000, we reported that PBGC’s failure to strategically manage its longer
                             term contracting needs, as well as weaknesses in its contractor selection
                             and oversight processes, could result in the corporation paying too much
                             for procured services. We also noted that PBGC’s budget structure provides



                             Page 187                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                it with substantial flexibility to use nonlimitation funds that are not directly
                                subject to congressional review and approval. This budgetary treatment
                                shields most corporation spending for administration and operations from
                                congressional scrutiny, creating a potentially favorable environment for
                                management weaknesses. Also, we have reported that PBGC does not
                                have a reliable basis for estimating its administrative expenses subject to
                                the legislative limitation. As a result, PBGC’s estimates for its activities
                                covered by the limitation are not meaningful and thus are ineffective in
                                controlling administrative costs. In addition, PBGC does not have a
                                meaningful basis for reporting adherence to the limitation, since it does not
                                accumulate and allocate actual expenses for activities subject to the
                                limitation.

                                As a means of strengthening its oversight over PBGC’s budget and
                                operations, the Congress could act to restrict the range of activities to be
                                supported by nonlimitation funds. This, however, would likely require a
                                similar increase in PBGC’s limitation budget in which the Congress has
                                direct appropriation oversight. Thus, more of PBGC’s spending for
                                operational activities and functions would fall within the normal
                                congressional appropriations process. Although this approach would not
                                necessarily reduce PBGC’s administrative spending initially, strengthened
                                oversight could result in management improvements, more efficient use of
                                funds, and slower spending growth in the future. In the past, CBO was
                                unable able to estimate savings from this option without a more specific
                                proposal.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Pension Benefit Guaranty Corporation: Statutory Limitation on
                                Administrative Expenses Does Not Provide Meaningful Control. GAO-03-
                                301. Washington, D.C.: February 28, 2003.

                                Pension Benefit Guaranty Corporation: Contracting Management Needs
                                Improvement. GAO/HEHS-00-130. Washington, D.C.: September 18, 2000.

GAO Contact                     Barbara D. Bovbjerg, (202) 512-7215




                                Page 188                                    GAO-03-1006 Opportunities for Oversight
                         Appendix I
                         Opportunities to Improve the Economy,
                         Efficiency, and Effectiveness of Federal
                         Programs




Share the Savings from
Bond Refundings

                         Primary agency                             Department of Housing and Urban Development
                         Account                                    Housing Certificate Fund (86-0319)
                         Spending types                             Discretionary/Direct
                         Budget subfunction                         604/Housing assistance

                         During the 1970s and early 1980s, the Department of Housing and Urban
                         Development (HUD) administered programs to develop housing for low-
                         income households using various types of financing arrangements and
                         long-term Section 8 rental housing assistance contracts. While some
                         properties were financed by loans and grants from HUD, others were
                         financed by bonds issued by state and local housing finance agencies.
                         During the late 1970s and early 1980s, the cost to finance housing
                         development rose to unprecedented levels. In response, HUD authorized
                         higher Section 8 rental assistance payments to cover the higher bond
                         financing costs, first in 1980 and then in 1981. Since then, as interest rates
                         declined, many state and local housing finance agencies have refunded the
                         bonds they issued and issued new bonds at lower interest rates. This action
                         has generated substantial savings for the state agencies. These savings
                         represent the difference between the amounts needed to repay the original
                         bonds and the lower amounts needed to repay the new bonds. Agencies
                         typically use these savings to provide affordable housing in their states.

                         In 1999, we reported that HUD had not issued clear guidance on when state
                         agencies are required to share the savings associated with bond refundings
                         with the federal government. The need for clearer guidance specifically
                         relates to state agency compliance with the bond refunding provisions in an
                         October 1992 amendment to Section 1012 of the McKinney Act. The
                         amendment was unclear as to whether the states were required to share the
                         savings from bond refundings with the federal government for all
                         properties covered by Section 8 rental assistance contracts that were
                         entered into from 1979 through 1984. In the absence of clear guidance from
                         HUD, we found that some state agencies have shared the savings from
                         bond refunding for such properties with the federal government while
                         other agencies have retained the savings.

                         Legislative changes could be made to clarify the Congress’s intent that state
                         agencies should be required to share bond refunding savings with the




                         Page 189                                            GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                federal government for all properties covered by Section 8 rental assistance
                                contracts entered into from 1979 through 1984.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Multifamily Housing: HUD Missed Opportunities to Reduce Costs on Its
                                Uninsured Section 8 Portfolio. GAO/RCED-99-217. Washington, D.C.:
                                July 30, 1999.

GAO Contact                     Thomas J. McCool, (202) 512-8678




                                Page 190                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Implement a Service Fee for
Successful Non-Temporary
Assistance for Needy
Families Child Support          Primary agency                             Department of Health and Human Services
Enforcement Collections         Account                                    Payments to States for Child Support
                                                                           Enforcement and Family Support Programs
                                                                           (75-1501)
                                Spending type                              Direct
                                Budget subfunction                         609/Other income security

                                The Child Support Enforcement program is a Federal/state/local
                                partnership designed to obtain child support for both families eligible for
                                Temporary Assistance for Needy Families (TANF) and non-TANF families.
                                The services provided to clients include locating noncustodial parents,
                                establishing paternity and support orders, and collecting and distributing
                                child support payments. From fiscal years 1984 through 1998, non-TANF
                                caseloads and costs rose about 500 percent and 1200 percent, respectively.
                                For fiscal years 1999 through 2002, non-TANF cases represented about 80
                                percent of the total caseload.

                                The federal government pays 66 percent of the Child Support Enforcement
                                program costs. While states have the authority to fully recover the costs of
                                their services, states have exercised their discretion and most have charged
                                only minimal application and service fees. Since 1992, we have reported on
                                opportunities to defray some of the costs of child support programs. Based
                                on this work, we believe that mandatory application fees should be
                                dropped and that states should be mandated to charge a minimum
                                percentage service fee on successful collections for non-TANF families.
                                Congressional action is necessary to put such a requirement in place.
                                Application fees are administratively burdensome, and a service fee would
                                ensure that families are charged only when the service has been
                                successfully performed. The costs recovered from such a service fee would
                                be determined by the percentage rate set by the Congress. For example, in
                                the past, CBO estimated that if the Congress set the service fee at 5 percent
                                for each successful non-TANF child support collection, the federal
                                government could recover $2 billion in 5 years.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report



                                Page 191                                       GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




Related GAO Products   Child Support Enforcement: Clear Guidance Would Help Ensure Proper
                       Access to Information and Use of Wage Withholding by Private Firms.
                       GAO-02-349, March 26, 2002.

                       Child Support Enforcement: Effects of Declining Welfare Caseloads Are
                       Beginning to Emerge. GAO/HEHS-99-105. Washington, D.C.: June 30, 1999.

                       Welfare Reform: Child Support an Uncertain Income Supplement for
                       Families Leaving Welfare. GAO/HEHS-98-168. Washington, D.C.: August 3,
                       1998.

                       Child Support Enforcement: Early Results on Comparability of
                       Privatized and Public Offices. GAO/HEHS-97-4. Washington, D.C.:
                       December 16, 1996.

                       Child Support Enforcement: Reorienting Management Toward Achieving
                       Better Program Results. GAO/HEHS/GGD-97-14. Washington, D.C.:
                       October 25, 1996.

                       Child Support Enforcement: States’ Experience with Private Agencies’
                       Collection of Support Payments. GAO/HEHS-97-11. Washington, D.C.:
                       October 23, 1996.

                       Child Support Enforcement: States and Localities Move to Privatized
                       Services. GAO/HEHS-96-43FS. Washington, D.C.: November 20, 1995.

                       Child Support Enforcement: Opportunity to Reduce Federal and State
                       Costs. GAO/T-HEHS-95-181. Washington, D.C.: June 13, 1995.

GAO Contact            Cornelia M. Ashby, (202) 512-8403




                       Page 192                                   GAO-03-1006 Opportunities for Oversight
                           Appendix I
                           Opportunities to Improve the Economy,
                           Efficiency, and Effectiveness of Federal
                           Programs




Improve Reporting of DOD
Reserve Employee Payroll
Data to State
Unemployment Insurance     Primary agency                             Department of Labor
Programs                   Account                                    Unemployment Trust Fund 20-8042
                           Spending type                              Direct
                           Budget subfunctions                        Multiple

                           The Congress established the national unemployment insurance (UI)
                           system in the 1930s to provide partial income assistance to many
                           temporarily unemployed workers with substantial work histories. Today,
                           UI is the major federal program providing assistance to the unemployed.
                           Many workers covered by the UI system were also among the 800,000
                           personnel who participated in National Reserve forces (Army National
                           Guard, Army Reserve, Naval Reserve, Marine Corps Reserve, Air National
                           Guard, and the Air Force Reserve) in fiscal year 2002.

                           Most UI claimants are required to report the income they receive while in
                           the Reserves so that state UI programs can reduce their benefits
                           accordingly. Our 1996 analysis of benefit and Reserve data from seven
                           states shows that some Reserve personnel are receiving improper benefit
                           payments from state UI programs. In the seven states in our analysis, we
                           estimate that UI claimants who were active participants in the Reserve
                           failed to report over $7 million in Reserve income in fiscal year 1994. This
                           led to UI benefit overpayments of approximately $3.6 million, of which
                           federal trust fund losses were about $1.2 million. We expect that the federal
                           and state trust fund losses from all UI programs are much greater because
                           the seven states we reviewed accounted for only 27 percent of all
                           reservists.

                           State officials cited various reasons why claimants may not be reporting
                           their Reserve income while receiving UI benefits. According to state
                           officials, the claimants may not understand their reporting responsibilities,
                           are often not specifically informed of these responsibilities, and may have
                           incentives not to report all Reserve income—incentives that are amplified
                           by the states’ limited ability to detect nonreporting.

                           The Department of Defense and the Department of Transportation’s Coast
                           Guard have acted to ensure that reservists are reminded of their
                           responsibility to report income from reserve activity to state UI agencies.
                           All reservists now receive an annual notice with their leave and earnings



                           Page 193                                       GAO-03-1006 Opportunities for Oversight
Appendix I
Opportunities to Improve the Economy,
Efficiency, and Effectiveness of Federal
Programs




statements reminding them of their duty to disclose their affiliation and any
Reserve related earnings when filing an UI claim. In addition, the
Department of Labor has issued a directive to all state employment security
agencies to ensure that they inform prospective and continuing UI benefit
claimants of their responsibility to report Reserve-related income.

These actions should improve general reservist compliance with state UI
program income reporting requirements. However, to detect unreported
Reserve income, the most frequently suggested alternative by federal and
state officials would be to require the Department of Defense (DOD) to
report Reserve payroll and personnel data to states on a quarterly basis, as
private-sector employers are required to do, to permit verification of
claimant income regularly. DOD has stated that it will develop an action
plan to provide such data to the state UI programs. However, completion of
this plan was delayed because of other competing agency priorities and a
recognition that the task was more complex than originally envisioned.

It is important to note that the nonreporting of claimant income appears to
be a broader problem involving all UI claimants who were former federal
civilian and military employees, rather than just those participating in the
Reserves. Officials from many of the state programs we analyzed reported
general difficulties in monitoring reported income from claimants who
were former federal employees.

DOD reports that, given its effort to ensure any action taken be cost-
effective and commensurate with potential savings, it does not intend to
take further action to respond to this recommendation. According to DOD,
13 states effectively exempt Reserve wages from any unemployment
insurance payment offset, and there could be significant costs associated
with providing automated data on the earnings of part-time reservists. We
do not agree that implementation costs would necessarily outweigh
savings. We found millions of dollars in unemployment insurance
overpayments for just 7 states and 27 percent of the reservists, which
would likely lead to even greater levels of overpayments for the remaining
states that offset reservist wages. The potential for overpayments may be
even greater given current national security conditions that involve a
greater role for reservists.

In the past, CBO estimated that budgetary savings would result from the
reduction in overpayments if DOD was required to report Reserve payroll
and personnel data to states on a quarterly basis.




Page 194                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Unemployment Insurance: Millions in Benefits Overpaid to Military
                                Reservists. GAO/HEHS-96-101. Washington, D.C.: August 5, 1996.

GAO Contact                     Sigurd R. Nilsen, (202) 512-7215




                                Page 195                                   GAO-03-1006 Opportunities for Oversight
                           Appendix I
                           Opportunities to Improve the Economy,
                           Efficiency, and Effectiveness of Federal
                           Programs




Improve Social Security
Benefit Payment Controls

                           Primary agency                             Social Security Administration
                           Account                                    Federal Old Age and Survivor’s Insurance
                                                                      Trust Fund (20-8006)
                           Spending type                              Direct
                           Budget subfunction                         651/Social security

                           The Social Security Administration (SSA) is required by law to reduce
                           social security benefits to persons who also receive a pension from
                           noncovered employment (typically persons who work for the federal
                           government or state and local governmental agencies). The Government
                           Pension Offset provision requires SSA to reduce benefits to persons whose
                           social security entitlement is based on another person’s social security
                           coverage (usually their spouse’s). The Windfall Elimination Provision
                           requires SSA to use a modified formula to calculate a person’s earned social
                           security benefit whenever a person also earned a pension through a
                           substantial career in noncovered employment. The modified formula
                           reduces the social security benefit significantly.

                           We found that SSA payment controls for these offsets were incomplete. For
                           state and local retirees, SSA had no third-party pension data to verify
                           whether persons were receiving a noncovered pension. At the time of our
                           report (1998), an analysis of available data indicated that this lapse in
                           payment controls for state and local government retirees cost the trust
                           funds from $129 million to $323 million from 1978 to about 1995.

                           In 1998 we recommended that SSA work with the Internal Revenue Service
                           (IRS) to revise the reporting of pension income on IRS tax form 1099R. IRS
                           has subsequently advised SSA that it needs a technical amendment to the
                           Tax Code to obtain the information SSA needs. This year, we testified that
                           complete and accurate reporting of government pension income is still
                           needed. Given the IRS response to our previous recommendation, we have
                           provided the following matter for congressional consideration. “To
                           facilitate complete and accurate reporting of government pension income,
                           the Congress should consider giving IRS the authority to collect this
                           information, which could perhaps be accomplished through a simple
                           modification to a single form.” We believe that millions of dollars in
                           reduced overpayments could be achieved each year with better payment
                           controls. However, it should be noted that these savings would be offset



                           Page 196                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                somewhat by administrative costs associated with conducting additional
                                computer matching at SSA. In the past, CBO estimated that improved
                                payment controls could result in budgetary savings.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Social Security: Issues Relating to Noncoverage of Public
                                Employees.GAO-03-710T. Washington, D.C.: May 1, 2003.

                                Social Security: Better Payment Controls for Benefit Reduction
                                Provisions Could Save Millions.GAO/HEHS-98-76. Washington, D.C.:
                                April 30, 1998.

GAO Contact                     Barbara D. Bovbjerg, (202) 512-7215




                                Page 197                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Simplify Supplemental
Security Income Recipient
Living Arrangements
                            Primary agency                             Social Security Administration
                            Account                                    Supplemental Security Income Program
                                                                       (28-0406)
                            Spending types                             Direct/Discretionary
                            Budget subfunction                         609/Other income security

                            The Social Security Administration (SSA) administers the Supplemental
                            Security Income (SSI) program, which is the nation’s largest cash
                            assistance program for the poor. Since its inception, the SSI program has
                            been difficult to administer because, similar to other means tested
                            programs, it relies on complicated criteria and policies to determine initial
                            and continuing eligibility and benefit levels. One of the factors considered
                            is the living arrangements of the beneficiary. When determining SSI
                            eligibility and benefit amounts, SSA staff apply a complex set of policies to
                            document an individual’s living arrangements and any additional support
                            they may be receiving from others. This process depends heavily on self-
                            reporting by recipients of whether they live alone or with others; the
                            relationships involved; the extent to which rent, food, utilities, and other
                            household expenditures are shared; and exactly what portion of those
                            expenses the individual pays. These numerous rules and policies have
                            made living arrangement determinations one of the most complex and
                            error prone aspects of the SSI program, and a major source of
                            overpayments.

                            We have reported that SSA has not addressed long-standing SSI living
                            arrangement verification problems, despite numerous internal and external
                            studies and many years of quality reviews denoting this as an area prone to
                            error and abuse. Some of the studies we reviewed recommended ways to
                            simplify the process by eliminating many complex calculations and thereby
                            making it less susceptible to manipulation by recipients. Other studies we
                            reviewed suggested ways to make this aspect of the program less costly to
                            taxpayers. In light of the potential cost savings associated with addressing
                            this issue, we recommended in September 2002 that SSA identify and move
                            forward in implementing cost-effective options for simplifying complex
                            living arrangement policies, with particular attention to those policies most
                            vulnerable to fraud, waste, and abuse. We also suggested that an effective
                            approach may include pilot testing various simplification options to better
                            assess their effects. SSA told us that it will use sophisticated computer



                            Page 198                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                simulations to assess the potential impacts of various proposals on
                                recipients, but has not completed these efforts yet.

                                Although in the past CBO agreed that some changes that would simplify
                                living arrangement policies have the potential to create savings, it could not
                                develop a savings estimate without a specific legislative proposal.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Supplemental Security Income: Progress Made in Detecting and
                                Recovering Overpayments, but Management Attention Should Continue.
                                GAO-02-849. Washington, D.C.: September 16, 2002.

                                Supplemental Security Income: Status of Efforts to Improve
                                Overpayment Detection and Recovery. GAO-02-962T. Washington, D.C.:
                                July 25, 2002.

                                Supplemental Security Income: Action Needed on Long-Standing
                                Problems Affecting Program Integrity. GAO/HEHS-98-158. Washington,
                                D.C.: September 14, 1998.

GAO Contact                     Barbara D. Bovbjerg, (202) 512-7215




                                Page 199                                   GAO-03-1006 Opportunities for Oversight
                          Appendix I
                          Opportunities to Improve the Economy,
                          Efficiency, and Effectiveness of Federal
                          Programs




Reduce Federal Funding
Participation Rate for
Automated Child Support
Enforcement Systems       Primary agency                             Department of Health and Human Services
                          Account                                    Payments to States for Child Support
                                                                     Enforcement and Family Support Programs
                                                                     (75-1501)
                          Spending type                              Direct
                          Budget subfunction                         609/Other income security

                          The Department of Health and Human Services’ (HHS) Office of Child
                          Support Enforcement (OCSE) oversees states’ efforts to develop
                          automated systems for the Child Support Enforcement Program.
                          Established for both welfare and nonwelfare clients with children, this
                          program is directed at locating parents not supporting their children,
                          establishing paternity, obtaining court orders for the amounts of money to
                          be provided, and collecting these amounts from noncustodial parents.
                          Achievement of Child Support Enforcement Program goals depends in part
                          on the effective planning, design, and operation of automated systems. The
                          federal government is providing enhanced funding to develop these
                          automated child support enforcement systems by paying up to 90 percent
                          of states’ development costs. From fiscal year 1981 through fiscal year
                          2000, the states spent about $5.3 billion to develop these systems, including
                          about $3.8 billion from the federal government.

                          The 90 percent funding participation rate was initially discontinued at the
                          end of fiscal year 1995, the congressionally mandated date for the systems
                          to be certified and operational. However, the Congress subsequently
                          extended the deadline for these systems to the end of fiscal year 1997. The
                          federal government will continue to reimburse states’ costs to operate
                          these systems at the 66 percent rate established for administrative
                          expenses. The Personal Responsibility and Work Opportunity
                          Reconciliation Act of 1996 (P.L. 104-193) provided additional funding for
                          the states to meet new systems requirements under this law. An 80 percent
                          federal funding participation rate, with a total national funding cap of $400
                          million, was authorized through fiscal year 2001. The 66 percent federal
                          funding participation rate was continued for systems operation and
                          administrative expenses.

                          The Congress could choose to reduce the federal funding participation rate
                          for modification and operation of these systems from 66 percent to the 50



                          Page 200                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                percent rate now common for such costs in other programs, such as Food
                                Stamps and other welfare programs. In the past, CBO estimated that a
                                reduced participation rate would produce budgetary savings.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Human Services: Federal Approval and Funding Processes for States’
                                Information Systems. GAO-02-347T. Washington, D.C.: July 9, 2002.

                                Child Support Enforcement: Leadership Essential to Implementing
                                Effective Automated Systems. GAO/T-AIMD-97-162. Washington, D.C.:
                                September 10, 1997.

                                Child Support Enforcement: Strong Leadership Required to Maximize
                                Benefits of Automated Systems. GAO/AIMD-97-72. Washington, D.C.:
                                June 30, 1997.

GAO Contact                     Joel C. Willemssen, (202) 512-6408




                                Page 201                                   GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Obtain and Share
Information on Medical
Providers and Middlemen to
Reduce Improper Payments     Primary agency                             Social Security Administration
to Supplemental Security     Account                                    Supplemental Security Income Program
                                                                        (28-0406)
Income Recipients
                             Spending types                             Direct/Discretionary
                             Budget subfunction                         609/Other income security

                             The Supplemental Security Income (SSI) program guarantees a minimum
                             level of income for needy, aged, blind, or disabled individuals. In fiscal year
                             2000, the SSI program paid 6.6 million recipients about $31 billion in
                             benefits.

                             Over the years, some SSI recipients may have improperly gained access to
                             program benefits by feigning or exaggerating disabilities with the help of
                             middlemen (particularly interpreters) and medical providers. Although it is
                             not possible to know the exact number of beneficiaries who became
                             eligible for benefits through these practices, analysis suggests that the SSI
                             program is vulnerable to this type of fraud and abuse. First, in an April 1998
                             sample, GAO found that more than 60 percent of the SSI beneficiaries
                             suffer from mental and physical impairments that are difficult to
                             objectively verify. Second, medical providers who were investigated for
                             defrauding Medicaid, Medicare, or private insurance companies provided
                             at least some of the medical evidence for 6 percent of the 208,000 disabled
                             SSI recipient cases we reviewed in six states. Third, over 96 percent of the
                             158 SSA officials and staff that we interviewed said that they believed that
                             the practice of middlemen helping people improperly qualify for SSI
                             benefits has continued. SSA has tried to address this problem by
                             developing ways to better identify and assess the initial or continuing
                             eligibility of applicants and recipients who may be feigning disabilities. The
                             agency has not, however, taken steps to systematically obtain and
                             distribute information on various medical providers and middlemen that
                             would better help identify such applicants and recipients. These steps are
                             important because past experiences have shown that a single middleman
                             or medical provider can help hundreds of ineligible beneficiaries get on the
                             rolls. Every individual who obtains benefits by feigning or exaggerating
                             disabilities will cost the federal government an estimated $122,000 in SSI
                             and Medicaid benefits over the 10-year period 1999 through 2009.




                             Page 202                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                In order to reduce the number of improper claims under the SSI program,
                                the Congress could consider requiring SSA to systematically obtain
                                information on various middlemen and service providers and routinely
                                share it throughout SSA. Such information could be collected from other
                                government agencies and private entities that also face similar fraud and
                                abuse issues as well as from SSA staff. SSA could use this information, for
                                example, to determine which claims should receive increased scrutiny to
                                prevent applicants from receiving improper benefits and to target
                                investigations of current beneficiaries to determine if they should be
                                removed from the program. Although in the past, CBO agreed that efforts
                                to reduce fraud in the SSI program through greater information sharing
                                about medical providers and middlemen have the potential to create
                                savings, it could not develop a savings estimate without a specific
                                legislative proposal.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            High-Risk Series: An Update. GAO-03-119. Washington, D.C.: January
                                2003.

                                High-Risk Series: An Update. GAO-01-263. Washington, D.C.: January
                                2001.

                                Supplemental Security Income: Additional Action Needed to Reduce
                                Program Vulnerability to Fraud and Abuse. GAO/HEHS-99-151.
                                Washington, D.C.: September 15, 1999.

                                Supplemental Security Income: Disability Program Vulnerable to
                                Applicant Fraud When Middlemen Are Used. GAO/HEHS-95-116.
                                Washington, D.C.: August 31, 1995.

GAO Contact                     Barbara D. Bovbjerg, (202) 512-7215




                                Page 203                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Sustain/Expand Range of
SSI Program Integrity
Activities
                                Primary agency                             Social Security Administration
                                Account                                    Supplemental Security Income Program
                                                                           (28-0406)
                                Spending types                             Direct/Discretionary
                                Budget subfunction                         609/Other income security

                                The Social Security Administration (SSA) administers the Supplemental
                                Security Income (SSI) program, which is the nation’s largest cash
                                assistance program for the poor. Since its inception, the SSI program has
                                been difficult and costly to administer because even small changes in
                                income, available resources, or living arrangements can affect recipients’
                                monthly benefit amounts or continued eligibility. To a significant extent,
                                SSA relies heavily on recipients to accurately report important eligibility
                                information. The agency also verifies certain income and resource
                                information through computer matching with the records of other federal
                                and state agencies. To determine whether a recipient remains eligible for
                                SSI benefits, SSA also periodically conducts financial redetermination
                                reviews, which involve personal contact with recipients to document their
                                income, resources, living arrangements, and other eligibility factors.
                                Recipients are reviewed at least every 6 years, but reviews may be more
                                frequent if SSA determines that changes in eligibility are likely.

                                We recently reported that SSA has made a variety of changes to improve its
                                ability to detect SSI payment errors and recover overpayments. We also
                                noted that SSA officials had estimated that conducting substantially more
                                redeterminations would yield hundreds of millions of dollars in additional
                                overpayment detections and preventions annually. In 2001, SSA estimated
                                that it would be cost beneficial to do another 2.5 million redeterminations.
                                The additional reviews would produce $1.1 billion in overpayment benefits
                                (additional overpayment recoveries and future overpayments prevented).
                                Subsequently, we recommended that SSA sustain and expand its program
                                integrity activities. SSA plans to process 200,000 more financial
                                redeterminations in 2003 than it did in 2002.

CBO 5-Year Cost Estimate        No, this is a new example. However, CBO indicated it could probably make
Included in GAO’s 2002          an estimate for this example.
Budgetary Implications Report



                                Page 204                                       GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




Related GAO Products   Supplemental Security Income: Progress Made in Detecting and
                       Recovering Overpayments, but Management Attention Should Continue.
                       GAO-02-849. Washington, D.C.: September 16, 2002.

                       Supplemental Security Income: Action Needed on Long-Standing
                       Problems Affecting Program Integrity. GAO/HEHS-98-158. Washington,
                       D.C.: September 14, 1998.

GAO Contact            Robert E. Robertson, (202) 512-7215




                       Page 205                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Revise Government Pension
Offset (GPO) Exemption

                            Primary agency                                Social Security Administration
                            Account                                       Federal Old-Age and Survivors Insurance
                                                                          Trust Fund (20-8006)
                            Spending types                                Direct/Discretionary
                            Budget subfunction                            651/Social security

                            The Social Security Administration (SSA) administers the Government
                            Pension Offset (GPO) provision. The GPO requires SSA to reduce benefits
                            to persons whose social security entitlement is based on another person’s
                            social security coverage (usually a spouse’s). The GPO prevents workers
                            from receiving a full Social Security spousal benefit in addition to a pension
                            from government employment not covered by Social Security. However,
                            the law provides an exemption from the GPO if an individual’s last day of
                            state/local employment is in a position that is covered by both Social
                            Security and the state/local government’s pension system. In these cases,
                            the GPO will not apply and Social Security spousal benefits will not be
                            reduced.

                            While we could not definitively confirm the extent nationwide that
                            individuals are transferring positions to avoid the GPO, we found that in
                            Texas and Georgia 4,819 individuals had performed work in positions
                            coverd by Social Security for short periods to qualify for the GPO last-day
                            exemption. SSA officials also acknowledged that use of the exemption
                            might be possible in some of the approximately 2,300 state and local
                            government retirement plans in other states where such plans contain
                            Social Security covered and noncovered positions. The transfers we
                            identified in Texas and Georgia could increase long-term benefit payments
                            from the Social Security Trust funds by $450 million.24 While this currently
                            represents a relatively small percentage of the Social Security Trust funds,
                            costs could increase significantly if the practice grows and begins to be
                            adopted by other states and localities.

                            24
                              We calculated this figure by multiplying the number of last-day cases reported in Texas and
                            Georgia (4,819) by SSA data on the average annual offset amount ($4,800) and the average
                            retiree’s life expectancy upon receipt of spousal benefits (19.4 years). This estimate may
                            over- underestimate costs due to the use of averages, the exclusion of inflation/cost-of-
                            living/net present value adjustments, lost investment earnings by the Trust Funds, and other
                            factors that may affect the receipt of spousal benefits.




                            Page 206                                           GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                Considering the potential for abuse of the last-day exemption and the
                                likelihood for its increased use we believe that timely action is needed. In
                                our report and testimony on this topic we presented a matter for
                                congressional consideration that the last-day GPO exemption be revised to
                                provide for a longer minimum time period, and the House has passed
                                necessary legislation that is pending in the Senate. This action would
                                provide an immediate “fix” to address possible abuses of the GPO
                                exemption.

CBO 5-Year Cost Estimate        No, this is a new example. However, CBO indicated it could probably make
Included in GAO’s 2002          an estimate for this example.
Budgetary Implications Report

Related GAO Products            Social Security: Congress Should Consider Revising the Government
                                Pension Offset “Loophole.” GAO-03-498T. Washington, D.C.: February 27,
                                2003.

                                Social Security Administration: Revision to the Government Pension
                                Offset Exemption Should Be Considered. GAO-02-950. Washington, D.C.:
                                August 15, 2002.

GAO Contact                     Barbara D. Bovbjerg, (202) 512-7215




                                Page 207                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Better Congressional
Oversight of PRWORA’s
Fugitive Felon Provisions
                            Primary agencies                                   Multiple
                            Accounts                                           Multiple
                            Spending types                                     Direct/Discretionary
                            Budget subfunctions                                Multiple

                            In response to concerns that individuals wanted in connection with a
                            felony, or violating terms of their parole or probation, could receive
                            benefits from programs for the needy, the Congress added provisions to the
                            Personal Responsibility and Work Opportunity Reconciliation Act
                            (PRWORA) of 1996 that prohibit these individuals from receiving
                            Supplemental Security Income (SSI) administered by the Social Security
                            Administration (SSA), Food Stamp benefits administered by the
                            Department of Agriculture (USDA), and Temporary Assistance to Needy
                            Families (TANF) administered by the Department of Health and Human
                            Services (HHS). These provisions also make fugitive felon25 status grounds
                            for termination of tenancy in many federal housing assistance programs,
                            administered by the Department of Housing and Urban Development
                            (HUD).

                            Since PRWORA was enacted, the SSI, Food Stamp, and TANF programs
                            have identified over 110,000 beneficiaries who are fugitive felons—largely
                            through computer matches of automated arrest warrant and recipient files.
                            When these programs took the initiative or were in a position to match
                            automated recipient and warrant data, many fugitive felons were identified,
                            which led to substantial cost savings. SSA, for example, conducted the
                            most comprehensive matches, comparing data from its entire SSI applicant
                            and recipient files each month to warrant data it obtained from various
                            federal, state, and local law enforcement agencies. As a result, SSA
                            reported that, in 2000 and 2001, it identified more than 36,000 fugitive
                            felons on the SSI rolls, incurring projected savings of over $96 million.

                            Use of computer matches of benefit recipient and arrest warrant files to
                            prevent fugitive felons from collecting benefits varies widely across
                            programs, however. While SSA had by far the most comprehensive


                            25
                                 Here, the term “fugitive felons” also refers to probation and parole violators.




                            Page 208                                                GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                computer matching initiative, fewer than one-third of the state agencies
                                administering the TANF and Food Stamp programs used periodic computer
                                matching, to any extent. HUD had not conducted any matches of this kind,
                                but our own match of HUD’s recipient file and arrest warrant files in a
                                single year turned up nearly 1,000 housing assistance recipients for whom
                                there were arrest warrants in Ohio and Tennessee, alone. We estimated
                                that HUD could have saved $4.2 million annually in program costs if the
                                housing assistance these individuals received had been terminated.

                                Given the savings SSA and some state Food Stamp and TANF programs
                                have incurred using computer matching to identify and drop fugitive felons
                                from their benefit rolls, and the potential savings we demonstrated HUD
                                could achieve in the same way, use of computer matching for this purpose
                                by additional state Food Stamp and TANF programs, as well as the HUD
                                housing assistance program, represent opportunities for greater cost
                                savings in this area.

                                Moreover, the law, as it applies to housing assistance programs, states that
                                fugitive felon status is only grounds for termination of tenancy and not that
                                fugitive felons are ineligible for housing assistance. Therefore, according
                                to HUD officials, while public housing agencies and landlords have the
                                authority to evict fugitive felons, they are not required to do so. This may
                                explain why HUD has done little to ensure that fugitive felons do not
                                receive housing assistance. The Congress should consider amending the
                                Housing Act of 1937 to explicitly make fugitive felons ineligible for housing
                                benefits.

CBO 5-Year Cost Estimate        No, this is a new example. However, CBO indicated it could probably make
Included in GAO’s 2002          an estimate for this example.
Budgetary Implications Report

Related GAO Products            Welfare Reform: Implementation of Fugitive Felon Provisions Should be
                                Strengthened. GAO-02-716. Washington, D.C.: September 25, 2002.

                                Social Security Administration: Fugitive Felon Program Could Benefit
                                from Better Use of Technology. GAO-02-346. Washington, D.C.:
                                September 6, 2002.

                                Social Security Programs: The Scope of SSA’s Authority to Deny Benefits
                                to Fugitive Felons and to Release Information About OASI and DI
                                Beneficiaries Who are Fugitive Felons. GAO-02-459R. Washington, D.C.:
                                February 27, 2002.



                                Page 209                                   GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




GAO Contact   Robert E. Robertson, (202) 512-7215




              Page 210                                   GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Improve the Administrative
Oversight of Food
Assistance Programs
                             Primary agency                             Department of Agriculture
                             Accounts                                   Multiple
                             Spending types                             Direct/Discretionary
                             Budget subfunction                         605 /Food and nutrition assistance

                             The U.S. Department of Agriculture (USDA) continues to face serious
                             challenges in ensuring that eligible individuals receive the proper benefits
                             from the food assistance programs administered by its Food and Nutrition
                             Service. Each day, 1 in every 6 Americans receives nutrition assistance
                             through 1 or more of the 15 programs administered by this agency. These
                             programs, which accounted for slightly more than half of USDA’s budget
                             authority for fiscal year 2002, provide children and low-income adults with
                             access to food, a healthful diet, and nutrition education. Specifically, for
                             fiscal year 2002, the Congress appropriated about $38.8 billion to operate
                             these programs, including the Food Stamp Program and child nutrition
                             programs, such as the school-breakfast and school-lunch programs. This
                             high level of support dictates that USDA must continually address and
                             minimize the amount of fraud and abuse occurring in these programs in
                             order to ensure their integrity.

                             USDA’s Food Stamp Program, the cornerstone of its nutrition assistance
                             programs, provided 17.3 million individuals with more than $15.5 billion in
                             benefits in fiscal year 2001. As noted in the President’s Management
                             Agenda, USDA must continue to address the challenge of accurately
                             issuing food stamp benefits to those who are eligible. Specifically, USDA
                             estimated that about $1.4 billion in erroneous payments were made to food
                             stamp recipients in fiscal year 2001—about $1 billion of the benefits issued
                             were estimated to be overpayments and more than $370 million of the
                             benefits issued were estimated to be underpayments—an error rate of
                             approximately 9 percent. To deal with the complexity of the Food Stamp
                             Program and the high error rate, the 2002 Farm Bill contained a number of
                             administrative and simplification reforms, such as allowing states to use
                             greater flexibility in considering the income of recipients for eligibility
                             purposes and to extend simplified reporting procedures for all program
                             recipients.

                             In addition to ensuring that eligible individuals receive proper benefits,
                             USDA faces the challenge of minimizing the illegal sale of benefits for



                             Page 211                                       GAO-03-1006 Opportunities for Oversight
Appendix I
Opportunities to Improve the Economy,
Efficiency, and Effectiveness of Federal
Programs




cash—a practice known as trafficking. Food Stamps are accepted by about
149,000 authorized retail food stores, and in a March 2000 report, estimated
that stores trafficked about $660 million, or about 3.5 cents of every dollar
of food stamp benefits issued per year from 1996 through 1998. In addition,
store owners generally do not pay the financial penalties assessed for
trafficking. In May 1999, we reported that USDA and the courts collected
only $11.5 million, or about 13 percent, of the $78 million in total penalties
assessed against storeowners for violating food stamp regulations from
1993 through 1998.26 USDA reduced the remaining amount owed by
storeowners by about $49 million, or about 55 percent, through waivers,
adjustments, and write-offs. While weaknesses in debt collection practices
contribute to low collection rates, USDA officials noted that these rates
also reflect the difficulties involved in collecting this type of debt, including
problems in locating storeowners who have been removed from the Food
Stamp Program and the refusal of some storeowners to pay their debts.

Better use of information technology has the potential to help USDA
minimize fraud, waste, and abuse in the Food Stamp Program. For
example, in our May 1999 report we recommended that the Food and
Nutrition Service make better use of data from electronic benefit transfers
(EBT) to identify and assess penalties against storeowners who violate the
Food Stamp Program’s regulations. Also, we recommended in March 2000
that the Food and Nutrition Service work with the states to implement best
practices for using EBT data to identify and take action against recipients
engaged in trafficking of food stamp benefits.27 The Food and Nutrition
Service has taken some actions to implement our recommendations, such
as assisting states in the use of EBT data to identify traffickers, and has
other actions under way.

USDA also faces fraud and abuse challenges in other nutrition programs,
including the Child and Adult Care Food Program (CACFP), which for
fiscal year 2002 was funded at $1.8 billion, and the National School Lunch
and School Breakfast programs, which for that year were funded at
$7.4 billion. In fiscal year 2001, CACFP provided subsidized meals for a


26
 U.S. General Accounting Office, Food Stamp Program: Storeowners Seldom Pay
Financial Penalties Owed for Program Violations, GAO/RCED-99-91 (Washington, D.C.:
May 11, 1999).
27
 U.S. General Accounting Office, Food Stamp Program: Better Use of Electronic Data
Could Result in Disqualifying More Recipients Who Traffic Benefits, GAO/RCED-00-61
(Washington, D.C.: Mar. 7, 2000).




Page 212                                      GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                daily average of 2.6 million participants in the care of about 215,000 day
                                care providers. Over the years, USDA’s Office of Inspector General (OIG)
                                has identified examples of the intentional misuse of CACFP funds,
                                including cases in which program sponsors created fictitious day care
                                providers and inflated the number of meals served. In response to our
                                November 1999 recommendation28 and reports by the OIG, legislation was
                                enacted in June 2000 to strengthen CACFP management controls and to
                                reduce its vulnerability to fraud and abuse. As a result, the Food and
                                Nutrition Service has intensified its management evaluations at the state
                                and local levels and has trained its regional and state agency staff on
                                revised management procedures.

                                Furthermore, in its strategic plan for fiscal years 2000 through 2005, USDA
                                specifically identified the challenge it faces in ensuring that only eligible
                                participants are provided benefits in the National School Lunch Program.
                                In fiscal year 2001, this program provided nutritionally balanced, low-cost
                                or free lunches for over 27 million children each school day in more than
                                98,000 public and nonprofit private schools and residential child care
                                institutions. Data show that the number of children certified as eligible to
                                receive free lunches in this program may be as much as 27 percent greater
                                than the number of children estimated eligible for this benefit. However,
                                these estimates are based on a broad review of certain Census data and are
                                best seen as indicators of a problem rather than precise measures of
                                program misuse. USDA has taken some initial steps to develop a cost-
                                effective strategy to address this integrity issue, such as pilot-testing
                                potential policy changes to improve the certification process, and other
                                measures may be considered as the Congress moves to reauthorize this
                                program.

CBO 5-Year Cost Estimate        No, this is a new option.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Food Stamp Program: Better Use of Electronic Data Could Result in
                                Disqualifying More Recipients Who Traffic Benefits. GAO/RCED-00-61.
                                Washington, D.C.: March 7, 2000.



                                28
                                 U.S. General Accounting Office, Food Assistance: Efforts to Control Fraud and Abuse in
                                the Child and Adult Care Food Program Should Be Strengthened, GAO/RCED-00-12
                                (Washington, D.C.: Nov. 29, 1999).




                                Page 213                                        GAO-03-1006 Opportunities for Oversight
               Appendix I
               Opportunities to Improve the Economy,
               Efficiency, and Effectiveness of Federal
               Programs




               Food Assistance: Efforts to Control Fraud and Abuse in the Child and
               Adult Care Food Program Should Be Strengthened. GAO/RCED-00-12.
               Washington, D.C.: November 29, 1999.

               Food Stamp Program: Storeowners Seldom Pay Financial Penalties
               Owed for Program Violations. GAO/RCED-99-91. Washington, D.C.:
               May 11, 1999.

GAO Contacts   Sigurd R. Nilsen, (202) 512-7003
               David Bellis, (415) 904-2272




               Page 214                                   GAO-03-1006 Opportunities for Oversight
                               Appendix I
                               Opportunities to Improve the Economy,
                               Efficiency, and Effectiveness of Federal
                               Programs




CBO Option Where
Related GAO Work Is
Identified29

600-07 Reduce the Federal
Matching Rate for
Administrative and Training
Costs in the Foster Care and
Adoption Assistance
Programs

Related GAO Product            Child Welfare: HHS Could Play a Greater Role in Helping Child Welfare
                               Agencies Recruit and Retain Staff. GAO-03-357. Washington, D.C.:
                               March 31, 2003.29

GAO Contact                    Cornelia Ashby, (202) 512-8403




                               29
                                We list GAO reports identified as relating to options included in the CBO March 2003
                               Budget Options report. Only those CBO options for which we identified related GAO
                               products are included. We included GAO reports if they related to the topic of the CBO
                               option, regardless of whether our work supported the option or not.




                               Page 215                                         GAO-03-1006 Opportunities for Oversight
                        Appendix I
                        Opportunities to Improve the Economy,
                        Efficiency, and Effectiveness of Federal
                        Programs




700 Veterans Benefits   Examples from Selected GAO Work

and Services            Revise VA’s Disability Ratings Schedule to Better Reflect Veterans’
                        Economic Losses

                        Discontinue Veterans’ Disability Compensation for Nonservice Connected
                        Diseases

                        Reassess Unneeded Health Care Assets within the Department of Veterans
                        Affairs

                        Reducing VA Inpatient Food and Laundry Service Costs

                        CBO Options Where Related GAO Work Is Identified

                        700-01 Narrow the Eligibility for Veterans’ Disability Compensation to
                        Include Only Veterans with High-Rated Disabilities

                        700-02 Narrow the Eligibility for Veterans’ Disability Compensation to
                        Veterans Whose Disabilities Are Related to Their Military Duties

                        700-03 Increase Beneficiaries’ Cost Sharing for Care at Nursing Facilities
                        Operated by the Department of Veterans Affairs




                        Page 216                                   GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Examples from
Selected GAO Work

Revise VA’s Disability
Ratings Schedule to Better
Reflect Veterans’ Economic
Losses                       Primary agency                             Department of Veterans Affairs
                             Account                                    Compensation and Pensions (36-0102)
                             Spending type                              Direct
                             Budget subfunction                         701/Income security for veterans

                             The Department of Veterans Affairs’ (VA) disability program is required by
                             law to compensate veterans for the average loss in earning capacity in
                             civilian occupations that results from injuries or conditions incurred or
                             aggravated during military service. Veterans with such service-connected
                             disabilities are entitled to monthly cash benefits under this program even if
                             they are working and regardless of the amount they earn. The amount of
                             compensation received is based on disability ratings that VA assigns to the
                             service-connected conditions. In fiscal year 2002, VA paid more than
                             $22 billion in compensation to more than 2.3 million veterans, and more
                             than 300,000 veterans’ survivors and children, for these service-connected
                             disabilities.

                             The disability ratings schedule that VA uses is still primarily based on
                             physicians’ and lawyers’ judgments made in 1945 about the effect service-
                             connected conditions had on the average individual’s ability to perform
                             jobs requiring manual or physical labor. Although the ratings in the
                             schedule have not changed substantially since 1945, dramatic changes have
                             occurred in the labor market and in society. The results of an economic
                             validation of the schedule conducted in the late 1960s indicated that ratings
                             for many conditions did not reflect the actual average loss in earnings
                             associated with them. Therefore, it is likely that some of the ratings in the
                             schedule do not reflect the economic loss experienced by veterans today.
                             Hence, the schedule may not equitably distribute compensation funds
                             among disabled veterans.

                             The Congress may wish to consider directing VA to determine whether the
                             ratings for conditions in the schedule correspond to veterans’ average loss




                             Page 217                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                in earnings due to these conditions and adjust disability ratings
                                accordingly. Generally accepted and widely used approaches exist to
                                statistically estimate the effect of specific service-connected conditions on
                                veterans’ average earnings. These estimates could be used to set disability
                                ratings in the schedule that are appropriate in today’s socioeconomic
                                environment. In 1997, we reported the cost to collect the data to produce
                                these estimates was projected to be between $5 million and $10 million,
                                which would be a small fraction of the more than $22 billion VA paid in
                                disability compensation to veterans and their families in fiscal year 2002.
                                Any savings associated with this option would depend on how the new
                                disability schedule alters payments to beneficiaries. A reexamination of the
                                disability schedule could find that some conditions are overpaid while
                                others may require increased payments. In the past, CBO was unable to
                                estimate any costs or savings that could result because a specific proposal
                                for revising the disability ratings schedule had not been presented.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Department of Veterans Affairs: Key Management Challenges in Health
                                and Disability Programs. GAO-03-756T. Washington, D.C.: May 8, 2003.

                                SSA and VA Disability Programs: Re-Examination of Disability Criteria
                                Needed to Help Ensure Program Integrity. GAO-02-597. Washington, D.C.:
                                August 9, 2002.

                                VA Disability Compensation: Disability Ratings May Not Reflect
                                Veterans’ Economic Losses. GAO/HEHS-97-9. Washington, D.C.: January 7,
                                1997.

GAO Contact                     Cynthia A. Bascetta, (202) 512-7101




                                Page 218                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Discontinue Veterans’
Disability Compensation for
Nonservice Connected
Diseases                        Primary agency                             Department of Veterans Affairs
                                Account                                    Compensation and Pensions (36-0102)
                                Spending type                              Direct
                                Budget subfunction                         701/Income security for veterans

                                In fiscal year 2002, the Department of Veterans Affairs (VA) paid more than
                                $18.5 billion in compensation to more than 2.3 million veterans for service-
                                connected disabilities. A disease or injury resulting in disability is
                                considered service-connected if it was incurred or aggravated during
                                military service. No causal connection is required. In 1989, GAO reported
                                on the U.S. practice of compensating veterans for conditions that were
                                probably neither caused nor aggravated by military service. These
                                conditions included diabetes, chronic obstructive pulmonary disease,
                                arteriosclerotic heart disease, and multiple sclerosis. In 1993, GAO
                                reported that other countries were less likely to compensate veterans when
                                diseases were unrelated to military service, when the relationship of the
                                disease to military service could not be established, or for off-duty injuries
                                such as those that happen while on vacation.

                                The Congress may wish to reconsider whether diseases neither caused nor
                                aggravated by military service should be compensated as service-
                                connected disabilities. In 1996, the CBO reported that about 230,000
                                veterans were receiving about $1.1 billion in disability compensation
                                payments annually for diseases neither caused nor aggravated by military
                                service. In the past, CBO estimated that budgetary savings would occur if
                                disability compensation payments to veterans with nonservice connected,
                                disease-related disabilities were eliminated in future cases.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            SSA and VA Disability Programs: Re-Examination of Disability Criteria
                                Needed to Help Ensure Program Integrity. GAO-02-597. Washington, D.C.:
                                August 9, 2002.




                                Page 219                                       GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              VA Disability Compensation: Disability Ratings May Not Reflect
              Veterans’ Economic Losses. GAO/HEHS-97-9. Washington, D.C.: January 7,
              1997.

              Disabled Veterans Programs: U.S. Eligibility and Benefit Types
              Compared With Five Other Countries. GAO/HRD-94-6. Washington, D.C.:
              November 24, 1993.

              VA Benefits: Law Allows Compensation for Disabilities Unrelated to
              Military Service. GAO/HRD-89-60. Washington, D.C.: July 31, 1989.

GAO Contact   Cynthia A. Bascetta, (202) 512-7101




              Page 220                                   GAO-03-1006 Opportunities for Oversight
                           Appendix I
                           Opportunities to Improve the Economy,
                           Efficiency, and Effectiveness of Federal
                           Programs




Reassess Unneeded Health
Care Assets within the
Department of Veterans
Affairs                    Primary agency                             Department of Veterans Affairs
                           Account                                    Medical Care (36-0160)
                           Spending type                              Discretionary
                           Budget subfunction                         703/Hospital and medical care for veterans

                           The Department of Veterans Affairs (VA) health care system owns 4,900
                           buildings and 15,500 acres of land. Its health care delivery system includes
                           over 160 major medical facilities and over 500 community based outpatient
                           clinics. VA spends about a fourth of its $23 billion budget to operate,
                           maintain, and improve these assets. To improve the delivery of health care
                           services, VA has shifted emphasis from inpatient to outpatient care in many
                           instances and shortened lengths of stay when hospitalization was required.
                           This change in health care delivery has resulted in excess inpatient
                           capacity at many locations. As a result, VA’s infrastructure is not efficiently
                           aligned to meet veterans’ needs. Without a realignment of its
                           infrastructure, VA will continue to spend millions of dollars to operate
                           unneeded VA facilities and miss the opportunity to reinvest the savings it
                           could realize from asset realignment into better health care for all veterans.

                           In response to GAO concerns, VA initiated its Capital Asset Realignment for
                           Enhanced Services (CARES) program to realign its assets and resources to
                           better serve veterans. Any realignment—which could include facility
                           closings—will take into consideration future directions in health care
                           delivery, demographic projections, physical plant capacity, community
                           health care capacity, and workforce requirements. VA plans to reinvest
                           savings generated through the implementation of CARES to meet veterans’
                           health care needs. VA plans to announce its proposed realignment plan by
                           the end of calendar year 2003. Continued congressional oversight is
                           warranted to review VA’s plans and assess their impact on costs and
                           services.

                           Although in the past CBO agreed that reducing unneeded health care assets
                           at the VA had the potential to create savings, it could not develop a savings
                           estimate without a specific legislative proposal.




                           Page 221                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Department of Veterans Affairs: Key Management Challenges in Health
                                and Disability Programs. GAO-03-756T. Washington, D.C.: May 8, 2003.

                                VA Health Care: Improved Planning Needed for Management of Excess
                                Real Property. GAO-03-326. Washington, D.C.: January 29, 2003.

                                VA Health Care: VA Is Struggling to Address Asset Realignment
                                Challenges. GAO/T-HEHS-00-88. Washington, D.C.: April 5, 2000.

                                VA Health Care: Improvements Needed in Capital Asset Planning and
                                Budgeting. GAO/HEHS-99-145. Washington, D.C.: August 13, 1999.

                                VA Health Care: Challenges Facing VA in Developing an Asset
                                Realignment Process. GAO/T-HEHS-99-173. Washington, D.C.: July 22,
                                1999.

                                Veterans’ Affairs: Progress and Challenges in Transforming Health Care.
                                GAO/T-HEHS-99-109. Washington, D.C.: April 15, 1999.

                                VA Health Care: Capital Asset Planning and Budgeting Need
                                Improvement. GAO/T-HEHS-99-83. Washington, D.C.: March 10, 1999.

                                VA Health Care: Closing a Chicago Hospital Would Save Millions and
                                Enhance Access to Services. GAO/HEHS-98-64. Washington, D.C.: April 16,
                                1998.

                                VA Health Care: Opportunities to Enhance Montgomery and Tuskegee
                                Service Integration. GAO/T-HEHS-97-191. Washington, D.C.: July 28, 1997.

                                VA Health Care: Lessons Learned From Medical Facility Integrations.
                                GAO/T-HEHS-97-184. Washington, D.C.: July 24, 1997.

                                Department of Veterans Affairs: Programmatic and Management
                                Challenges Facing the Department. GAO/T-HEHS-97-97. Washington, D.C.:
                                March 18, 1997.

                                VA Health Care: Opportunities for Service Delivery Efficiencies Within
                                Existing Resources. GAO/HEHS-96-121. Washington, D.C.: July 25, 1996.



                                Page 222                                   GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              VA Health Care: Opportunities to Increase Efficiency and Reduce
              Resource Needs. GAO/T-HEHS-96-99. Washington, D.C.: March 8, 1996.

              VA Health Care: Challenges and Options for the Future. GAO/T-HEHS-95-
              147. Washington, D.C.: May 9, 1995.

GAO Contact   Cynthia A. Bascetta, (202) 512-7101




              Page 223                                   GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Reducing VA Inpatient Food
and Laundry Service Costs

                             Primary agency                             Department of Veterans Affairs
                             Account                                    Medical Care (VA) (35-0160)
                             Spending type                              Discretionary
                             Budget subfunction                         703/Hospital and medical care for veterans

                             The Department of Veterans Affairs (VA) provides inpatient food services
                             and laundry processing for thousands of inpatients a day in hospitals,
                             nursing homes, and domiciliaries. In fiscal year 1999, VA spent about $324
                             million (food service) and $52 million (laundry) for these activities and
                             employed 7,000 Nutrition and Food Service (NFS) wage-grade workers, not
                             including dietitians and 1,100 laundry processing workers. The NFS
                             workers cook and prepare food, distribute food to patients, and retrieve
                             and wash plates, trays, and utensils. The laundry processing workers sort,
                             wash, dry, fold, and transport laundry.

                             As of November 2000, VA had consolidated 28 of its food production
                             locations into 10, begun using less expensive Veterans Canteen Service
                             (VCS) workers in 9 locations, and contracted out in 2 locations. For laundry
                             services, VA had consolidated 116 of its laundries into 67 locations and
                             used competitive sourcing to contract with the private sector in other
                             locations.

                             VA has the potential to further reduce its inpatient food service and laundry
                             costs by systematically assessing, at all its health care delivery locations,
                             options it is already using at some of its health care locations. For example,
                             VA could consolidate food production locations within a 90-minute driving
                             distance of each other and laundry locations within a 4-hour driving
                             distance of each other. VA could also use less expensive VCS employees at
                             all inpatient food locations. In addition, competitive sourcing could be a
                             cost effective alternative for providing both food and laundry services.

                             VA has established a plan to complete studies of competitive sourcing of
                             55,000 positions, including about 13,000 laundry and food service positions,
                             by 2008. However, VA has suspended this effort, except for its Veterans




                             Page 224                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                Canteen Service,30 because its general counsel determined that VA could
                                not continue these studies using appropriations from the Veterans Health
                                Administration without specific authorization from the Congress. VA plans
                                to ask the Congress for authorization to carry out these studies.

                                In the past, CBO estimated that budgetary savings could occur if the
                                Congress required VA to consolidate and competitively bid its food service
                                and laundry operations and use VCS employees at all inpatient food
                                locations.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            VA Health Care: Consolidations and Competitive Sourcing of Laundry
                                Service Could Save Millions. GAO-01-61. Washington, D.C.: November 30,
                                2000.

                                VA Health Care: Expanding Food Service Initiatives Could Save Millions.
                                GAO-01-64. Washington, D.C.: November 30, 2000.

                                VA Health Care: Laundry Service Operations and Costs. GAO/HEHS-00-
                                16. Washington, D.C.: December 21, 1999.

                                VA Health Care: Food Service Operations and Costs at Inpatient
                                Facilities. GAO/HEHS-00-17. Washington, D.C.: November 19, 1999.

GAO Contact                     Cynthia A. Bascetta, (202) 512-7101




                                30
                                  VA is continuing its competitive sourcing study of the Veterans Canteen Service because
                                operations are funded from nonappropriated funds. The Canteen Service generates
                                revenues from its sales of food and other retail items in its food court, and from retail
                                operations in VA hospitals to fund operations. VA expects to complete the competitive
                                sourcing study on the food service part of the Canteen Service during the fourth quarter of
                                fiscal year 2003.




                                Page 225                                          GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




CBO Options Where
Related GAO Work Is
Identified31

700-01 Narrow the Eligibility
for Veterans’ Disability
Compensation to Include
Only Veterans with High-
Rated Disabilities

Related GAO Product             VA Disability Compensation: Disability Ratings May Not Reflect
                                Veterans’ Economic Losses. GAO/HEHS-97-9. Washington, D.C.: January 7,
                                1997.31

GAO Contact                     Cynthia A. Bascetta, (202) 512-7101



700-02 Narrow the Eligibility
for Veterans’ Disability
Compensation to Veterans
Whose Disabilities Are
Related to Their Military
Duties

Related GAO Products            VA Disability Compensation: Disability Ratings May Not Reflect
                                Veterans’ Economic Losses. GAO/HEHS-97-9. Washington, D.C.: January 7,
                                1997.




                                31
                                 We list GAO reports identified as relating to options included in the CBO March 2003
                                Budget Options report. Only those CBO options for which we identified related GAO
                                products are included. We included GAO reports if they related to the topic of the CBO
                                option, regardless of whether our work supported the option or not.




                                Page 226                                         GAO-03-1006 Opportunities for Oversight
                              Appendix I
                              Opportunities to Improve the Economy,
                              Efficiency, and Effectiveness of Federal
                              Programs




                              Disabled Veterans Programs: U.S. Eligibility and Benefit Types
                              Compared With Five Other Countries. GAO/HRD-94-6. Washington, D.C.:
                              November 24, 1993.

                              VA Benefits: Law Allows Compensation for Disabilities Unrelated to
                              Military Service. GAO/HRD-89-60. Washington, D.C.: July 31, 1989.

GAO Contact                   Cynthia A. Bascetta, (202) 512-7101



700-03 Increase
Beneficiaries’ Cost Sharing
for Care at Nursing
Facilities Operated by the
Department of Veterans
Affairs

Related GAO Products          VA Aid and Attendance Benefits: Effects of Revised HCFA Policy on
                              Veterans’ Use of Benefits. GAO/HEHS-97-72R. Washington, D.C.: March 3,
                              1997.

                              VA Health Care: Better Data Needed to Effectively Use Limited Nursing
                              Home Resources. GAO/HEHS-97-27. Washington, D.C.: December 20, 1996.

                              VA Health Care: Potential for Offsetting Long-Term Care Costs Through
                              Estate Recovery. GAO/HRD-93-68. Washington, D.C.: July 27, 1993.

                              VA Health Care: Offsetting Long-Term Care Costs by Adopting State
                              Copayment Practices. GAO/HRD-92-96. Washington, D.C.: August 12, 1992.

GAO Contact                   Cynthia A. Bascetta, (202) 512-7101




                              Page 227                                   GAO-03-1006 Opportunities for Oversight
                      Appendix I
                      Opportunities to Improve the Economy,
                      Efficiency, and Effectiveness of Federal
                      Programs




800 General           Examples from Selected GAO Work

Government; 900 Net   Prevent Delinquent Taxpayers from Benefiting from Federal Programs
Interest; and 999
                      Target Funding Reductions in Formula Grant Programs
Multiple
                      Adjust Federal Grant Matching Requirements

                      Replace the 1-Dollar Note with a 1-Dollar Coin

                      Increase Fee Revenue from Federal Reserve Operations

                      Recognize the Costs Up-front of Long-term Space Acquisitions

                      Seek Alternative Ways to Address Federal Building Repair Needs

                      Improper Benefit Payments Could Be Avoided or More Quickly Detected if
                      Data from Various Programs Were Shared

                      Better Target Infrastructure Investments to Meet Mission and Results-
                      Oriented Goals

                      Information Sharing Could Improve Accuracy of Workers Compensation
                      Offset Payments

                      Determine Feasibility of Locating Federal Facilities in Rural Areas

                      Leverage Buying Power to Reduce Costs of Supplies and Services

                      Consolidate Grants for First Responders to Improve Efficiency

                      CBO Options Where Related GAO Work Is Identified

                      800-03 Eliminate Federal Antidrug Advertising

                      920-03 Impose a Fee on the Investment Portfolios of Government-
                      Sponsored Enterprises




                      Page 228                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Examples from
Selected GAO Work

Prevent Delinquent
Taxpayers from Benefiting
from Federal Programs
                            Primary agency                             Internal Revenue Service
                            Spending type                              Direct

                            The federal government’s operations are funded primarily through tax
                            revenue collected from the nation’s taxpayers. In fiscal year 2002, the
                            federal government, through the Internal Revenue Service (IRS), collected
                            over $2 trillion in federal tax revenue to finance government operations.
                            However, while most taxpayers comply with their tax obligation, a
                            significant portion of taxpayers do not. Over time, this has led to unpaid
                            taxes, penalties, and interest, which totaled about $249 billion at the end of
                            fiscal year 2002. Of this amount, the IRS estimates that only $20 billion, or
                            about 8 percent, will be collected.

                            A significant number of taxpayers, both individuals and businesses, who
                            owe the federal government billions of dollars in delinquent taxes receive
                            significant federal benefits and other federal payments. In addition to
                            Social Security Administration benefit payments, federal civilian
                            retirement payments, and federal civilian salaries, payments on federal
                            contracts and Small Business Administration loans are also provided to
                            these delinquent taxpayers. Federal law, generally, does not prevent
                            businesses or individuals from receiving federal payments or loans when
                            they are delinquent in paying federal taxes.

                            The Office of Management and Budget’s (OMB) Circular A-129, revised,
                            provides policies for the administration of federal credit programs. These
                            policies specifically direct agencies to determine whether applicants are
                            delinquent on any federal debt, including tax debt, and to suspend the
                            processing of credit applications if applicants have outstanding tax debt
                            until such time as the applicant pays the debt or enters into a payment plan.
                            Unfortunately, these policies have not been effective in preventing the
                            disbursement of federal dollars to individuals and businesses with
                            delinquent taxes.




                            Page 229                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                In order to fully realize this benefit, the Congress could enact legislation
                                codifying the provisions of OMB Circular A-129, as revised, that relate to
                                this matter. A key aspect of this legislation would be to ensure that IRS’s
                                efforts to modernize its business systems are successful in enabling it to
                                generate timely and accurate information on the taxpayer’s status to assist
                                other agencies in making determinations about eligibility for federal
                                benefits and payments.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Debt Collection: Barring Delinquent Taxpayers From Receiving Federal
                                Contracts and Loan Assistance. GAO/T-GGD/AIMD-00-167. Washington,
                                D.C.: May 9, 2000.

                                Unpaid Payroll Taxes: Billions in Delinquent Taxes and Penalty
                                Assessments Are Owed. GAO/AIMD/GGD-99-211. Washington, D.C.:
                                August 2, 1999.

                                Tax Administration: Billions in Self-Employment Taxes Are Owed.
                                GAO/GGD-99-18. Washington, D.C.: February 19, 1999.

GAO Contacts                    Steven J. Sebastian, (202) 512-3406
                                James R. White, (202) 512-9110




                                Page 230                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Target Funding Reductions
in Formula Grant Programs

                            Primary agencies                           Multiple
                            Accounts                                   Multiple
                            Spending types                             Discretionary/Direct
                            Budget subfunctions                        Multiple

                            Many federal grant programs with formula-based distribution of funds to
                            state and local governments are not well targeted to jurisdictions with high
                            programmatic needs but comparatively low funding capacity. As a result, as
                            we pointed out in 1996 and in 1998,32 it is not uncommon that program
                            recipients in areas with greater wealth and relatively lower needs may
                            enjoy a higher level of services than available in harder pressed areas.
                            Alternatively, these wealthier areas can provide the same level of services
                            but at lower tax rates than harder pressed areas.

                            At a time when federal discretionary resources are increasingly
                            constrained, better targeting of formula-based grant awards offers a
                            strategy to bring down federal outlays by concentrating reductions in
                            wealthier localities with comparatively fewer needs and greater capacity to
                            absorb the cuts. At the same time, redesigned formulas could hold
                            harmless the hardest pressed areas that are most vulnerable. For example,
                            Medicaid reimburses approximately 57 percent of eligible state spending,
                            with the federal share ranging from a minimum of 50 to a maximum of 77
                            percent depending on the per capita income of the state. There are a variety
                            of ways in which budgetary savings could be achieved to improve the
                            targeting of these programs, including the following:

                            • Reduce the minimum federal reimbursement rate to below 50 percent.
                              This example would focus the burden of the reduced federal share on
                              those states with the highest per capita income. To the extent that per
                              capita income provides a reasonable basis for comparing state tax
                              bases, this example would require states with the strongest tax bases to
                              shoulder the burden of a reduced federal share.


                            32
                             U.S. General Accounting Office, Deficit Reduction: Better Targeting Can Reduce
                            Spending and Improve Programs and Services, GAO/AIMD-96-14 (Washington, D.C.: Jan.
                            16, 1996), and School Finance: State Efforts to Equalize Funding Between Weathly and
                            Poor School Districts, GAO/HEHS-98-92 (Washington, D.C.: June 16, 1998).




                            Page 231                                       GAO-03-1006 Opportunities for Oversight
Appendix I
Opportunities to Improve the Economy,
Efficiency, and Effectiveness of Federal
Programs




• Reduce federal reimbursement rates only for those states with
  comparatively low program needs and comparatively strong tax bases.
  Under this example, the matching formula could be revised to better
  reflect the relative number of people in need, geographic differences in
  the cost of services, and state tax bases. Under the revised formula,
  states with comparatively low need and strong tax bases would receive
  lower federal reimbursement rates while states with high needs and
  weak tax bases would continue to receive their current reimbursement
  percentage. This example would focus the burden of a reduced federal
  share in those states with the lowest need and the strongest ability to
  fund program services from state resources.

Many other formulas used to distribute federal grant funding do not
recognize the different fiscal capacities of states to provide benefits from
their own resources. Moreover, many of these formulas have not been
reassessed for years or even decades. One option that would realize
budgetary savings in nonentitlement programs such as these would be to
revise the funding formula to reflect the strength of state tax bases. A new
formula could be calibrated so that funding is maintained in states or local
governments with weak tax bases in order to maintain needed program
services but reduced in high tax base states to realize budgetary savings.
Examples of these types of formula grant programs include the following.

• Federal Aid Highways: This program, the largest nonentitlement
  formula grant program, allocates funds among the states based on their
  historic share of funding. This approach reflects antiquated indicators of
  highway needs, such as postal road miles and the land area of the state.

• Community Development Block Grant: This program allocates funds
  among local governments based on housing age and condition,
  population, and poverty, and does not include a factor recognizing local
  wealth or fiscal capacity. For example, Greenwich, Conn., received five
  times more funding per person in poverty in 1995 than that provided to
  Camden, N.J., even though Greenwich, with per capita income six times
  greater than Camden, could more easily afford to fund its own
  community development needs. This disparity is due to the formula’s
  recognition of older housing stock and population and its exclusion of
  fiscal capacity indicators.




Page 232                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                An option that illustrates the potential savings from targeting formula grant
                                programs is a 10 percent reduction in the aggregate total of all close-ended
                                or capped formula grant programs exceeding $1 billion.33 In the past, CBO
                                estimated that the savings achieved through this option could serve as a
                                benchmark for overall savings from this approach but should not be
                                interpreted as a suggestion for across-the-board cuts. Rather, as the above
                                examples indicate, the Congress may wish to determine specific reductions
                                on a program-by-program basis, after examining the relative priority and
                                performance of each grant program.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Formula Grants: Effects of Adjusted Population Counts on Federal
                                Funding to States. GAO/HEHS-99-69. Washington, D.C.: February 26, 1999.

                                Medicaid Formula: Effects of Proposed Formula on Federal Shares of
                                State Spending. GAO/HEHS-99-29R. Washington, D.C.: February 19, 1999.

                                Welfare Reform: Early Fiscal Effect of the TANF Block Grant. GAO/AIMD-
                                98-137. Washington, D.C.: August 22, 1998.

                                Public Housing Subsidies: Revisions to HUD’s Performance Funding
                                System Could Improve Adequacy of Funding. GAO/RCED-98-174.
                                Washington, D.C.: June 19, 1998.

                                School Finance: State Efforts to Equalize Funding Between Wealthy and
                                Poor School Districts. GAO/HEHS-98-92. Washington, D.C.: June 16, 1998.

                                School Finance: State and Federal Efforts to Target Poor Students.
                                GAO/HEHS-98-36. Washington, D.C.: January 28, 1998.

                                School Finance: State Efforts to Reduce Funding Gaps Between Poor and
                                Wealthy Districts. GAO/HEHS-97-31. Washington, D.C.: February 5, 1997.




                                33
                                  In the transportation function, several very small, close-ended grants could not be easily
                                isolated in the baseline and these are included in the estimate.




                                Page 233                                            GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Federal Grants: Design Improvements Could Help Federal Resources Go
              Further. GAO/AIMD-97-7. Washington, D.C.: December 18, 1996.

              Public Health: A Health Status Indicator for Targeting Federal Aid to
              States. GAO/HEHS-97-13. Washington, D.C.: November 13, 1996.

              School Finance: Options for Improving Measures of Effort and Equity in
              Title I. GAO/HEHS-96-142. Washington, D.C.: August 30, 1996.

              Highway Funding: Alternatives for Distributing Federal Funds.
              GAO/RCED-96-6. Washington, D.C.: November 28, 1995.

              Ryan White Care Act of 1990: Opportunities to Enhance Funding Equity.
              GAO/HEHS-96-26. Washington, D.C.: November 13, 1995.

              Department of Labor: Senior Community Service Employment Program
              Delivery Could Be Improved Through Legislative and Administrative
              Action. GAO/HEHS-96-4. Washington, D.C.: November 2, 1995.

GAO Contact   Paul L. Posner, (202) 512-9573




              Page 234                                   GAO-03-1006 Opportunities for Oversight
                        Appendix I
                        Opportunities to Improve the Economy,
                        Efficiency, and Effectiveness of Federal
                        Programs




Adjust Federal Grant
Matching Requirements

                        Primary agencies                           Multiple
                        Accounts                                   Multiple
                        Spending types                             Discretionary/Direct
                        Budget subfunctions                        Multiple

                        Intergovernmental grants are a significant part of both federal and state
                        budgets. From the first annual cash grant under the Hatch Act of 1887, the
                        number of grant programs rose to approximately 660 in 2001 with outlays
                        of $317 billion, about 17 percent of total federal spending. Grants serve
                        many purposes beyond returning resources to taxpayers in the form of
                        state services. For example, grants can serve as a tool to supplement state
                        spending for nationally important activities. However, if states use federal
                        grant dollars to reduce (i.e., substitute for) their own spending for the aided
                        program either initially or over time, the fiscal impact of federal grant
                        dollars is reduced.

                        Public finance experts suggest that grants are unlikely to supplement
                        completely a state’s own spending, and thus some substitution is to be
                        expected in any grant. Our review of economists’ estimates of substitution
                        suggests that every additional federal grant dollar results in less than a
                        dollar of total additional spending on the aided activity. The estimates of
                        substitution showed that about 60 cents of every federal grant dollar
                        substitutes for state funds that states otherwise would have spent.

                        Our 1996 analysis linked substitution to the way in which most grants are
                        designed. For example, many of the 87 largest grant programs did not
                        include features, such as state matching and maintenance-of-effort
                        requirements, that can encourage states to use federal funds as a
                        supplement rather than a replacement for their own spending. While not
                        every grant is intended to supplement state spending, proponents of grant
                        redesign argue that if some grants incorporated more rigorous
                        maintenance-of-effort requirements and lower federal matching rates, then
                        fewer federal funds could still encourage states to contribute to
                        approximately the same level of overall spending on nationally important
                        programs. Critics of this approach argue that such redesign would put a
                        higher burden on states because they would have to finance a greater share
                        of federally aided programs.




                        Page 235                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                The savings that could be achieved from redesigning grants to increase
                                their fiscal impact would depend on the nature of the design changes and
                                state responses to those changes. For example, faced with more rigorous
                                financing requirements, states might reduce or eliminate their own
                                financial support for the aided activity. The outcome will be influenced by
                                the trade-off decisions that the Congress makes to balance the importance
                                of achieving each program’s goals and objectives against the goal of
                                encouraging greater state spending and lowering the federal deficit.

                                We were unable to precisely measure the budgetary impact of inflation-
                                adjusted maintenance-of-effort requirements because current state
                                spending levels are not reported consistently. However, it was possible to
                                estimate the impact of changes in the matching rates on many close-ended
                                federal grants. For example, many such grants do not require any state or
                                local matching funds. The federal share of these programs could be
                                reduced modestly, for example from 100 percent to 90 percent, a reduction
                                unlikely to discourage states from participating in the program. In the past,
                                CBO estimated that the introduction of a 10 percent matching requirement
                                on some of the largest federal discretionary grant programs that at the time
                                were 100 percent federally funded, and a corresponding 10 percent
                                reduction from the appropriated grant levels, would result in budgetary
                                savings. If such a change in match rates were combined with inflation-
                                adjusted maintenance-of-effort requirements, states that choose to
                                participate in the program would have to maintain the same or increased
                                levels of program spending in order to receive federal funding.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Welfare Reform: Early Fiscal Effects of the TANF Block Grant.
                                GAO/AIMD-98-137. Washington, D.C.: August 22, 1998.

                                Federal Grants: Design Improvements Could Help Federal Resources Go
                                Further. GAO/AIMD-97-7. Washington, D.C.: December 18, 1996.

                                Block Grants: Issues in Designing Accountability Provisions.
                                GAO/AIMD-95-226. Washington, D.C.: September 1, 1995.

GAO Contact                     Paul L. Posner, (202) 512-9573




                                Page 236                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Replace the 1-Dollar Note
with a 1-Dollar Coin

                            Primary agency                             Department of the Treasury
                            Account                                    United States Mint Public Enterprise Fund
                                                                       (20-4159)
                            Spending type                              Direct/Governmental Receipts
                            Budget subfunction                         803/Central fiscal operations

                            Replacing the 1-dollar note with a new 1-dollar coin would save the
                            government hundreds of millions of dollars annually. Substituting a dollar
                            coin for a dollar note could yield over $522 million of savings to the
                            government per year, on average, over a 30-year period. The savings come
                            about because a coin lasts longer than paper money, the Federal Reserve
                            has lower processing costs with coins than paper money, and a coin would
                            result in interest savings from the additional seigniorage earned on a coin
                            (i.e., the difference between the face value of a coin and its production
                            cost).

                            In the past, neither the Congress nor the executive branch has supported
                            the replacement of the $1 note with a coin. All western economies now use
                            a coin for monetary transactions at the same value that Americans use the
                            more costly paper note. These countries have demonstrated that public
                            resistance to such a change can be managed and overcome. The United
                            States released a new gold-colored dollar coin in 2000. While initial demand
                            for the coin had been strong, for it to realize its savings potential, the note
                            has to be eliminated. Most of the coins that were issued are being held by
                            collectors and do not circulate. With proper congressional oversight, public
                            resistance to elimination of the $1 note could be overcome and public
                            support for the coin improved. For example, the Congress could require the
                            Treasury or the Federal Reserve to conduct a public awareness campaign,
                            explaining the savings that could be achieved by eliminating the $1 note. In
                            addition, the Congress could require the Federal Reserve or the
                            Department of the Treasury to designate a central spokesperson who
                            would handle all public and press inquiries about the elimination of the
                            $1 note.

                            Even though this option would result in significant long-term savings, it
                            would not yield savings over the first 5 years. First, seigniorage, which
                            would lower interest costs to the government by either replacing the need




                            Page 237                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                to borrow from the public or allowing the government to pay down its
                                accumulated debt more quickly, is not included in the savings estimate
                                because it is not considered part of the budget. Second, while the initial 5-
                                year window captures much of the additional cost for the U.S. Mint to
                                produce and stockpile a sufficient number of 1-dollar coins for circulation,
                                it includes only a fraction of the savings to the Federal Reserve System
                                from lower production and processing costs.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            New Dollar Coin: Marketing Campaign Raised Public Awareness but Not
                                Widespread Use. GAO-02-896. Washington, D.C.: September 13, 2002.

                                A Dollar Coin Could Save Millions. GAO/T-GGD-95-203. Washington, D.C.:
                                July 13, 1995.

                                1-Dollar Coin Reintroduction Could Save Millions if It Replaced the 1-
                                Dollar Note. GAO/T-GGD-95-146. Washington, D.C.: May 3, 1995.

                                1-Dollar Coin: Reintroduction Could Save Millions if Properly Managed.
                                GAO/GGD-93-56. Washington, D.C.: March 11, 1993.

                                National Coinage Proposals: Limited Public Demand for New Dollar
                                Coin or Elimination of Pennies. GAO/GGD-90-88. Washington, D.C.:
                                May 23, 1990.

GAO Contact                     Bernard L. Ungar, (202) 512-4232




                                Page 238                                   GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




Increase Fee Revenue from
Federal Reserve Operations

                                Primary agency                             Federal Reserve Board
                                Spending type                              Direct

                                The Federal Reserve is responsible for conducting monetary policy,
                                maintaining the stability of financial markets, providing services to
                                financial institutions and government agencies, and supervising and
                                regulating banks and bank-holding companies. The Federal Reserve is
                                unique among governmental entities in its mission, structure, and finances.
                                Unlike federal agencies funded through congressional appropriations, the
                                Federal Reserve is a self-financing entity that deducts its expenses from its
                                revenue and transfers the remaining amount to the U.S. Department of the
                                Treasury. Although the Federal Reserve’s primary mission is to support a
                                stable economy, rather than to maximize the amount transferred to
                                Treasury, its revenues contribute to total U.S. revenues and, thus, can help
                                reduce the federal deficit.

                                One way to enhance the Federal Reserve’s revenue would be to charge fees
                                for bank examinations, thus increasing the Federal Reserve’s return to
                                taxpayers. The Federal Reserve Act authorizes the Federal Reserve to
                                charge fees for bank examinations, but the Federal Reserve has not done
                                so, either for the state-member banks it examines or the bank-holding
                                company examinations it conducts. Taxpayers in effect bear the cost of
                                these examinations, which total hundreds of millions of dollars annually. In
                                the past, CBO estimated that budgetary savings could be achieved if fees
                                were assessed similar to those charged national banks, with a credit
                                allowed for fees paid to state regulators.

CBO 5-Year Cost Estimate        Yes.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Federal Reserve System: Update on GAO’s 1996 Recommendations.
                                GAO-02-774. Washington, D.C.: September 25, 2002.

                                Federal Reserve System: Current and Future Challenges Require
                                Systemwide Attention. GAO/T-GGD-96-159. Washington, D.C.: July 26,
                                1996.




                                Page 239                                       GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Federal Reserve System: Current and Future Challenges Require
              Systemwide Attention. GAO/GGD-96-128. Washington, D.C.: June 17, 1996.

              Federal Reserve Banks: Internal Control, Accounting, and Auditing
              Issues. GAO/AIMD-96-5. Washington, D.C.: February 9, 1996.

GAO Contact   Thomas J. McCool, (202) 512-8678




              Page 240                                   GAO-03-1006 Opportunities for Oversight
                           Appendix I
                           Opportunities to Improve the Economy,
                           Efficiency, and Effectiveness of Federal
                           Programs




Recognize the Costs Up-
front of Long-term Space
Acquisitions
                           Primary agency                             General Services Administration
                           Account                                    Federal Buildings Fund (47-4542)
                           Spending type                              Discretionary
                           Budget subfunction                         804/General property and records
                                                                      management

                           Building ownership through construction or lease-purchase—where
                           ownership of the asset is transferred to the government at the end of the
                           lease period—is generally less costly than meeting agencies’ long-term
                           requirements through ordinary operating leases. However, we have
                           reported over the last decade that the General Services Administration
                           (GSA) relies heavily on operating leases to meet the long-term space needs
                           of the federal government. In March 1999, we reported that for nine major
                           operating lease acquisitions GSA proposed between fiscal years 1994 and
                           1996, construction would have been the least cost option in eight cases. In
                           these eight cases, lease-purchase was estimated to be more costly than
                           construction, but less than the operating lease option GSA proposed. For
                           example, the present value cost for the operating lease to meet the Patent
                           and Trademark Office’s long-term requirements in northern Virginia was
                           estimated to be about $973 million. Construction was estimated to be $925
                           million—or $48 million less—and lease-purchase was estimated at $935
                           million—or $38 million less than the operating lease option. In total for
                           these eight cases, construction and lease-purchase had cost advantages
                           over operating leases estimated at about $126 million and $107 million,
                           respectively.

                           Historically, the Federal Buildings Fund (FBF) has not generated sufficient
                           revenue for constructing new office buildings. Operating leases have
                           become an attractive option for GSA because the total costs do not have to
                           be scored up-front for budget purposes and payments are spread out over
                           time. However, as shown above, they are a costly alternative to ownership
                           over the long-run. A lease-purchase would seem to be a desirable
                           alternative from GSA’s point of view. However, the budget scorekeeping
                           rules established by the Budget Enforcement Act of 1990 (BEA) effectively
                           prevent GSA from using this option. These scorekeeping rules require the
                           total budget authority for lease-purchases and capital leases to be
                           recognized and recorded up-front in the year that the acquisition is
                           approved. Furthermore, we reported in August 2001 that the scorekeeping



                           Page 241                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                rules might result in shorter terms for some leases, which could result in
                                higher costs than for longer term leases. The scorekeeping rules require the
                                total budget authority for lease-purchases and capital leases to be
                                recognized and recorded up-front in the year they are approved. Although
                                GSA has viewed the up-front funding requirement as an impediment to
                                meeting agency space needs in a cost-effective manner, it is generally
                                recognized as an important tool for maintaining governmentwide fiscal
                                control. That is, the rules prevent agencies and the Congress from
                                committing the government to future payments that may exceed future
                                resources and spending priorities.

                                Since lease-purchases are not an option for improving the cost
                                effectiveness of space acquisition, an option that could result in long-term
                                savings for the government would be to recognize that many operating
                                leases are used for long-term needs and should be treated on the same
                                basis as the ownership options. This would make such instruments
                                comparable in the budget to direct federal ownership and would foster
                                more cost-effective decision-making by the Office of Management and
                                Budget and the Congress. Applying the principle of up-front full recognition
                                of the long-term costs to all options for satisfying long-term space needs—
                                construction, purchases, lease-purchases, or operating leases—is more
                                likely to result in selecting the most cost-effective alternative than the
                                current scoring rules.

                                It is important to note that there would be implementation challenges if this
                                option is pursued. If discretionary spending caps similar to those contained
                                in the expired BEA are enacted, their levels should take into account the
                                additional budget authority that would be needed to fully fund capital up
                                front. Also, for existing leases, the additional budget authority would need
                                to be provided at once.34 It also would be difficult to reach agreement on
                                what constitutes long-term space needs that would warrant this up-front
                                budgetary treatment. And finally, even though in the past CBO estimated
                                that this option should result in long-term savings, it concluded that it
                                would not yield savings over the first 5 years.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

                                34
                                   Existing contracts could also be “grandfathered” in as occurred under the lease-purchase
                                rule.




                                Page 242                                          GAO-03-1006 Opportunities for Oversight
                       Appendix I
                       Opportunities to Improve the Economy,
                       Efficiency, and Effectiveness of Federal
                       Programs




Related GAO Products   High-Risk Series: Federal Real Property. GAO-03-122. Washington, D.C.:
                       January 2003.

                       Budget Scoring: Budget Scoring Affects Some Lease Terms, but Full
                       Extent Is Uncertain. GAO-01-929. Washington, D.C.: August 31, 2001.

                       Federal Buildings: Funding Repairs and Alterations Has Been a
                       Challenge—Expanded Financing Tools Needed. GAO-01-452. Washington,
                       D.C.: April 12, 2001.

                       General Services Administration: Comparison of Space Acquisition
                       Alternatives—Leasing to Lease-Purchase and Leasing to Construction.
                       GAO/GGD-99-49R. Washington, D.C.: March 12, 1999.

                       Space Acquisition Cost: Comparison of GSA Estimates for Three
                       Alternatives. GAO/GGD-97-148R. Washington, D.C.: August 6, 1997.

                       Budget Issues: Budgeting for Federal Capital. GAO/AIMD-97-5.
                       Washington, D.C.: November 12, 1996.

                       Budget Issues: Budget Scorekeeping for Acquisition of Federal Buildings.
                       GAO/T-AIMD-94-189. Washington, D.C.: September 20, 1994.

                       Federal Office Space: Increased Ownership Would Result in Significant
                       Savings. GAO/GGD-90-11. Washington, D.C.: December 22, 1989.

GAO Contact            Bernard L. Ungar, (202) 512-4232




                       Page 243                                   GAO-03-1006 Opportunities for Oversight
                           Appendix I
                           Opportunities to Improve the Economy,
                           Efficiency, and Effectiveness of Federal
                           Programs




Seek Alternative Ways to
Address Federal Building
Repair Needs
                           Primary agency                             General Services Administration
                           Account                                    Federal Building Fund (47-4542)
                           Spending type                              Discretionary
                           Budget subfunction                         804/General property and records
                                                                      management

                           The General Services Administration (GSA) is the federal government’s real
                           property manager, providing office space for most federal agencies. In this
                           capacity, GSA is responsible for keeping the approximately 1,700 federal
                           buildings it manages in good repair to ensure that the value of these assets
                           is preserved and that tenants occupy safe and modern space. Many
                           buildings in GSA’s portfolio are more than 50 years old, monumental in
                           design, and historically significant. Consequently, unlike a private sector
                           company, GSA cannot always dispose of a building simply because it would
                           be economically advantageous to do so. GSA identifies needed repairs
                           through detailed building inspections and sorts them into three tiers based
                           on costs. Repairs in the highest cost tier must be approved by the Office of
                           Management and Budget (OMB) and then authorized for funding by the
                           Congress. GSA receives annual authority for funding for repairs in the
                           other two tiers.

                           In August 2002, we reported that the estimated backlog of GSA-identified
                           repair and alteration needs in GSA-owned buildings was $5.7 billion. A
                           major reason for this large and growing backlog is the lack of available
                           funding. For example, from 1995 through 2001, the Congress approved only
                           63 percent of the approximately $6.8 billion GSA requested for repair and
                           alteration projects.

                           Unless the Congress increases the funding available to GSA to address its
                           backlog of repair and alteration needs, it is likely that this backlog will
                           continue to grow given the age of the current federal inventory of buildings.
                           Delaying or not performing needed repairs and alterations can have serious
                           consequences, including health and safety concerns, and lead to higher
                           operating costs associated with inefficient heating and cooling systems.
                           Given the current and likely increasing demands on discretionary
                           appropriations, the Congress may wish to grant GSA the authority to
                           experiment with funding alternatives such as public-private partnerships,
                           where such approaches would achieve the best economic value for the



                           Page 244                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                government. Furthermore, it seems reasonable to allow GSA to retain
                                some of the proceeds from disposal of unneeded properties to cover the
                                costs associated with disposal and for reinvestment in its portfolio, where a
                                need exists. However, in considering whether to allow agencies to retain
                                proceeds from real property transactions, it is important for the Congress
                                to ensure that it maintains appropriate control and oversight over these
                                funds, including the ability to redistribute these funds to accommodate
                                changing needs.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            High-Risk Series: Federal Real Property. GAO-03-122. Washington, D.C.:
                                January 2003.

                                General Services Administration: Status of Achieving Key Outcomes and
                                Addressing Major Management Challenges. GAO-01-931. Washington,
                                D.C.: August 3, 2001.

                                Public-Private Partnerships: Pilot Program Needed to Demonstrate the
                                Actual Benefits of Using Partnerships. GAO-01-906. Washington, D.C.:
                                July 25, 2001.

                                Federal Buildings: Funding Repairs and Alterations Has Been a
                                Challenge—Expanded Financing Tools Needed. GAO-01-452. Washington,
                                D.C.: April 12, 2001.

                                Federal Buildings: Billions are Needed for Repairs and Alterations.
                                GAO/GGD-00-98. Washington, D.C.: March 30, 2000.

GAO Contact                     Bernard L. Ungar, (202) 512-4232




                                Page 245                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Improper Benefit Payments
Could Be Avoided or More
Quickly Detected if Data
from Various Programs       Primary agencies                           Multiple
Were Shared                 Accounts                                   Multiple
                            Spending types                             Direct/Discretionary
                            Budget subfunctions                        Multiple

                            Many federally funded benefit and loan programs rely on applicants and
                            current recipients to accurately report information, such as the amount of
                            income they earn, that affects their eligibility for assistance. To the extent
                            that such information is underreported or not reported at all, the federal
                            government overpays benefits or provides loans to individuals who are
                            ineligible. Others and we have demonstrated that federally funded benefit
                            and loan programs, such as housing and higher education assistance, have
                            made hundreds of millions of dollars in improper payments. Some of these
                            payments were made improperly because the federal, state, and local
                            entities that administer the programs sometimes lacked adequate, timely
                            data needed to determine applicants’ and current recipients’ eligibility for
                            assistance. Our previous work has demonstrated that improper payments
                            can be avoided or detected more quickly by using data from other
                            programs, or data maintained for other purposes, to verify self-reported
                            information.

                            Federally funded benefit and loan programs provide cash or in-kind
                            assistance to individuals who meet specified eligibility criteria. Because
                            these programs require similar information to make eligibility
                            determinations, it is more efficient to share the necessary data with one
                            another rather than requiring each program to independently verify similar
                            data. These programs may verify self-reported information by comparing
                            their records with independent, third-party data sources from other federal
                            or state agencies as well as private organizations. For example, benefit and
                            loan programs can compare large amounts of information on applicants
                            and recipients by using computers to match automated records. Electronic
                            transmission of data and on-line access to agencies’ databases are
                            additional tools program administrators can use to share important
                            information on applicants and recipients in a timely, efficient manner. If
                            used consistently, they can help program administrators check the
                            accuracy of individuals’ self-reported statements as well as identify
                            information relevant to eligibility that the applicants and recipients
                            themselves have not provided.



                            Page 246                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                Various opportunities exist for federal, state, and local agencies to save
                                taxpayer dollars by sharing information that affects individuals’ eligibility
                                for benefits. For example, the Department of Education’s Office of
                                Inspector General estimates that underreported income contributed to
                                over $100 million in excess Pell Grant awards in 2000. Access to Internal
                                Revenue Service taxpayer information could have helped Education
                                prevent some of these overpayments. Improper payments could also be
                                avoided or detected more quickly in other programs. For example, four
                                states and the District of Columbia estimate that they prevented about
                                $16 million in improper Temporary Assistance to Needy Children (TANF),
                                Medicaid, and Food Stamp benefit payments by participating in the Public
                                Assistance Reporting Information System (PARIS). PARIS could also help
                                other states save program funds by identifying and preventing future
                                improper payments.

                                The three federally funded benefit and loan programs we examined—
                                TANF, Tenant-Based Section 8 and Public Housing, and student grants and
                                loans—all use data sharing to varying degrees to verify information that
                                applicants and current benefit recipients provide. However, the
                                weaknesses in these programs’ eligibility determination processes could be
                                mitigated if additional data sources were available for sharing. For
                                example, the Congress could grant the Department of Education access to
                                IRS taxpayer data, which could reduce overpayments in student loan
                                programs. In the past, CBO could not estimate savings without a more
                                specific option.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            Public Assistance: PARIS Project Can Help States Reduce Improper
                                Benefit Payments. GAO-01-935. Washington, D.C.: September 6, 2001.

                                The Challenge of Data Sharing: Results of a GAO-Sponsored Symposium
                                on Benefit and Loan Programs. GAO-01-67. Washington, D.C.: October 20,
                                2000.

                                Benefit and Loan Programs: Improved Data Sharing Could Enhance
                                Program Integrity. GAO/HEHS-00-119. Washington, D.C.: September 13,
                                2000.




                                Page 247                                   GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




GAO Contact   Robert E. Robertson, (202) 512-7215




              Page 248                                   GAO-03-1006 Opportunities for Oversight
                               Appendix I
                               Opportunities to Improve the Economy,
                               Efficiency, and Effectiveness of Federal
                               Programs




Better Target Infrastructure
Investments to Meet
Mission and Results-
Oriented Goals                 Primary agencies                           Multiple
                               Accounts                                   Multiple
                               Spending type                              Discretionary
                               Budget subfunctions                        Multiple

                               The federal government plays a prominent role in identifying the nation’s
                               infrastructure investment needs and has spent an average of $149 billion (in
                               constant 1998 dollars) annually since the late 1980s on the nation’s
                               infrastructure through 1998. A sound public infrastructure plays a vital role
                               in encouraging a more productive and competitive national economy and
                               meeting public demands for safety, health, and improved quality of life.
                               Little, however, is known about the comparability and reasonableness of
                               federal agencies’ estimates for infrastructure needs. In fact, infrastructure
                               “need” is difficult to define and to distinguish from “wish lists” of capital
                               projects.

                               In a review of seven federal agencies’ investment practices, GAO found that
                               none of them followed leading practices for capital decision-making. In
                               particular, five of the agencies did not develop assessments of the
                               investments needed to meet outcomes. Rather, these agencies developed
                               estimates that were summations of the costs of projects eligible to receive
                               federal funding or projects identified by the Congress and others. Also,
                               agencies were not likely to (1) develop a long-term capital plan, (2) use
                               cost-benefit analysis as the primary method to compare alternative
                               investments, (3) rank and select projects for funding based on established
                               criteria, and (4) budget for projects in useful segments.

                               Given the importance of federal infrastructure investment to the nation, the
                               Congress may wish to have the Office of Management and Budget develop
                               standards for agencies to follow when submitting funding requests. At a
                               minimum, requiring agencies to link the benefits of investment projects to
                               the achievement of mission goals would give decisionmakers better
                               information to base funding decisions on. Infrastructure investment
                               requests based on other leading practices, especially those enumerated
                               above, could also increase the Congress’s capacity to make better
                               investment decisions. In the past, CBO could not develop a savings
                               estimate without a specific proposal.




                               Page 249                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Products            U.S. Infrastructure: Agencies’ Approaches to Developing Investment
                                Estimates Vary. GAO-01-835. Washington, D.C.: July 20, 2001.

                                U.S. Infrastructure: Funding Trends and Opportunities to Improve
                                Investment Decisions. GAO/RCED/AIMD-00-35. Washington, D.C.:
                                February 7, 2000.

                                Executive Guide: Leading Practices in Capital Decision-Making.
                                GAO/AIMD-99-32. Washington, D.C.: December 1998.

GAO Contact                     Katherine Siggerud, (202) 512-6570




                                Page 250                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Information Sharing Could
Improve Accuracy of
Workers’ Compensation
Offset Payments             Primary Agency                             Social Security Administration
                            Accounts                                   Multiple
                            Spending type                              Direct
                            Budget subfunctions                        Multiple

                            In 2000, workers received almost $46 billion in cash and medical benefits
                            through the nation’s workers’ compensation (WC) programs to cover work-
                            related injuries. Workers’ compensation consists of a complex array of
                            programs that provide benefits to persons injured while working or who
                            suffer occupational diseases. Each state and the District of Columbia
                            requires employers operating in its jurisdictions to provide WC insurance
                            for their employees and to report work-related injuries to the state WC
                            agency. WC beneficiaries may also be eligible for federal program benefits,
                            such as Social Security Disability Insurance (DI) and Supplemental
                            Security Income (SSI). In such programs, the law often limits access or
                            reduces benefits for those receiving workers’ compensation. Generally, if a
                            person receives both DI and WC benefits, and together these benefits
                            exceed 80 percent of the injured worker’s average current earnings, the
                            Social Security Administration (SSA) generally reduces the DI benefit. This
                            reduction in benefits is referred to as the WC offset. A number of other
                            federal programs also rely on information on WC benefit payments as a
                            determinant of federal benefit payments. For example, Medicare covers
                            medical expenses for persons who have received DI benefits for 2 years,
                            but WC insurers are supposed to be the primary payer and Medicare the
                            secondary payer of medical expenses that arise from work-related injuries
                            and are covered under the WC program. Similarly, other federal programs,
                            including food stamps and Section 8 rental housing assistance, consider
                            WC benefits as income or assets when determining program eligibility and
                            benefit payment amounts.

                            Because there is no national reporting system that identifies WC
                            beneficiaries, federal agencies largely rely on applicants and beneficiaries
                            to report their WC benefits. This fragmented reporting system has resulted
                            in federal agencies making erroneous payments. For example, evaluations
                            by GAO, SSA, and SSA’s Office of Inspector General (OIG) have found
                            significant overpayment and underpayment errors related to the WC offset
                            provision. In December 1999, the SSA Inspector General reported that
                            more than 50 percent of DI beneficiaries whose benefits are being offset



                            Page 251                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                have been paid inaccurately. Another study projected $1.5 billion in
                                payment errors related to the WC offset. About 85 percent of these errors
                                are underpayments of entitled benefits that result when DI beneficiaries do
                                not report reductions in their WC benefits. SSA’s administration of the WC
                                offset provision continues to be undermined by the lack of reliable
                                information identifying the receipt of WC benefits by DI beneficiaries.
                                Other federal programs, such as Medicare, food stamps, and Section 8
                                rental housing, also rely on self-reported WC information as a basis for
                                determining benefit payments, and similarly are vulnerable to payment
                                errors as a result. For example, Medicare relies on its applicants and
                                beneficiaries to self-report WC benefits and is vulnerable to payment errors
                                when they do not. Health Care Financing Administration (HCFA), now the
                                Centers for Medicare & Medicaid Services (CMS), officials have estimated
                                that about 8 percent of its beneficiaries have medical claims that may be
                                the responsibility of another health insurer, liability insurer, or WC
                                program. A GAO review of one state (not nationally representative) found
                                that (1) Medicare’s interests relative to the payment of future medical
                                benefits were not considered in any of the WC cases resolved through
                                settlements (83 percent of our sample), (2) HCFA was aware of WC
                                benefits being received in only one-third of the cases where it paid benefits
                                under Part A (a nonrandom sample), and (3) about 39 percent of joint WC
                                and Medicare beneficiaries had received Medicare benefits for treatments
                                that were potentially related to the WC injury. Finally, an inability to obtain
                                WC benefit information could affect the accuracy of benefit payments for
                                other federal programs such as food stamps and Section 8 housing and
                                could result in the overpayment of benefits.

                                Given the fragmented nature of WC programs, the Congress could establish
                                a reporting requirement that WC insurers provide SSA with information on
                                changes to WC benefit payments. SSA could use this information to make
                                adjustments to DI and SSI payments accordingly, and this information
                                could be shared with other federal agencies. Doing so would reduce the
                                potential for errors in the disbursing of benefits. In the past, CBO could not
                                develop a savings estimate without more information on the key details of
                                the requirements—such as which insurers would be covered and how
                                frequently they would be required to report.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report




                                Page 252                                   GAO-03-1006 Opportunities for Oversight
                      Appendix I
                      Opportunities to Improve the Economy,
                      Efficiency, and Effectiveness of Federal
                      Programs




Related GAO Product   Workers’ Compensation: Action Needed to Reduce Payment Errors in SSA
                      Disability and Other Programs. GAO-01-367. Washington, D.C.: May 4,
                      2001.

GAO Contact           Barbara D. Bovbjerg, (202) 512-7215




                      Page 253                                   GAO-03-1006 Opportunities for Oversight
                              Appendix I
                              Opportunities to Improve the Economy,
                              Efficiency, and Effectiveness of Federal
                              Programs




Determine Feasibility of
Locating Federal Facilities
in Rural Areas
                              Primary agency                                General Services Administration
                              Accounts                                      Multiple
                              Spending type                                 Discretionary
                              Budget subfunctions                           Multiple

                              The Rural Development Act of 1972 (RDA) and the Competition in
                              Contracting Act of 1984 (CICA), as well as executive orders, provide
                              guidance on site location decisions for federal facilities. While considering
                              areas in which to locate, RDA requires all executive departments and
                              agencies to establish policies and procedures giving first priority to the
                              location of new offices and other facilities in rural areas.35 The General
                              Services Administration (GSA) is the central management agency for
                              acquiring real estate for many federal agencies, while some other agencies,
                              such as the Department of Defense, have their own authority to acquire
                              space.

                              A 2001 survey of 115 new federal site locations acquired between 1998 and
                              2000 for buildings over 25,000 square feet found that about 72 percent were
                              located in urban areas. Agencies said they selected urban areas primarily
                              because of the need to be near agency clients and related government and
                              private sector facilities to accomplish their missions. Eight of the 13
                              cabinet agencies surveyed had no formal RDA siting policy, and there was
                              little evidence that agencies considered RDA’s requirements when siting
                              new federal facilities. Furthermore, GSA has not developed a cost-
                              conscious, governmentwide location policy. Federal site acquisition
                              practices differ from private sector practices in that private sector
                              companies are more likely to take advantage of local incentives and of
                              lower real estate and labor costs.

                              Obviously, many factors are considered in site location decisions, and chief
                              among them should be the agency’s ability to accomplish its mission in the
                              best way possible and to retain an adequate number of skilled employees.
                              But, where there are opportunities to reduce costs and/or improve service
                              by locating to rural areas, federal agencies may benefit from more closely

                              35
                                 Government agencies have different definitions of what constitutes a rural area. See
                              GAO-01-805, p. 25 for more detail.




                              Page 254                                           GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                following private sector practices. Consequently, the Congress may wish to
                                follow through on the intent of RDA by requiring federal agencies to
                                establish siting policies consistent with RDA’s goals and also requiring GSA
                                to establish a formal governmentwide siting policy that takes into account
                                potential cost savings from locating in rural areas. In the past, CBO could
                                not estimate cost savings because specific options had not been proposed.

CBO 5-Year Cost Estimate        No.
Included in GAO’s 2002
Budgetary Implications Report

Related GAO Product             Facilities Location: Agencies Should Pay More Attention to Costs and
                                Rural Development Act Has Had Limited Impact. GAO-01-805.
                                Washington, D.C.: July 31, 2001.

GAO Contact                     Bernard L. Ungar, (202) 512-4232




                                Page 255                                   GAO-03-1006 Opportunities for Oversight
                           Appendix I
                           Opportunities to Improve the Economy,
                           Efficiency, and Effectiveness of Federal
                           Programs




Leverage Buying Power to
Reduce Costs of Supplies
and Services
                           Primary agencies                           Multiple
                           Accounts                                   Multiple
                           Spending type                              Discretionary

                           Federal agencies procured more than $235 billion in goods and services
                           during fiscal year 2001. Additionally, federal civilian agencies spent almost
                           $14 billion using purchase cards in fiscal year 2001. Overall, contracting for
                           goods and services accounted for about 24 percent of the government’s
                           discretionary resources in fiscal year 2001. Further growth in contract
                           spending, at least in the short term, is likely given the President’s request
                           for additional funds for defense and homeland security, agencies’ plans to
                           update their information technology systems, and other factors.

                           The growth in contract spending, combined with decreases in the
                           acquisition workforce, creates a challenging acquisition environment. The
                           degree to which individual agencies contract for goods and services also
                           underscores the importance of ensuring that acquisitions are managed
                           properly. This money, however, is not always well spent. Our work, as well
                           as the work of other oversight agencies, continues to find that millions of
                           dollars of service contract dollars are at risk at defense and civilian
                           agencies because acquisitions are poorly planned, not adequately
                           competed, or poorly managed. Moreover, because agency procurement
                           processes are decentralized and uncoordinated, it is not apparent that the
                           federal government is fully leveraging its enormous buying power to obtain
                           the most advantageous terms and conditions for its purchases. With the
                           events of September 11, and the federal government’s short- and long-term
                           budget challenges, it is more important than ever that agencies effectively
                           transform business processes to ensure that the federal government gets
                           the most from every dollar spent.

                           In view of these challenges, we have examined alternative ways developed
                           by leading companies to manage their spending on goods and services in
                           order to reduce costs, stay competitive, and improve service levels.
                           Leading companies are taking a strategic approach—centralizing and
                           reorganizing their operations to get the best value for the company as a
                           whole. Taking a strategic approach involves a range of activities from
                           developing a better picture of what the company was spending to buying
                           goods and services on a corporate rather than business unit basis.



                           Page 256                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                A strategic approach pulls together participants from a variety of places
                                within an organization who recommend changes in personnel, processes,
                                structure, and culture that can constrain rising acquisition costs. These
                                changes can include adjustments to procurement and other processes such
                                as instituting companywide purchasing of specific services; reshaping a
                                decentralized process to follow a more center-led, strategic approach; and
                                increasing the involvement of the enterprise procurement organization,
                                including working across units to help identify service needs, select
                                providers, and manage contractor performance.

                                The procurement best practices of leading companies should be
                                considered in reforming the acquisition of goods and services in the federal
                                government. Taking a strategic approach clearly pays off. One recent
                                survey of 147 companies in 22 industries indicated a strategic approach to
                                procurement had resulted in savings of more than $13 billion in one year.
                                Studies have reported some companies achieving reported savings of 10 to
                                20 percent of their total procurement costs through the use of a strategic
                                approach to buying goods and services. A recent Purchasing Magazine
                                poll finds that companies employing procurement best practices are
                                routinely delivering a 3 percent to 7 percent savings from their
                                procurement costs. The leading companies we studied reported achieving
                                and expecting to achieve billions of dollars in savings by developing
                                companywide spend analysis programs and strategic sourcing strategies.
                                The very same strategic approach could serve as a foundation for
                                leveraging the federal government’s buying power to reduce costs of
                                supplies and services.

CBO 5-Year Cost Estimate        No, this is a new example. CBO could not develop an estimate for this
Included in GAO’s 2002          example.
Budgetary Implications Report

Related GAO Products            Best Practices: Improved Knowledge of DOD Service Contracts Could
                                Reveal Significant Savings. GAO-03-661. Washington, D.C.: June 10, 2003.

                                Federal Procurement: Spending and Workforce Trends. GAO-03-443.
                                Washington, D.C.: April 30, 2003.

                                Contract Management: Taking a Strategic Approach to Improving
                                Services Acquisition. GAO-02-499T. Washington, D.C.: March 7, 2002.

                                Best Practices: Taking a Strategic Approach Could Improve DOD’s
                                Acquisition of Services. GAO-02-230. Washington, D.C.: January 18, 2002.



                                Page 257                                   GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Contract Management: Trends and Challenges in Acquiring Services.
              GAO-01-753T. Washington, D.C.: May 22, 2001.

GAO Contact   David E. Cooper, (617) 788-0555




              Page 258                                   GAO-03-1006 Opportunities for Oversight
                               Appendix I
                               Opportunities to Improve the Economy,
                               Efficiency, and Effectiveness of Federal
                               Programs




Consolidate Grants for First
Responders to Improve
Efficiency
                               Primary agency                             Department of Homeland Security
                               Accounts                                   Multiple
                               Spending type                              Discretionary
                               Budget subfunctions                        Multiple

                               GAO’s work over the years has repeatedly shown that mission
                               fragmentation and program overlap are widespread in the federal
                               government and that crosscutting program efforts are not well
                               coordinated. As far back as 1975, GAO reported that many of the
                               fundamental problems in managing federal grants were the direct result of
                               the proliferation of federal assistance programs and the fragmentation of
                               responsibility among different federal departments and agencies. While we
                               noted that the large number and variety of programs tended to ensure that
                               a program is available to meet a defined need, we found that substantial
                               problems occur when state and local governments attempt to identify,
                               obtain, and use the fragmented grants-in-aid system to meet their needs.

                               In a specific and timely example of this fragmentation, in April 2003 GAO
                               identified at least 16 different grant programs that can be used by the
                               nation’s first responders to address homeland security needs. These grants
                               are currently provided through two different directorates within the
                               Department of Homeland Security, the Department of Justice, and the
                               Department of Health and Human Services and serve state governments,
                               cities and localities, counties, and others. Multiple fragmented grant
                               programs can create a confusing and administratively burdensome process
                               for state and local officials seeking to use federal resources for pressing
                               homeland security needs.

                               It now falls to the Congress to redesign the nation’s homeland security
                               grant programs in light of the events of September 11, 2001. In so doing,
                               the Congress must balance the needs of our state and local partners in their
                               call for both additional resources and more flexibility for meeting the
                               nation’s goals of attaining the highest levels of preparedness. In addressing
                               the fragmentation prompted by the current homeland security grant
                               system, the Congress has several alternatives, including block grants,
                               performance partnerships, and grant waivers. These approaches could
                               provide state and local governments with increased flexibility while
                               potentially improving intergovernmental efficiency and homeland security



                               Page 259                                       GAO-03-1006 Opportunities for Oversight
                                Appendix I
                                Opportunities to Improve the Economy,
                                Efficiency, and Effectiveness of Federal
                                Programs




                                program outcomes. An example of how consolidation of first responder
                                grants might be achieved would be to merge the existing Emergency
                                Management Performance Grant, the State Homeland Security Grant
                                Program, and the Urban Area Security Initiative into one new grant
                                program. If such a consolidation can be assumed to yield administrative
                                efficiencies, then the Congress might reduce the amount of the combined
                                grant by, for example, 10 percent. Alternatively if the Congress did not
                                want to reduce the overall amount of the consolidated grant, efficiencies
                                achieved through consolidation could possibly result in an improved level
                                of program performance given the current level of funding.

CBO 5-Year Cost Estimate        No, this is a new example. CBO could not develop an estimate for this
Included in GAO’s 2002          example.
Budgetary Implications Report

Related GAO Products            Federal Assistance: Grant System Continues to Be Highly Fragmented.
                                GAO-03-718T. Washington, D.C.: April 29, 2003.

                                Multiple Employment and Training Programs: Funding and
                                Performance Measures for Major Programs. GAO-03-589. Washington,
                                D.C.: April 18, 2003.

                                Workforce Investment Act: States and Localities Increasingly Coordinate
                                Services for TANF Clients, but Better Information Needed on Effective
                                Approaches. GAO-02-696. Washington, D.C.: July 3, 2002.

                                Managing for Results: Continuing Challenges to Effective GPRA
                                Implementation. GAO/T-GGD-00-178. Washington, D.C.: July 20, 2000.

                                Fundamental Changes are Needed in Federal Assistance to State and
                                Local Governments. GAO/GGD-75-75. Washington, D.C.: August 19, 1975.

GAO Contact                     Paul L. Posner, (202) 512-9573




                                Page 260                                   GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




CBO Options Where
Related GAO Work Is
Identified36

800-03 Eliminate Federal
Antidrug Advertising

Related GAO Products         Anti-Drug Media Campaign: Aspects of Advertising Contract
                             Mismanaged by the Government; Contractor Improperly Charged Some
                             Costs. GAO-01-1017T. Washington, D.C.: August 1, 2001.36

                             Anti-Drug Media Campaign: Aspects of Advertising Contract
                             Mismanaged by the Government; Contractor Improperly Charged Some
                             Costs. GAO-01-623. Washington, D.C.: June 25, 2001.

GAO Contact                  Bernard L. Ungar, (202) 512-4232



920-03 Impose a Fee on the
Investment Portfolios of
Government-Sponsored
Enterprises

Related GAO Products         Government-Sponsored Enterprises: Federal Oversight Needed for
                             Nonmortgage Investments. GAO/GGD-98-48. Washington, D.C.: March 11,
                             1998.

                             Housing Enterprises: Potential Impacts of Severing Government
                             Sponsorship. GGD-96-120. Washington, D.C.: May 13, 1996.

GAO Contact                  Thomas J. McCool, (202) 512-8678


                             36
                              We list GAO reports identified as relating to options included in the CBO March 2003
                             Budget Options report. Only those CBO options for which we identified related GAO
                             products are included. We included GAO reports if they related to the topic of the CBO
                             option, regardless of whether our work supported the option or not.




                             Page 261                                         GAO-03-1006 Opportunities for Oversight
           Appendix I
           Opportunities to Improve the Economy,
           Efficiency, and Effectiveness of Federal
           Programs




Receipts   Examples from Selected GAO Work

           Tax Interest Earned on Life Insurance Policies and Deferred Annuities

           Further Limit the Deductibility of Home Equity Loan Interest

           Limit the Tax Exemption for Employer-Paid Health Insurance

           Repeal the Partial Exemption for Alcohol Fuels from Excise Taxes on
           Motor Fuels

           Index Excise Tax Rates for Inflation

           Increase Highway User Fees on Heavy Trucks

           Require Corporate Tax Document Matching

           Improve Administration of the Tax Deduction for Real Estate Taxes

           Increase Collection of Returns Filed by U.S. Citizens Living Abroad

           Increase the Use of Seizure Authority to Collect Delinquent Taxes

           Increase Collection of Self-employment Taxes

           Increase the Use of Electronic Funds Transfer for Installment Tax
           Payments

           Reduce Gasoline Excise Tax Evasion

           Improve Independent Contractor Tax Compliance

           Expand the Use of IRS’s TIN-Matching Program

           Improve Administration of the Federal Payment Levy Program

           Enhance Nontax Debt Collection Using Available Tools




           Page 262                                   GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




Examples from
Selected GAO Work

Tax Interest Earned on Life
Insurance Policies and
Deferred Annuities
                                  Primary agency                             Internal Revenue Service
                                  Spending type                              Direct

                                  Interest earned on life insurance policies and deferred annuities, known as
                                  “inside buildup,” is not taxed as long as it accumulates within the contract.
                                  Although the deferred taxation of inside buildup is similar to the tax
                                  treatment of income from some other investments, such as capital gains, it
                                  differs from the policy of taxing interest as it accrues on certain other
                                  investments, such as certificates of deposit and original issue discount
                                  bonds.

                                  Not taxing inside buildup may have merit if it increases the amount of
                                  insurance coverage purchased and the amount of income available to
                                  retirees and beneficiaries. However, the tax preference given life insurance
                                  and annuities mainly benefits middle- and upper-income people. Coverage
                                  for low-income people is largely provided through the Social Security
                                  system, which provides both insurance and annuity protection. The
                                  Congress may wish to consider taxing the interest earned on life insurance
                                  policies and deferred annuities. In the past, JCT estimated that this option
                                  would result in budgetary savings. Investment income from annuities
                                  purchased as part of a qualified individual retirement account would be
                                  tax-deferred until benefits were paid.

JCT 5-Year Estimate Included in   Yes.
GAO’s 2002 Budgetary
Implications Report

Related GAO Product               Tax Policy: Tax Treatment of Life Insurance and Annuity Accrued
                                  Interest. GAO/GGD-90-31. Washington, D.C.: January 29, 1990.

GAO Contact                       James R. White, (202) 512-9110




                                  Page 263                                       GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




Further Limit the
Deductibility of Home
Equity Loan Interest
                                  Primary agency                             Department of the Treasury
                                  Spending type                              Direct

                                  The term home equity borrowing or financing is usually applied to
                                  mortgages other than the original loan used to acquire a home or to any
                                  subsequent refinancing of that loan. Interest is deductible on up to $100,000
                                  of home equity indebtedness and $1 million of indebtedness used to acquire
                                  a home. Home equity financing is not limited to home-related uses and can
                                  be used to finance additional consumption by borrowers.

                                  Use of mortgage-related debt to finance nonhousing assets and
                                  consumption purchases through home equity loans could expose
                                  borrowers to increased risk of losing their homes should they default.
                                  Equity concerns may exist because middle- and upper-income taxpayers
                                  who itemize primarily take advantage of this tax preference, and such an
                                  option is not available to people who rent their housing.

                                  One way to address the issues concerning the amounts or uses of home
                                  equity financing would be to limit mortgage interest deductibility up to
                                  $300,000 of indebtedness for the taxpayer’s principal and second residence.
                                  In the past, JCT estimated that this option would generate additional
                                  revenues.

JCT 5-Year Estimate Included in   Yes.
GAO’s 2002 Budgetary
Implications Report

Related GAO Product               Tax Policy: Many Factors Contributed to the Growth in Home Equity
                                  Financing in the 1980s. GAO/GGD-93-63. Washington, D.C.: March 25,
                                  1993.

GAO Contact                       James R. White, (202) 512-9110




                                  Page 264                                       GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




Limit the Tax Exemption for
Employer-Paid Health
Insurance
                                  Primary agency                             Internal Revenue Service
                                  Spending type                              Direct

                                  The current tax treatment of health insurance—amounting to revenue
                                  losses of about $67.6 billion in 2001—gives few incentives to workers to
                                  economize on purchasing health insurance. Employer contributions for
                                  employee health protection are considered deductible, ordinary business
                                  expenses and employer contributions are not included in an employee’s
                                  taxable income. The same is true for a portion of the premiums paid by self-
                                  employed individuals. Although some employers or employees could drop
                                  employer-sponsored coverage without the tax exemption, some analysts
                                  believe that the tax-preferred status of these benefits has contributed to the
                                  overuse of health care services and large increases in our nation’s health
                                  care costs. In addition, the primary tax benefits accrue to those in high tax
                                  brackets who also have above average incomes.

                                  Placing a cap on the amount of health insurance premiums that could be
                                  excluded—including in a worker’s income the amount over the cap—could
                                  improve incentives and, to a lesser extent, tax equity. Alternatively,
                                  including health insurance premiums in income but allowing a tax credit
                                  for some percentage of the premium would improve equity since tax
                                  savings per dollar of premium would be the same for all taxpayers.
                                  Incentives could be improved for purchasing low-cost insurance if the
                                  amounts given credits were capped.

                                  One specific option the Congress may wish to consider would be to tax all
                                  employer-paid health insurance, while providing individuals a refundable
                                  tax credit of 20 percent of premiums that they or their employers would
                                  pay, with eligible premiums capped at $500 and $200 per month for family
                                  coverage and individuals, respectively.

                                  In the past, JCT could not develop a revenue estimate for this option due to
                                  uncertainty in determining the amount of health insurance that would be
                                  purchased given a repeal of the employer exclusion.

JCT 5-Year Estimate Included in   No.
GAO’s 2002 Budgetary
Implications Report


                                  Page 265                                       GAO-03-1006 Opportunities for Oversight
                      Appendix I
                      Opportunities to Improve the Economy,
                      Efficiency, and Effectiveness of Federal
                      Programs




Related GAO Product   Tax Policy: Effects of Changing Tax Treatment of Fringe Benefits.
                      GAO/GGD-92-43. Washington, D.C.: April 7, 1992.

GAO Contact           James R. White, (202) 512-9110




                      Page 266                                   GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




Repeal the Partial
Exemption for Alcohol
Fuels from Excise Taxes on
Motor Fuels                       Primary agency                             Internal Revenue Service
                                  Spending type                              Direct

                                  The tax code partially exempts biomass-derived alcohol fuels—made from
                                  nonfossil material of biological origin—from excise taxes on motor fuels.
                                  The tax code also provides that income tax credits for alcohol fuel use may
                                  be claimed instead of the excise tax exemption. However, the credit is in
                                  almost all cases less valuable than the exemption and is rarely used.

                                  Tax incentives that encourage alternatives to fossil fuels might have merit if
                                  energy security or environmental benefits were realized. However, as we
                                  reported in 1997, if alcohol fuel use was not subsidized it is unlikely that
                                  U.S. energy security or air quality would be significantly affected. Even
                                  with tax subsidies, alcohol fuels were not competitive in price with fossil
                                  fuels in most markets. In 1995, alcohol fuels accounted for less than 1
                                  percent of total U.S. energy consumption. Our report concluded that the
                                  incentives have not created enough usage to affect the likelihood of an oil
                                  price shock. Nor could their use be expanded enough to counter such a
                                  shock given existing production technologies. Use of oxygenated fuels
                                  such as ethanol-gasoline mixtures in motor vehicles generally produces
                                  less carbon monoxide pollution than does straight gasoline. However, the
                                  Clean Air Act Amendments of 1990 reduced the need for an ethanol subsidy
                                  by mandating the minimum oxygen content of gasoline in areas with poor
                                  air quality. The global warming effects of using ethanol are likely to be no
                                  better than, and could be worse than, those of gasoline.

                                  The Congress may wish to consider repealing the partial excise tax
                                  exemption and the alcohol fuels tax credit. The repeal could result in
                                  higher federal outlays for price support loan programs, but any increase in
                                  outlays probably would be much smaller than the estimated revenue
                                  increase. The excise tax exemption is currently scheduled to expire on
                                  October 1, 2007; the equivalent blender’s tax credit is scheduled to expire
                                  on January 1, 2008. In the past, JCT estimated that this option would result
                                  in budgetary savings.

JCT 5-Year Estimate Included in   Yes.
GAO’s 2002 Budgetary
Implications Report


                                  Page 267                                       GAO-03-1006 Opportunities for Oversight
                      Appendix I
                      Opportunities to Improve the Economy,
                      Efficiency, and Effectiveness of Federal
                      Programs




Related GAO Product   Tax Policy: Effects of the Alcohol Fuels Tax Incentives. GAO/GGD-97-41.
                      Washington, D.C.: March 6, 1997.

GAO Contact           James R. White, (202) 512-9110




                      Page 268                                   GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




Index Excise Tax Rates for
Inflation

                                  Primary agency                             Internal Revenue Service
                                  Spending type                              Direct

                                  Federal excise taxes are sometimes set at a fixed dollar amount per unit of
                                  taxed good. For example, alcoholic beverages are taxed at a set rate per
                                  gallon or barrel, with the rate varying for different types of beverages and
                                  differing concentrations of alcohol. When set in this manner, the real dollar
                                  value of the tax falls with inflation.

                                  The real dollar value of these taxes can be maintained over time if the tax is
                                  indexed for inflation or set as a percentage of the price of the taxed product
                                  or service. Tax policy issues would need to be considered, and
                                  administrative difficulties may be encountered, but they are not
                                  insurmountable. The Congress may wish to consider indexing excise tax
                                  rates for alcohol and tobacco. In the past, JCT estimated that this option
                                  would generate additional revenues.

JCT 5-Year Estimate Included in   Yes.
GAO’s 2002 Budgetary
Implications Report

Related GAO Products              Alcohol Excise Taxes: Simplifying Rates Can Enhance Economic and
                                  Administrative Efficiency. GAO/GGD-90-123. Washington, D.C.:
                                  September 27, 1990.

                                  Tax Policy: Revenue Potential of Restoring Excise Taxes to Past Levels.
                                  GAO/GGD-89-52. Washington, D.C.: May 9, 1989.

GAO Contact                       James R. White, (202) 512-9110




                                  Page 269                                       GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Increase Highway User Fees
on Heavy Trucks

                             Primary agency                             Department of Transportation
                             Spending type                              Direct

                             To develop and maintain highways, the government collects user fees
                             including fuel taxes, a heavy vehicle use tax, an excise tax on truck and
                             tractor sales, and an excise tax on heavy tires. In fiscal year 1999, about
                             $35.1 billion was collected from general highway user taxes. For many
                             years, questions have been raised concerning whether highway users,
                             including owners of heavy trucks, pay taxes in proportion to the wear and
                             tear that their vehicles impose on highway pavement.

                             In 1982, the Congress passed the first major increase in federal highway use
                             taxes since 1956 in order to increase highway revenues and to respond to a
                             Federal Highway Administration (FHWA) report that heavy trucks
                             underpaid by about 50 percent their fair share relative to the pavement
                             damage that they caused. FHWA also reported that lighter trucks were
                             overpaying by between 30 and 70 percent (depending on weight), and
                             automobiles were overpaying by 10 percent. The 1982 tax increase required
                             that the ceiling for the heavy vehicle use tax be increased from $240 a year
                             to $1,900 a year by 1989. In response to the concerns of the trucking
                             industry about the new tax structure, the Congress again revised the
                             system in the Deficit Reduction Act of 1984. Under the act, the ceiling for
                             the heavy vehicle use tax was lowered from $1,900 to $550 a year. To ensure
                             that this action was revenue neutral, the Congress raised the tax on diesel
                             fuel from 9 cents to 15 cents per gallon.

                             As GAO recommended in June 1994, FHWA conducted a cost allocation
                             study. The study, released in August 1997, noted that the overall equity of
                             highway user fees could be incrementally improved by implementing either
                             a weight-distance tax or eliminating the existing $550 cap on the Heavy
                             Vehicle Use Tax. However, the study made no recommendations; the
                             administration continues to monitor highway user fees but plans no action
                             unless the overall equity of highway user fees worsens. In the past, JCT
                             estimated that removing the $550 cap on the Heavy Vehicle Use Tax would
                             generate additional revenues.




                             Page 270                                       GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




JCT 5-Year Estimate Included in   Yes.
GAO’s 2002 Budgetary
Implications Report

Related GAO Products              Highway Financing: Factors Affecting Highway Trust Fund Revenues.
                                  GAO-02-667T. Washington, D.C.: May 9, 2002.

                                  Highway User Fees: Updated Data Needed To Determine Whether All
                                  Users Pay Their Fair Share. GAO/RCED-94-181. Washington, D.C.: June 7,
                                  1994.

GAO Contact                       Katherine Siggerud, (202) 512-6570




                                  Page 271                                   GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




Require Corporate Tax
Document Matching

                                  Primary agency                             Internal Revenue Service
                                  Spending type                              Direct

                                  The Internal Revenue Service’s (IRS) document matching program for
                                  payments to individuals has proven to be a highly cost-effective way of
                                  bringing in billions of dollars in tax revenues to the Department of the
                                  Treasury while at the same time boosting voluntary compliance. However,
                                  unlike payments to individuals, the law does not require that information
                                  returns be submitted on most payments to corporations.

                                  Generally using IRS’s assumptions, we estimated the benefits and costs for
                                  a corporate document matching program that would cover interest,
                                  dividends, rents, royalties, and capital gains. Assuming that a corporate
                                  document matching program began in 1993, we estimated that for years
                                  1995 through 1999, IRS’s annual costs would have been about $70 million
                                  and annual increased revenues about $1 billion. This estimate did not
                                  factor in compliance costs and changes in taxpayer behavior. Given
                                  increased corporate noncompliance, and declining audit coverage, the
                                  Congress may wish to require a corporate document matching program.

                                  In the past, JCT agreed that the option had the potential for increased
                                  revenue, but it could not develop estimates of revenue gain.

JCT 5-Year Estimate Included in   No.
GAO’s 2002 Budgetary
Implications Report

Related GAO Product               Tax Administration: Benefits of a Corporate Document Matching
                                  Program Exceed the Costs. GAO/GGD-91-118. Washington, D.C.:
                                  September 27, 1991.

GAO Contact                       James R. White, (202) 512-9110




                                  Page 272                                       GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




Improve Administration of
the Tax Deduction for Real
Estate Taxes
                                  Primary agency                             Internal Revenue Service
                                  Spending type                              Direct

                                  Based on the Internal Revenue Service’s (IRS) last compliance
                                  measurement study, individuals overstated their real estate tax deductions
                                  by about $1.5 billion nationwide in 1988. We estimate that this resulted in
                                  about $400 million federal tax loss for 1992. However, this may understate
                                  lost revenues because our review also found that IRS auditors detected
                                  only about 29 percent of $127 million in overstated deductions in three
                                  locations we reviewed. Revenues could be lost not only for the federal
                                  government but also for the 31 states that in 1991 tied their itemized
                                  deductions to those used for federal tax purposes.

                                  Two changes to the reporting of real estate cash rebates and real estate
                                  taxes could reduce noncompliance and increase federal tax collections.
                                  First, the Congress could require that states report to IRS, and to taxpayers
                                  on Form 1099s, cash rebates of real estate taxes. Second, the Congress
                                  could require that state and local governments conform real estate tax
                                  statements to specifications issued by IRS that would separate real estate
                                  taxes from nondeductible fees, which are often combined on these
                                  statements.

                                  In the past, JCT estimated that the proposals would increase federal fiscal
                                  revenues.

JCT 5-Year Estimate Included in   Yes.
GAO’s 2002 Budgetary
Implications Report

Related GAO Product               Tax Administration: Overstated Real Estate Tax Deductions Need To Be
                                  Reduced. GAO/GGD-93-43. Washington, D.C.: January 19, 1993.

GAO Contact                       James R. White, (202) 512-9110




                                  Page 273                                       GAO-03-1006 Opportunities for Oversight
                         Appendix I
                         Opportunities to Improve the Economy,
                         Efficiency, and Effectiveness of Federal
                         Programs




Increase Collection of
Returns Filed by U.S.
Citizens Living Abroad
                         Primary agency                             Internal Revenue Service
                         Spending type                              Direct

                         U.S. citizens residing abroad are generally subject to the same filing
                         requirements as citizens residing in the United States. Some evidence
                         suggests that the failure to file tax returns may be relatively prevalent in
                         some segments of the U.S. population abroad, and the revenue impact,
                         while unknown, could be significant.

                         IRS’s ability to identify and collect taxes from nonfilers residing abroad is
                         restricted by the limited reach of U.S. laws in foreign countries, particularly
                         U.S. laws on tax withholding, information reporting, and enforced
                         collection through liens, levies, and seizures. Another factor that could
                         contribute to nonfiling abroad is the ambiguity in IRS’s filing instructions
                         for its Form 1040 and related guidance. For example, it may not be clear
                         that income qualifying for the foreign earned income or housing expense
                         exclusions must be considered in determining whether one’s gross income
                         exceeds the filing threshold.

                         In pursuing nonfilers abroad, IRS has not fully explored the usefulness of
                         passport application data as a means of identifying potential nonfilers.
                         While passport applications contain no income information, they could be
                         used to collect applicants’ social security number, age, occupation, and
                         country of residence.

                         IRS may want to take additional steps to enforce the current information
                         requirement that all passport applicants provide their social security
                         numbers as a means of identifying potential nonfilers abroad. IRS may also
                         want to clarify its instructions for determining what income must be
                         considered in determining whether gross income exceeds the filing
                         threshold. Initial projects to increase the number of returns filed from
                         overseas suggest that the potential increase in tax revenues would justify
                         the costs to improve compliance.

                         In the past, JCT agreed that the option had the potential for increased
                         revenue, but it could not develop estimates of revenue gain.




                         Page 274                                       GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




JCT 5-Year Estimate Included in   No.
GAO’s 2002 Budgetary
Implications Report

Related GAO Products              Tax Administration: Nonfiling Among U.S. Citizens Abroad. GAO/GGD-
                                  98-106. Washington, D.C.: May 11, 1998.

                                  IRS Activities to Increase Compliance on Overseas Taxpayers.
                                  GAO/GGD-93-93. Washington, D.C.: May 18, 1993.

GAO Contact                       James R. White, (202) 512-9110




                                  Page 275                                   GAO-03-1006 Opportunities for Oversight
                              Appendix I
                              Opportunities to Improve the Economy,
                              Efficiency, and Effectiveness of Federal
                              Programs




Increase the Use of Seizure
Authority to Collect
Delinquent Taxes
                              Primary agency                             Internal Revenue Service
                              Spending type                              Direct

                              The Internal Revenue Service’s (IRS) use of its statutory authority to seize
                              taxpayer assets has been instrumental in bringing into compliance (i.e., full
                              pay status) many delinquent taxpayers who had been unresponsive to other
                              tax collection efforts, including demands for payment through letters,
                              phone calls, personal visits, and levies on bank accounts and wages. Of the
                              approximate 8,300 taxpayers whose assets were seized by IRS in fiscal year
                              1997, about 42 percent became fully tax compliant--resolving about
                              $186 million in tax debts--as a result of the seizures. In total, the seizure of
                              taxpayer property in fiscal year 1997 resulted in resolving about
                              $235 million, or about 22 percent of the $1.1 billion of tax debts owed by
                              the 8,300 taxpayers.

                              IRS’s use of seizure authority has declined since the enactment of the IRS
                              Restructuring and Reform Act of 1998. Seizures declined from 10,090 in FY
                              1997 to 234 in FY 2001—a decline of about 98 percent. In 2002, the number
                              of seizures was essentially unchanged with IRS completing 296 seizures.
                              According to an IRS official the number of seizures is not expected to
                              change in 2003. At this greatly reduced level of seizures, IRS is at risk of
                              foregoing the collection of millions of dollars as indicated by the 1997 data.
                              IRS employees told GAO in 2000 that seizures have nearly stopped because
                              of their uncertainty over the act’s seizure requirements and IRS’ slow
                              development of workable policies and procedures for implementing the
                              act. IRS officials indicated to GAO that they expected the future level of
                              seizures to be substantially below the level before the Reconstruction Act
                              experience given (1) IRS program changes that provide taxpayers with
                              additional opportunities to resolve their tax delinquencies prior to seizure,
                              (2) expanded definition of taxpayer property statutorily exempt from
                              seizure, (3) increased time available to taxpayers to exercise rights to
                              challenge seizures, and (4) reductions in collection staff available to make
                              seizures. GAO has recently reported that the number of revenue officers—
                              the IRS staff responsible for making seizures—decreased about 35 percent
                              from 1997 to 2002.

                              To help ensure that revenue officers have clear guidance for the use of
                              seizure authority, GAO has made a number of recommendations to IRS. In



                              Page 276                                       GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




                                  part, GAO recommended that IRS provide written guidance to describe
                                  when seizure action ought to be taken; that is, the conditions and
                                  circumstances that would justify seizure action and the responsibilities of
                                  senior managers to ensure that such actions are taken. GAO also has
                                  recommended that IRS develop a computer based information system to
                                  monitor compliance with the seizure guidance. IRS has issued the revised
                                  seizure guidance and will implement a limited seizures monitoring system
                                  this fall. In the past, JCT agreed that the option has the potential for
                                  increased revenue, but it could not develop estimates of revenue gain.

JCT 5-Year Estimate Included in   No.
GAO’s 2002 Budgetary
Implications Report

Related GAO Product               IRS Seizures: Needed for Compliance but Processes for Protecting
                                  Taxpayer Rights Have Some Weaknesses. GAO/GGD-00-4. Washington,
                                  D.C.: November 29, 1999.

GAO Contact                       James R. White, (202) 512-9110




                                  Page 277                                   GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




Increase Collection of Self-
employment Taxes

                                  Primary agency                             Internal Revenue Service
                                  Spending type                              Direct

                                  Self-employed taxpayers can get Social Security benefits based on earnings
                                  for which they did not pay taxes because the Social Security Act requires
                                  the Social Security Administration to grant earnings credits, which are used
                                  to determine benefit eligibility and amounts, and pay benefits without
                                  regard to whether the Social Security taxes have been paid. We reported in
                                  1999 that, as of September 1997, more than 1.9 million self-employed
                                  taxpayers were delinquent in paying $6.9 billion in self-employment taxes.
                                  Also, more than 144,000 taxpayers with delinquent self-employment taxes
                                  of $487 million were receiving about $105 million annually in monthly
                                  Social Security benefits.

                                  While IRS’s ability to collect self-employment taxes before taxpayers
                                  become delinquent is hampered because there is no withholding on self-
                                  employment income, most self-employed taxpayers are required to make
                                  estimated tax payments. However, as of September 1997, about 90 percent
                                  of the delinquent self-employed taxpayers required to make estimated tax
                                  payments did not.

                                  In the past, there have been proposals to deny social security credits to
                                  taxpayers that fail to pay their self-employment taxes and to require
                                  withholding on certain self-employment income. No actions were taken on
                                  these proposals. One way to collect self-employment taxes before
                                  taxpayers become delinquent that does not require a law change would be
                                  to encourage more self-employed individuals to make their required
                                  estimated tax payments. IRS could do this by establishing a program to
                                  remind previously noncompliant taxpayers (i.e., those who were assessed
                                  an estimated tax penalty the previous year) to make such payments.

                                  In the past, JCT agreed that the option had the potential for increased
                                  revenue, but it could not develop estimates of revenue gain.

JCT 5-Year Estimate Included in   No.
GAO’s 2002 Budgetary
Implications Report



                                  Page 278                                       GAO-03-1006 Opportunities for Oversight
                      Appendix I
                      Opportunities to Improve the Economy,
                      Efficiency, and Effectiveness of Federal
                      Programs




Related GAO Product   Tax Administration: Billions in Self-Employment Taxes Are Owed.
                      GAO/GGD-99-18. Washington, D.C.: February 19, 1999.

GAO Contact           James R. White, (202) 512-9110




                      Page 279                                   GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




Increase the Use of
Electronic Funds Transfer
for Installment Tax
Payments                    Primary agency                             Internal Revenue Service
                            Spending type                              Direct

                            The Internal Revenue Code authorizes the Internal Revenue Service (IRS)
                            to allow taxpayers to pay their taxes in installments, with interest, if this
                            arrangement would facilitate collection of the liability. As of September
                            2000, IRS had about 2.2 million installment agreements outstanding, worth
                            about $8.3 billion. At the end of fiscal year 2000, approximately 35 percent
                            of these installment agreements were in default.

                            A number of states use electronic funds transfer (EFT) to make their
                            installment agreement program more efficient and effective. In 1998, we
                            reported on two states’ use of EFT. Minnesota, requires taxpayers to pay
                            by EFT, with some exceptions. As of late 1997, approximately 90 percent of
                            Minnesota’s installment agreements were EFT agreements, and the default
                            rate had dropped from about 50 percent to between 3 percent and 5 percent
                            in the 2 years the EFT requirement had been in effect. In California, within
                            6 months of implementing its EFT procedures, its default rate for new
                            installment agreements dropped from around 40 percent to 5 percent.

                            EFT payments also produce administrative savings through lower
                            processing costs involved in recording and posting remittances, lower
                            postage and handling costs associated with sending monthly payment
                            reminders, and lower collection enforcement costs needed to pursue fewer
                            taxpayers in default. IRS’s initial comparison of the cost of EFT payments
                            with the cost of having taxpayers send installment payments to lockboxes
                            in commercial banks showed that EFT payment costs were about 37
                            percent less than the lockbox costs.

                            The reported benefits for IRS of using EFT for installment agreement
                            payments include the potential to reduce the percentage of taxpayer
                            defaults, decrease administrative costs, and achieve faster collections. At
                            the end of fiscal year 2000, less than 1.5 percent of IRS’s outstanding
                            installment agreements were EFT agreements.

                            In the past, JCT agreed that the option had the potential for increased
                            revenue, but it could not develop estimates of revenue gain.




                            Page 280                                       GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




JCT 5-Year Estimate Included in   No.
GAO’s 2002 Budgetary
Implications Report

Related GAO Products              Tax Administration: Increasing EFT Usage for Installment Agreements
                                  Could Benefit IRS. GAO/GGD-98-112. Washington, D.C.: June 10, 1998.

                                  Tax Administration: Administrative Improvements Possible in IRS’
                                  Installment Agreement Program. GAO/GGD-95-137. Washington, D.C.:
                                  May 2, 1995.

GAO Contact                       James R. White, (202) 512-9110




                                  Page 281                                   GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




Reduce Gasoline Excise Tax
Evasion

                                  Primary agency                             Internal Revenue Service
                                  Spending type                              Direct

                                  Although no current and reliable estimate of gasoline excise tax evasion
                                  exists, the most recent Federal Highway Administration estimate, from
                                  1992, was that evasion amounted to between 3 and 7 percent of gasoline
                                  excise tax revenue. From a tax administration perspective, moving the
                                  collection point for gasoline excise taxes from the terminal to the refinery
                                  level may reduce tax evasion because (1) gasoline would change hands
                                  fewer times before taxation, (2) refiners are presumed to be more
                                  financially sound and have better records than other parties in the
                                  distribution system, and (3) fewer taxpayers would be involved. However,
                                  industry representatives raise competitiveness and cost-efficiency
                                  questions associated with moving the collection point.

                                  In a May 1992 report, we suggested that the Congress explore the level of
                                  gasoline excise tax evasion and, if it was found to be sufficiently high, move
                                  tax collection to the point at which gasoline leaves the refinery. In the past,
                                  JCT agreed that the option had the potential for increased revenue, but it
                                  could not develop estimates of revenue gain.

JCT 5-Year Estimate Included in   No.
GAO’s 2002 Budgetary
Implications Report

Related GAO Product               Tax Administration: Status of Efforts to Curb Motor Fuel Tax Evasion.
                                  GAO/GGD-92-67. Washington, D.C.: May 12, 1992.

GAO Contact                       James R. White, (202) 512-9110




                                  Page 282                                       GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




Improve Independent
Contractor Tax Compliance

                                  Primary agency                             Internal Revenue Service
                                  Spending type                              Direct

                                  Common law rules for classifying workers as employees or independent
                                  contractors are unclear and subject to conflicting interpretations. While
                                  recognizing this ambiguity, the Internal Revenue Service (IRS) enforces tax
                                  laws and rules through its Employment Tax Examinations program. For
                                  fiscal year 2002, 90 percent of the examinations found misclassified
                                  workers and associated unpaid taxes. Establishing clear rules is difficult.
                                  Nevertheless, taxpayers need--and the government is obligated to provide--
                                  clear rules for classifying workers if businesses are to voluntarily comply.
                                  In addition, improved tax compliance could be gained by requiring
                                  businesses to (1) withhold taxes from payments to independent
                                  contractors and/or (2) file information returns with IRS on payments made
                                  to independent contractors constituted as corporations. Both approaches
                                  have proven to be effective in promoting individual tax compliance.

                                  In the past, the Congress considered but rejected extending information
                                  reporting requirements for unincorporated independent contractors to
                                  incorporated ones. Thus, independent contractors organized as either sole
                                  proprietors or corporations could have been on equal footing, and IRS
                                  could have had a less intrusive means of ensuring their tax compliance.

                                  There have been various proposals on clarifying the definition of
                                  independent contractors and improving related information reporting.
                                  Congressional hearings dealt with some of these bills.

                                  We believe that revenues from this option could possibly increase by
                                  billions of dollars. In the past, JCT agreed that the option had the potential
                                  for increased revenue, but it could not develop estimates of revenue gain.

JCT 5-Year Estimate Included in   No.
GAO’s 2002 Budgetary
Implications Report

Related GAO Products              Tax Administration: Estimates of the Tax Gap for Service Providers.
                                  GAO/GGD-95-59. Washington, D.C.: December 28, 1994.




                                  Page 283                                       GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Tax Administration: Approaches for Improving Independent Contractor
              Compliance. GAO/GGD-92-108. Washington, D.C.: July 23, 1992.

GAO Contact   James R. White, (202) 512-9110




              Page 284                                   GAO-03-1006 Opportunities for Oversight
                          Appendix I
                          Opportunities to Improve the Economy,
                          Efficiency, and Effectiveness of Federal
                          Programs




Expand the Use of IRS’s
TIN-Matching Program

                          Primary agency                             Internal Revenue Service
                          Spending type                              Direct

                          The Internal Revenue Service’s (IRS) and the Department of Treasury’s
                          Financial Management Service (FMS) have initiated a continuous tax levy
                          program designed to identify and levy federal payments to taxpayers that
                          owe federal taxes. The potential effectiveness of this program will be
                          reduced because payment records submitted to FMS by federal agencies
                          often have an inaccurate Taxpayer Identification Number (TIN) and/or
                          name.

                          Since 1997, IRS has had a TIN-matching program that federal agencies can
                          use to verify the accuracy of TIN and name combinations furnished by
                          federal payees that are necessary for issuing information returns. This
                          program was intended to reduce the number of notices of incorrect TIN
                          and name combinations issued for backup withholding by allowing
                          agencies the opportunity to identify TIN and name discrepancies and to
                          contact payees for corrected information before issuing an information
                          return. Monthly, federal agencies may submit a batch of name and TIN
                          combinations to IRS for verification. IRS matches each record submitted
                          and informs the agency whether the TIN and name submitted matches its
                          records. However, IRS cannot explicitly tell an agency what the correct
                          TIN, name, or both TIN and name should be if the records do not match. To
                          do so would violate tax disclosure laws.

                          In an April 2000 report, we found that about 33 percent of vendor payment
                          records submitted by federal agencies to FMS during one quarter in fiscal
                          year 1999 had TINs and/or names that differed with the TINs and/or names
                          in IRS’s accounts receivable records. As a result, vendor payment records
                          totaling almost $20 billion were unsuitable for matching against IRS’s
                          accounts receivable records and therefore would not be included in the
                          joint FMS/IRS continuous tax levy program for the purpose of reducing
                          federal tax delinquencies.

                          The Congress may wish to expand the use of IRS’s TIN-matching program
                          for purposes other than information reporting to enable federal agencies to
                          specifically verify the accuracy of vendor TINs and names. This would help
                          to reduce the number of federal payment records that are unsuitable for



                          Page 285                                       GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




                                  matching against IRS’s accounts receivable records and to increase the
                                  number of federal tax delinquencies that could be collected through the
                                  continuous tax levy program. We estimate that resolving inconsistencies
                                  between the names payees use to receive federal payments and the names
                                  payees use on their federal tax returns could generate as much as
                                  $74 million annually. In the past, JCT estimated that savings would result
                                  from this option.

JCT 5-Year Estimate Included in   Yes.
GAO’s 2002 Budgetary
Implications Report

Related GAO Product               Tax Administration: IRS’ Levy of Federal Payments Could Generate
                                  Millions of Dollars. GAO/GGD-00-65, April 7, 2000.

GAO Contact                       James R. White, (202) 512-9110




                                  Page 286                                   GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




Improve Administration of
the Federal Payment Levy
Program
                                  Primary agency                             Internal Revenue Service
                                  Spending type                              Direct/Discretionary

                                  The Internal Revenue Service (IRS) and the Department of Treasury’s
                                  Financial Management Service (FMS) have initiated the Federal Payment
                                  Levy Program, which is designed to continuously levy federal payments
                                  made to taxpayers that owe federal taxes. The potential effectiveness of
                                  this program will be reduced because IRS has blocked certain delinquent
                                  taxpayers from being levied.

                                  Since July 2000, IRS has been levying federal payments of delinquent
                                  taxpayers. Certain taxpayers are not levied because they meet certain
                                  exclusion criteria, such as taxpayers who are paying their taxes through
                                  installment agreements or those who have contacted IRS and
                                  demonstrated that they currently do not have the means to pay their taxes.
                                  However, there are many other delinquent taxpayers who do not meet IRS’s
                                  exclusion criteria but are not having their federal payments levied. In a
                                  March 2003 report, we found that about 112,000 delinquent taxpayers were
                                  collectively receiving about $6.8 billion in federal payments and owed
                                  about $1.6 billion in delinquent taxes that IRS had blocked from the levy
                                  program. While IRS began to unblock about 20,000 of these accounts in
                                  January 2003, it does not plan to unblock the remaining portion until
                                  sometime in 2005. The sooner IRS unblocks these accounts, the more
                                  likely it is to collect the delinquent taxes.

JCT 5-Year Estimate Included in   No, this is a new example. CBO could not develop an estimate for this
GAO’s 2002 Budgetary              example.
Implications Report

Related GAO Product               Tax Administration: Federal Payment Levy Program Measures,
                                  Performance, and Equity Can Be Improved. GAO-03-356. Washington,
                                  D.C.: March 6, 2003.

GAO Contact                       Michael Brostek, (202) 512-9110




                                  Page 287                                       GAO-03-1006 Opportunities for Oversight
                             Appendix I
                             Opportunities to Improve the Economy,
                             Efficiency, and Effectiveness of Federal
                             Programs




Enhance Nontax Debt
Collection Using Available
Tools
                             Primary agency                             Department of the Treasury
                             Spending types                             Direct/Discretionary

                             Nontax federal debt delinquent more than 180 days continues to be a
                             significant problem governmentwide. The Department of Treasury
                             reported that such debt totaled over $60 billion for each of the last 4 fiscal
                             years. As delinquent debts age, they become increasingly difficult to
                             collect. In 1996, the Congress enacted the Debt Collection Improvement
                             Act of 1996 (DCIA) to provide for more aggressive pursuit of delinquent
                             debt. Treasury’s Financial Management Service (FMS) has been
                             instrumental in helping agencies identify and refer more seriously
                             delinquent nontax debts to FMS for additional effort. FMS has had some
                             success in these centralized efforts; however, two key aspects of the 1996
                             legislation have lagged behind other initiatives.

                             In particular, the law authorized federal agencies to perform administrative
                             wage garnishment (AWG) for certain delinquent debt. Debt collection
                             experts have emphasized that AWG is a powerful instrument for collecting
                             debt since the mere threat of using it is often enough to motivate voluntary
                             payment. Properly used in tandem with other debt recovery techniques
                             such as Treasury’s centralized debt collection program, AWG should
                             generate collections and provide leverage for agencies to obtain voluntary
                             payments from delinquent debtors. However, few agencies are using AWG.
                             Although the Department of Education had implemented AWG granted
                             under separate authority, none of the nine large Chief Financial Officers
                             Act agencies we reviewed in fiscal year 2001 had fully implemented AWG as
                             authorized by the DCIA. According to Treasury officials, as of March 2003,
                             only one of the nine large agencies, the Department of Housing and Urban
                             Development, had authorized Treasury to perform AWG as part of its
                             centralized debt collection efforts. Although AWG is not mandatory, by
                             failing to employ this tool—more than 7 years after the DCIA’s enactment—
                             agencies have missed collection opportunities.

                             DCIA also called for steps to prevent certain delinquent debtors from
                             receiving additional federal financial assistance in the form of loans, loan
                             guarantees, and loan insurance. Our March 2002 report discussed three
                             major information sources that contain data on delinquent federal debtors:
                             credit bureau reports, the Department of Housing and Urban



                             Page 288                                       GAO-03-1006 Opportunities for Oversight
                                  Appendix I
                                  Opportunities to Improve the Economy,
                                  Efficiency, and Effectiveness of Federal
                                  Programs




                                  Development’s Credit Alert Interactive Voice Response System, and the
                                  Department of the Treasury’s offset program (TOP) database. Each
                                  information source contained certain information on delinquent federal
                                  nontax debtors, but none provided all-inclusive, timely data or maintained
                                  data long enough to be an adequate basis for successfully barring future
                                  financial assistance to current or prior delinquent debtors. According to
                                  Treasury officials, FMS is in the initial implementation phase of a new
                                  Internet-based program to assist agencies in identifying delinquent debtors.
                                  As currently envisioned, the program will allow agencies to initiate
                                  searches of limited information from the TOP database to determine
                                  whether applicants for direct or guaranteed loans owe delinquent federal
                                  nontax debt.

                                  We have recommended that agencies begin implementing AWG and that
                                  FMS augment its current plans for using the TOP database to bar
                                  delinquent debtors from obtaining access to future federal financial
                                  assistance. Because it is not clear at this time how much federal agency
                                  debt is eligible for AWG, an estimate of additional receipts from full
                                  implementation of this debt collection tool would only be a preliminary
                                  indication. The same uncertainty exists for estimated benefits related to
                                  full implementation of the delinquent debtor bar provision. Given the pace
                                  of implementation, it may be desirable for the Congress to establish certain
                                  milestones and performance expectations for the debt collection function.

JCT 5-Year Estimate Included in   No, this is a new example. CBO could not develop an estimate for this
GAO’s 2002 Budgetary              example.
Implications Report

Related GAO Products              Debt Collection: Agriculture Making Progress in Addressing Key
                                  Challenges. GAO-03-202T. Washington, D.C.: November 13, 2002.

                                  Debt Collection Improvement Act of 1996: Major Data Sources Inadequate
                                  for Implementing the Debtor Bar Provision. GAO-02-462. Washington,
                                  D.C.: March 29, 2002.

                                  Debt Collection Improvement Act of 1996: Status of Selected Agencies’
                                  Implementation of Administrative Wage Garnishment. GAO-02-313.
                                  Washington, D.C.: February 28, 2002.

                                  Debt Collection Improvement Act of 1996: Department of Agriculture
                                  Faces Challenges Implementing Certain Key Provisions. GAO-02-277T.
                                  Washington, D.C.: December 5, 2001.



                                  Page 289                                   GAO-03-1006 Opportunities for Oversight
              Appendix I
              Opportunities to Improve the Economy,
              Efficiency, and Effectiveness of Federal
              Programs




              Debt Collection Improvement Act of 1996: Agencies Face Challenges
              Implementing Certain Key Provisions. GAO-02-61T. Washington, D.C.:
              October 10, 2001.

GAO Contact   Gary T. Engel, (202) 512-8815




              Page 290                                   GAO-03-1006 Opportunities for Oversight
                        Appendix I
                        Opportunities to Improve the Economy,
                        Efficiency, and Effectiveness of Federal
                        Programs




Slowing the Long-Term   CBO Options Where Related GAO Work Is Identified

Growth of Social        Constrain the Increase in Initial Benefits
Security and Medicare
                        Raise the Retirement Age




                        Page 291                                     GAO-03-1006 Opportunities for Oversight
                            Appendix I
                            Opportunities to Improve the Economy,
                            Efficiency, and Effectiveness of Federal
                            Programs




CBO Options Where
Related GAO Work Is
Identified37

Constrain the Increase in
Initial Benefits

Related GAO Products        Social Security: Analysis of Issues and Selected Reform Proposals. GAO-
                            03-376T. Washington, D.C.: January 15, 2003.37

                            Social Security Reform: Analysis of Reform Models Developed by the
                            President’s Commission to Strengthen Social Security. GAO-03-310.
                            Washington, D.C.: January 15, 2003.

GAO Contact                 Barbara Bovbjerg, (202) 512-7215



Raise the Retirement Age

Related GAO Product         Social Security Reform: Implications of Raising the Retirement Age.
                            GAO/HEHS-99-112. Washington, D.C.: August 27, 1999.

GAO Contact                 Barbara Bovbjerg, (202) 512-7215




                            37
                             We list GAO reports identified as relating to options included in the CBO March 2003
                            Budget Options report. Only those CBO options for which we identified related GAO
                            products are included. We included GAO reports if they related to the topic of the CBO
                            option, regardless of whether our work supported the option or not.




(450220)                    Page 292                                         GAO-03-1006 Opportunities for Oversight
GAO’s Mission            The General Accounting Office, the audit, evaluation and investigative arm of
                         Congress, exists to support Congress in meeting its constitutional responsibilities
                         and to help improve the performance and accountability of the federal government
                         for the American people. GAO examines the use of public funds; evaluates federal
                         programs and policies; and provides analyses, recommendations, and other
                         assistance to help Congress make informed oversight, policy, and funding
                         decisions. GAO’s commitment to good government is reflected in its core values of
                         accountability, integrity, and reliability.


Obtaining Copies of      The fastest and easiest way to obtain copies of GAO documents at no cost is
                         through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and full-
GAO Reports and          text files of current reports and testimony and an expanding archive of older
                         products. The Web site features a search engine to help you locate documents
Testimony                using key words and phrases. You can print these documents in their entirety,
                         including charts and other graphics.
                         Each day, GAO issues a list of newly released reports, testimony, and
                         correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site
                         daily. The list contains links to the full-text document files. To have GAO e-mail this
                         list to you every afternoon, go to www.gao.gov and select “Subscribe to
                         e-mail alerts” under the “Order GAO Products” heading.


Order by Mail or Phone   The first copy of each printed report is free. Additional copies are $2 each. A check
                         or money order should be made out to the Superintendent of Documents. GAO
                         also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a single
                         address are discounted 25 percent. Orders should be sent to:
                         U.S. General Accounting Office
                         441 G Street NW, Room LM
                         Washington, D.C. 20548
                         To order by Phone:     Voice: (202) 512-6000
                                                TDD: (202) 512-2537
                                                Fax: (202) 512-6061


To Report Fraud,         Contact:
                         Web site: www.gao.gov/fraudnet/fraudnet.htm
Waste, and Abuse in      E-mail: fraudnet@gao.gov
Federal Programs         Automated answering system: (800) 424-5454 or (202) 512-7470



Public Affairs           Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800
                         U.S. General Accounting Office, 441 G Street NW, Room 7149
                         Washington, D.C. 20548
United States                                 First Class
General Accounting Office                 Postage & Fees Paid
Washington, D.C. 20548-0001    PRIORITY          GAO
                                            Permit No. GI00
Official Business
Penalty for Private Use $300
Address Service Requested