oversight

GAO: Transformation Challenges, and Opportunities

Published by the Government Accountability Office on 2003-09-16.

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

                              United States General Accounting Office

GAO                           Testimony
                              Before the Senate Committee on Governmental Affairs




For Release on Delivery
Expected at 9:30 a.m. EDT
Tuesday, September 16, 2003
                              GAO
                              Transformation,
                              Challenges, and
                              Opportunities
                              Statement of David M. Walker
                              Comptroller General of the United States




GAO-03-1167T
                              A
                                                September 16, 2003


                                                GAO

                                                Transformation, Challenges, and
Highlights of GAO-03-1167T, a testimony         Opportunities
before the Senate Committee on
Governmental Affairs




The Committee sought GAO’s                      As an arm of the legislative branch, GAO exists to support the Congress in
views on GAO’s accomplishments,                 meeting its constitutional responsibilities to improve the performance and
challenges, and opportunities for               ensure the accountability of the federal government for the American
its oversight hearing. The                      people. Established in 1921 by the Budget and Accounting Act to follow the
Committee also sought GAO’s                     federal dollar and ensure that it is spent in an economical, efficient, and
views on its latest human capital
proposal, which has been
                                                effective manner, GAO has evolved over its 82-year history to meet the
introduced in the Senate as S. 1522.            changing needs of the Congress and the nation. Faced with a budgetary
                                                reduction in the mid-1990s that had to be implemented over a 2-year period,
                                                GAO undertook measures that, while necessary, also increased the risk that
                                                the agency would not be positioned well to serve the Congress in the future.
GAO recommends that the
Committee act on S. 1522 promptly               To effectively position itself for the future, GAO has been undergoing a
and that the Congress enact the                 major transformation effort over the past 4 years that even in the best of
GAO Human Capital Reform Act of
                                                organizations takes 7 or more years to implement. Based on its strategic
2003 before it adjourns this year.
                                                plan developed in consultation with the Congress, GAO’s effort is focused on
GAO believes that its latest human              three specific areas: achieving results, serving the client, and investing in
capital proposal is both well                   people. GAO has realigned the agency to eliminate a management layer,
reasoned and reasonable. There                  consolidate 35 issue areas into 13 teams, and reduce its field offices from 16
are compelling reasons why GAO                  to 11. Today, GAO is a significantly smaller organization—40 percent
ought to be given this additional               smaller than in 1992—with slightly over 3,250 staff on board. GAO has
human capital authority. These                  worked with its appropriations committees to obtain targeted funding for
include the fact that GAO already               such particularly acute risk areas as human capital and information
has a hybrid pay system                         technology. GAO also launched a range of internal and external initiatives
established by the authority that               that have helped it become more strategic, results-oriented, partnerial,
the Congress granted it over two
                                                integrated, flexible, responsive, employee-oriented, and externally focused.
decades ago, the proposal is
modest if viewed in light of                    Since 1998, GAO’s work has produced a steady increase in financial benefits
authorities granted and requested               and nonfinancial benefits including many improvements in government
by other agencies, and GAO already              operations. For example, in fiscal year 2002, GAO’s work helped achieve
has a number of key systems and                 $37.7 billion in financial benefits—a $88 return for every dollar invested in
safeguards in place and has plans               GAO. In addition, GAO’s work informed the debate and the resulting
to build in additional safeguards.              legislation relating to such areas as our nation’s national security, homeland
                                                security, economic security, and the financial security of Americans.
GAO has conducted extensive
external and internal outreach                  GAO faces a number of challenges. Issues that GAO is either watching
efforts on this proposal. GAO                   closely and/or believes require congressional attention include supply and
respectfully requests the
                                                demand imbalances, unfunded mandates, access to records, the Deputy
Committee’s support and prompt
passage by the Congress.                        Comptroller General selection process, performance and accountability
                                                community coordination, and additional bid protest volume. S. 1522, the
                                                GAO Human Capital Reform Act of 2003, which mirrors H.R. 2751, which has
                                                been marked-up and reported to the full House Government Reform
                                                Committee, is urgently needed to help address GAO’s challenges. Some
                                                specific initiatives that the Comptroller General plans to focus on for the
www.gao.gov/cgi-bin/getrpt?GAO-03-1167T.
                                                future include helping the Congress address challenges relating to the long-
To view the full product, including the scope   term fiscal outlook, transforming government and how government does
and methodology, click on the link above.       business, and making GAO the federal employer of choice and the gold
For more information, contact Gene Dodaro
at (202) 512-5600 or dodarog@gao.gov.
                                                standard for a world class professional services organization.
                      Madam Chair and Members of the Committee:

                      I am pleased to appear before you today—almost 5 years after becoming
                      the seventh Comptroller General of the United States—to discuss what
                      GAO has accomplished during my tenure thus far, the challenges we face at
                      GAO, including why passage of S. 1522, the GAO Human Capital Reform
                      Act, is an integral part of helping GAO prepare for those challenges, and
                      what we are contemplating for the future. Before I begin, I would like to
                      commend you for holding this oversight hearing, the first oversight hearing
                      this Committee has held on GAO since 1995. In addition, Madam Chair, I
                      would like to thank both you and Sen. Voinovich for sponsoring S. 1522, the
                      GAO Human Capital Reform Act, and for introducing the bill before the
                      August recess.

                      When I became Comptroller General in November 1998, I found an
                      organization, with a long-standing reputation for doing good work and a
                      talented workforce, that was doing many things right. However, the agency
                      was in need of revitalization because it had not had a confirmed agency
                      head for more than 2 years and had undergone many years of downsizing
                      and severe budgetary reductions. I also found an organization that, in my
                      opinion, was still too hierarchical, process-oriented, “siloed,” internally
                      focused, and somewhat risk adverse. My consultations with congressional
                      members and staff, external entities in both the public and private sectors,
                      and GAO staff led me to the belief that GAO must do things differently as
                      we move forward in order to continue to maximize our value to the
                      Congress and the country, especially in view of the strong likelihood of
                      constrained resources and client demands. Specifically, we needed to take
                      steps to transform GAO to make it more results-oriented, more client
                      focused, more partnerial, more externally aware, more transparent, more
                      strategic, more employee oriented, and more constructive in dealing with
                      those who are the subject of our work. Over the past 5 years, we believe
                      that we have accomplished much. Nevertheless, we recognize that we still
                      have much to do and welcome and value the comments of every Member of
                      this Committee in helping us become and stay a model federal agency that
                      supports the Congress’ important responsibilities under the U. S.
                      Constitution.



GAO’s Evolving Role   Established in 1921 by the Budget and Accounting Act to follow the federal
                      dollar and ensure that it is spent in an economical, efficient, and effective
                      manner, GAO has evolved over its 82-year history to meet the changing
                      needs of the Congress and the nation. Today’s GAO is profoundly different



                      Page 1                                                           GAO-03-1167T
in organization than the one established in 1921. For example, over the
years, GAO has changed from an entity that once

• operated as an independent entity (the law did not state that GAO was
  to be part of the legislative branch) to one that is recognized as an
  independent agency within the legislative branch whose primary client
  is the institution of the Congress;

• audited the government’s vouchers to one that evaluates the efficiency
  and effectiveness of a wide range of federal policies and programs;

• performed work mostly of a self-initiated basis to one where 89 percent
  of its work in fiscal year 2002 was either mandated or requested by the
  Congress;

• conducted work primarily in the area of oversight to one that now
  performs work in the areas of oversight, insight, foresight, and
  legal/adjudicatory activities.

• employed principally voucher examiners to an organization that
  employs a highly educated, skilled, and diverse professional staff with
  degrees in a variety of academic disciplines, such as accounting, law,
  engineering, public administration, business administration, computer
  science, economics, medicine, and social and physical sciences.

Although today’s GAO is different from that of 1921, it has remained faithful
throughout its history to its original mandate of assuring the government’s
accountability to the American people. In addition, GAO has historically
defended its ability to conduct and report its work in an independent,
objective, professional, and nonpartisan manner in order to maintain the
credibility that an “honest broker” must have in order to have its
information, analyses, and judgments trusted by lawmakers, policymakers,
and the American people.

GAO has benefited from the past leadership of several of my predecessors.
In particular, I would like to commend my most recent predecessors, Elmer
B. Staats, who served from 1966 to1981 and, Charles A. Bowsher, who
served from 1981 to 1996, both of whom accomplished a great deal during
their 15 year tenures. Mr. Staats strengthened GAO’s emphasis on program
evaluation and policy analysis so that GAO would be better equipped to
review the expanded social programs of the Great Society. He also
promoted progress in federal financial and program accountability both



Page 2                                                           GAO-03-1167T
domestically and internationally. In addition, Mr. Staats was responsible
for the United States’ joining the International Organization of Supreme
Audit Institutions (INTOSAI), an organization composed of national audit
offices of 184 nations who share knowledge and expertise on an ongoing
basis. Mr. Bowsher championed federal financial management reform, in
general, and the Chief Financial Officers (CFO) Act, in particular. He also
initiated GAO’s high-risk series. In the human capital arena, it was Mr.
Staats who in 1980 successfully gained GAO’s legislative authority to
establish a broad-banding and pay for performance system that Mr.
Bowsher subsequently was able to implement in 1989. It is because of
their leadership efforts that GAO had certain initial human capital tools and
flexibilities for over two decades that many executive branch agencies are
either just requesting or recently received and was able to exercise them.

Today, GAO is an agency uniquely poised to serve the Congress with the
information it needs to address the full range of important issues and
challenges our nation faces in a complex, rapidly changing, and
increasingly interdependent world. We examine a broad range of federal
activities and programs, publish thousands of reports and other documents
annually, and provide a number of other services to the Congress. We also
look at national and international trends and challenges to anticipate their
implications for the Congress and our country. By making
recommendations to improve the practices and operations of government
agencies, we contribute not only to the increased effectiveness of federal
spending, but also to the enhancement of the taxpayers’ trust and
confidence in their federal government.

For us, achieving our goals and objectives rests on providing professional,
objective, fact-based, nonpartisan, nonideological, fair, and balanced
information to the Congress and the public at large. We develop and
present this information in a number of ways to support the Congress,
including the following:

• evaluations of federal policies and the performance of agencies;

• oversight of government operations through financial and other
  management audits to determine whether public funds are spent
  efficiently, effectively, and in accordance with applicable laws;

• insight related work that involves determining which programs work
  and which do not;




Page 3                                                           GAO-03-1167T
                   • foresight related work that is future oriented and involves identifying
                     key trends and emerging challenges before they reach crisis
                     proportions;

                   • reviews and analyses of agencies’ budgets in support of the
                     appropriations process;

                   • investigations to assess whether illegal or improper activities are
                     occurring;

                   • analyses of the financing for government activities;

                   • legal/adjudicatory activities, including legal opinions to determine
                     whether agencies are in compliance with applicable laws and
                     regulations and resolution of bid protests by disappointed bidders
                     seeking to obtain federal contracts;

                   • policy analyses to assess needed actions, develop options, and note the
                     implications of possible actions;

                   • “constructive engagements” whereby we help agencies make progress
                     in key areas by “helping them to help themselves” through the issuance
                     of self-help guides, benchmarking and best practice studies, etc.; and

                   • additional assistance to the Congress in support of its oversight and
                     decision- making involving legislative branch entities, activities, and
                     functions.

                   See appendix I for graphics describing GAO past and present.



GAO’S Downsizing   The 1990s was a difficult period for the GAO. Beginning in 1992, GAO
                   began an over 5-year period of significant staff downsizing. During the mid-
                   1990s, GAO underwent a 25 percent budgetary reduction that had to be
                   implemented over a 2-year period. In order to absorb such a large
                   budgetary reduction within such a short period of time, GAO undertook a
                   number of measures such as closing 5 field offices (including our European
                   and Far East field offices) and 4 sublocations in 1995. GAO also reduced its
                   workforce, using authority granted by the Congress, by granting voluntary
                   early retirements and buyouts and by conducting a reduction in force or
                   “layoffs” of staff in select field offices and in Washington, D.C. While the
                   measures taken allowed the agency to address the immediate budgetary



                   Page 4                                                           GAO-03-1167T
                         challenge, they also increased the risk that GAO would not be positioned
                         well to serve the Congress in the future. For example, GAO’s hiring freeze
                         at the entry level produced an over 5-year gap in the workforce pipeline
                         that affected a smooth succession and resulted in a top heavy workforce.
                         GAO also significantly reduced its investments in technology by curtailing
                         upgrades of hardware and software, which adversely affected its ability to
                         apply technology to perform work better, faster, and more efficiently. GAO
                         also eliminated bonuses and reduced other investments in its people.

                         Today, we have a significantly smaller staff--40 percent smaller than in
                         1992—with slightly over 3,250 staff on board. About 75 percent of our staff
                         are located in our headquarters in Washington, D. C. and 25 percent in 11
                         field offices around the country. While maintaining approximately the
                         same number of staff, we have been able to accomplish much in support of
                         the Congress. How was this made possible? First, we conducted a
                         comprehensive outreach and risk assessment shortly after I became the
                         Comptroller General. We identified risks that could undermine our ability
                         to support the Congress in future years, such as in the areas of human
                         capital and information technology and worked with our appropriations
                         committees to obtain targeted funding for those areas. We also determined
                         that the agency needed to undertake a transformation that even in the best
                         of organizations typically takes 7 or more years to accomplish. Critical to
                         that transformation was the development of a strategic plan that would
                         provide the agency a clear set of strategic goals and objectives.



Becoming More            Fortunately, before my becoming Comptroller General, GAO had
                         recognized the need to prepare a strategic plan. We made this a top priority
Strategic, Partnerial,   after my appointment as Comptroller General. GAO’s strategic plan, which
and Externally Aware     is developed in consultation with the Congress, is forward looking and built
                         on several key themes or trends that relate to the United States and our
                         position in the world community. GAO’s strategic plan continues to be a
                         model for others, a framework for aligning our organization and resources,
                         and a basis to help inform client requests and identify work initiated on the
                         Comptroller General’s authority (also termed research and development
                         work). Our strategic planning process provides for updates every 2 years,
                         including an ongoing analysis of emerging conditions and trends, extensive
                         consultation with congressional clients and outside experts, and
                         assessments of internal capacities and needs.

                         Our first strategic plan, issued in the spring of 2000, set forth the issues
                         around which we needed to focus and develop our resources to effectively



                         Page 5                                                           GAO-03-1167T
serve the Congress in covering the period 2000-2005. We updated the plan
in fiscal 2002, carrying forward the following four strategic goals, and will
retain these goals for our latest update scheduled to be issued in early 2004
(see appendix I of this statement for our strategic plan framework):

• Goal 1: Address current and emerging challenges to the well-being and
  financial security of the American people.

• Goal 2: Respond to changing security threats and the challenges of
  global interdependence.

• Goal 3: Help transform the government’s role and how it does business
  to meet 21st century challenges.

• Goal 4: Maximize the value of GAO by being a model federal agency and
  a world-class professional services organization.

Because achieving our strategic goals and objectives also requires
strategies for coordinating with other organizations with similar or
complementary missions, we use (1) advisory panels and other bodies (e.g.,
the Comptroller General Advisory Board, the Educators’ Advisory Panel,
the Accountability Advisory Board) to inform GAO’s strategic and annual
work planning and (2) initiate and support collaborative national and
international audit, technical assistance, and other knowledge-sharing
efforts. In order to leverage our resources and tap certain expertise not
resident in GAO, we have entered into a partnership agreement with the
National Academy of Sciences. Also, we have worked to foster
partnerships with other “good government” organizations, such as the
National Academy for Public Administration, the Private Sector Council,
the Council for Excellence in Government, the Partnership for Public
Service, and the Association of Government Accountants. These types of
strategic working relationships allow us to extend our institutional
knowledge and experience and, in turn, to improve our service to the
Congress, the country, and the American people.

As previously mentioned, since 1970 GAO has been part of an international
network, INTOSAI, which is composed of 184 accountability organizations.
We have benefited from this network directly as an organization doing
work in support of the Congress in that the relationships fostered by
INTOSAI have facilitated our access to people, information, and knowledge
sharing needed to maximize the value and ensure the expeditious
completion of our international engagements. It is my opinion that our



Page 6                                                           GAO-03-1167T
                       country has also benefited from our participation in this network because
                       our efforts have served to promote democratic institutions and fight
                       corruption through strengthening accountability organizations around the
                       world. I serve on the Board of INTOSAI and head of the Accounting
                       Standards Committee and the Board’s Strategic Planning Task Force. In
                       this regard, during fiscal 2002, GAO was asked to lead a 10-nation task
                       force to develop a strategic planning framework for INTOSAI. INTOSAI’s
                       draft strategic planning framework, which was based on GAO’s approach
                       to strategic planning, was approved by INTOSAI’s Board in October 2002.
                       During fiscal 2003, the task force has been working to expand that
                       framework into a comprehensive strategic plan. GAO also is an active
                       member of the auditing standards, internal control standards, and public
                       debt committees. I am a founder of the Global Working Group (GWG), in
                       which the heads of GAO’s counterparts from 17 countries and I meet
                       annually to discuss mutual challenges and share best practices. These 18
                       members represent over 75 percent of global gross domestic product
                       (GDP), and the efforts of this group have helped all member countries as
                       well as INTOSAI as a whole.

                       Domestically, I chair the National Intergovernmental Audit Forum, and
                       through 10 regional intergovernmental audit forums, GAO consults
                       regularly with federal inspectors general as well as state and local auditors
                       on issues of mutual interest and concern. In addition, through the
                       Domestic Working Group (DWG), the Comptroller General and the heads
                       of 18 federal, state, and local audit organizations exchange information and
                       seek opportunities to collaborate in a manner similar to the GWG. As
                       Comptroller General, I also serve as one of the four principals of the Joint
                       Financial Management Improvement Program (JFMIP), who are actively
                       fostering financial management reform. The JFMIP principals have met
                       five times during the past 2 years with significant progress being made
                       during this period of time.



GAO’S Transformation   In a testimony on executive reorganization authority that I delivered in
                       April this year, I stated that creating high performing organizations requires
Efforts                a cultural transformation within agencies. Hierarchical management
                       approaches will need to yield to participative approaches. Process-
                       oriented ways of doing business will need to yield to results-oriented ones.
                       Siloed organizations—burdened with overlapping functions, inefficiencies,
                       and turf battles—will need to become more horizontal and integrated
                       organizations if they expect to make the most of the knowledge, skills, and
                       abilities of their people. Internally focused agencies will need to focus



                       Page 7                                                            GAO-03-1167T
externally in order to meet the needs and expectations of their ultimate
clients—the American people.

Consistent with our strategic plan’s fourth goal, I believe that GAO should
“lead by example” and be a model federal agency and world-class
professional services organization. As the leading performance and
accountability organization in the United States and possibly the world,
GAO should be the federal government’s model for best practices in every
major operational area, from strategic planning and organizational
alignment to performance and accountability reporting, client service,
human capital practices, financial management, information technology,
change management, and knowledge management. To achieve this, we
have undertaken a comprehensive transformation effort over the past few
years. Leading this transformation team is an Executive Committee that I
established to provide strategic leadership. The members of the Committee
include myself as Chief Executive Officer; Gene Dodaro, Chief Operating
Officer; Sallyanne Harper, Chief Mission Support Officer and Chief
Financial Officer; and Anthony Gamboa as our General Counsel. Together,
we have focused GAO’s transformation efforts on three primary areas:
results, clients, and people.

Our efforts to transform GAO into a high performing organization have
included a range of internal and external initiatives that has helped us
become more strategic, results-oriented, partnerial, integrated, responsive,
flexible, employee oriented, externally focused and constructive with those
who we audit. Our strategic and annual planning processes, as discussed
earlier, have helped us look forward and allowed us to proactively engage
our clients in planning work that is focused on a more balanced time
horizon and results orientation. Our organizational restructuring efforts
have resulted in a significant streamlining and consolidation. We have
expanded and revised our products to better meet client needs. In
addition, we have redefined success in results-oriented terms and have
linked our goals both to institutional and individual performance measures.
We have strengthened our client relations and employed a constructive
engagement approach to those we review. The impact of these and other
efforts has been dramatic.

Over the past 4 years, we have worked on continuously improving GAO’s
performance measures, including most recently the development of a
balanced scorecard that would allow us to better monitor, track, and report
the achievement of results. Measuring the right things is vitally important
because you manage what you measure and measurements ultimately drive



Page 8                                                          GAO-03-1167T
                              basic organizational and individual behaviors. The performance measures
                              that I found upon arriving at GAO were similar to other traditional
                              performance measures in that, among other things, some of them focused
                              on items that can be easily counted (e.g., numbers of reports); were
                              numerous and of undifferentiated significance; and were process-oriented
                              rather than results oriented. Our balanced scorecard is based on the three
                              key areas that I mentioned earlier: results, clients, and people. For results,
                              we measure such items as: financial benefits, other (nonfinancial) benefits,
                              progress towards meeting the strategic plan’s goals and objectives, number
                              of recommendations made, the percentage of reports with
                              recommendations; and the percentage of our recommendations adopted.
                              For clients, we measure such items as: direct client feedback on individual
                              products and testimonies, number of testimonies, and timeliness. For
                              people, we measure: attracting and retaining quality talent; developing,
                              supporting, and using staff; and leading, recognizing, and listening to staff.



Realigning the Organization   After our strategic plan was developed in 2000, we used it to restructure
                              our organization in that same year to align with the goals and objectives of
                              our strategic plan. Restructuring can be an important tool, but in order to
                              be effective, it must be focused on clear goals and specific desired
                              outcomes. GAO’s restructuring resulted in the elimination of a layer of
                              management and the consolidation of 35 issue areas into 13 teams. These
                              teams perform the bulk of our research, analysis, and audit work for the
                              Congress.

                              Of the agencies in the legislative branch, GAO is the only one with a field
                              office presence that has allowed it to be Congress’ “eyes and ears” beyond
                              the nation’s capital. However, with changes in air transportation, computer
                              technology, demographics, and federal presence, our field office structure
                              needed to be reexamined. After extensive study, we continued a process
                              that began in 1986 and, as a result of the organizational realignment effort
                              referenced above, further reduced our field offices from 16 to 11.
                              Subsequently, we further restructured our field offices by eliminating the
                              position of regional manager—a Senior Executive Service level position—
                              in the individual field offices and consolidating the remaining field offices
                              into three regions—the eastern region, the central region, and the western
                              region, each headed by a single senior executive.



Achieving Results             GAO’s contributions to the Congress and our country are significant and
                              varied. While our contributions to financial benefits are quantifiable, what


                              Page 9                                                            GAO-03-1167T
is more difficult to quantify and yet very valuable, are contributions to help
inform the national debate on a broad spectrum of issues; providing the
Congress with assistance such as reviews of agency budgets that help
identify areas of potential savings; preventing major problems from
occurring through constructive engagement efforts, when appropriate,
with agencies to “help them help themselves” make progress in key areas;
leading by example to demonstrate to agencies what can be done to
advance management reform; and advancing the accountability
community, both domestically and internationally, through the sharing of
best practices and methodologies in areas where GAO is a recognized
leader, such as performance auditing, financial auditing and reporting,
standards setting, and governance.

To move towards a results orientation, we have reexamined our desired
outcomes and are working to simplify and improve our performance
measures to capture those contributions that are most significant.
Beginning with the issuance of our strategic plan, we monitor our progress.
Fortunately, by any reasonable benchmark, we are making excellent
progress towards achieving most of our performance goals. We also
modified our performance measures and eliminated specific goals, such as
the number of products issued, which, while easy to count, was not results-
oriented and did not have a strong enough correlation to positive results.

GAO delivers by any benchmark, an excellent return on investment to the
Congress and the American people. I would like to briefly summarize some
of our achievements over the past 5 years. Our financial and nonfinancial
accomplishments have increased steadily over the past 5 years, and some
have almost doubled. See table 1 for a summary of GAO’s financial and
nonfinancial benefits.




Page 10                                                           GAO-03-1167T
Table 1: Annual Measures and Targets

                                                                                                2002
                                                                                                                       5-year
                                        1998        1999         2000          2001                                      Avg.          2003
Performance measure                    Actual      Actual       Actual        Actual        Target       Actual        Actual         Target
Financial benefits (billions)           $19.7        $20.1        $23.2        $26.4          $30.0       $37.7a        $25.4         $32.5b
Other benefits                              537        607          788          799            770          906          727           800b
Past recommendations implemented            69%       70%          78%          79%            75%          79%           N/A           77%
New recommendations made                    987        940        1,224        1,563          1,200        1,950        1,333         1,250b
New products with recommendations           33%       33%          39%          44%            45%          53%          40%            50%
Testimonies                                 256        229          263          151            200          216          223           180b
Timeliness                                  93%       96%          96%          95%            98%          96%          95%            98%
Source: GAO.
                                        a
                                         Changes GAO made to its methodology for tabulating financial benefits caused the fiscal 2002 results
                                        to increase about 11 percent.
                                        b
                                         Four targets published in GAO’s performance plan for fiscal 2003 were subsequently revised based
                                        on more current information. Two were raised; two were lowered. The original targets were financial
                                        benefits, $35 billion; other benefits, 785; recommendations made, 1,200; and testimonies, 210.


                                        As depicted in table 1, in fiscal year 1998, for every dollar invested in GAO,
                                        we helped the Congress and the agencies produce about $58 in financial
                                        benefits or $19.7 billion in total. In fiscal year 2002, for every dollar
                                        invested in GAO, we helped the Congress and the agencies produce about
                                        $88 in financial benefits or $37.7 billion in total. The 5-year average for
                                        financial benefits was $25.4 billion for fiscal years 1998 through 2002.
                                        These financial benefits were achieved through actions taken by the
                                        Congress and federal departments and agencies that led to budget
                                        reductions, avoided costs, deferred appropriations, or resulting in
                                        additional revenue collections. Several recent examples of where our work
                                        resulted in significant financial benefits include our work in preventing
                                        inappropriate Medicare payments (financial benefits of $8.1 billion) and
                                        our work on the Department of Defense’s (DOD) consolidation initiatives
                                        at its computer centers (financial benefits of $859 million). Based on our
                                        results to date, we fully expect our fiscal year 2003 financial benefits to
                                        significantly exceed the 5-year average.

                                        GAO’s work has helped inform congressional deliberations and debate on a
                                        broad spectrum of issues. During the 107th Congress, we made substantive
                                        contributions through our products, testimonies, briefings, and technical
                                        assistance in areas vital to helping legislators address challenges to our
                                        nation’s national security, homeland security, economic security, as well as



                                        Page 11                                                                              GAO-03-1167T
the financial security of Americans. For example, during the 107th
Congress, GAO’s work supported legislative deliberations and policy
decisions involving the Homeland Security Act of 2002, Public Law 107-296;
the Aviation Security and Transportation Act, Public Law 107-71; the
Sarbanes-Oxley Act of 2002, Public Law 107-204; Help America Vote Act of
2002, Public Law 107-252; Best Pharmaceuticals for Children Act, Public
Law 107-1092; Terrorism Insurance Act of 2002, Public Law 107-297; and the
E-Government Act of 2002, Public Law 107-347. Our work has also helped
facilitate the transformation of the federal government in general. More
specifically, our efforts have helped identify the attributes of high
performing organization, challenges in the human capital arena,
competitive sourcing, and reforms needed for specific entities like the U. S.
Postal Service and the Pension Benefit Guaranty Corporation.

In addition to financial benefits, GAO’s work has led to improvements in a
wide range of government operations and activities. GAO’s work was
instrumental in bringing 906 needed improvements in the effectiveness and
efficiency of government operations and services in fiscal year 2002. Since
most of the results of our work take the form of action initiated in response
to our recommendations, we use the number of recommendations made
during the year as a performance measure. In fiscal year 2002, we made
1,950 recommendations for improvements in the economy, efficiency, and
effectiveness of federal operations. An example of recommendations that
led to such improvements is our work on improper payments, where we
made recommendations on actions agencies should take to reduce
improper payments. These recommendations not only led to the
enactment of the Improper Payments Information Act of 2002, Public Law
107-300, but also resulted in action by the Office of Management and
Budget (OMB) through the President’s Management Agenda which required
selected agencies to report improper payment rates and the causes of those
payments. Because our recommendations take time to implement, we
track recommendations made in past years. Specifically, in fiscal year
2002, we noted that 79 percent of the recommendations we had made in
fiscal 1998 had been implemented, a significant percentage when the work
we have done for the Congress becomes a catalyst for creating tangible
benefits for the American people.

GAO continued its long-standing tradition of providing the Congress a
framework for oversight through the issuance of our Performance and
Accountability Series and High-Risk Update. Our 2001Update identified
close to 100 major management challenges and program risks at 21 federal
agencies and highlighted actions to address these serious problems. In



Page 12                                                          GAO-03-1167T
                     preparing the 2001 update, we established a new framework with respect
                     to the High Risk list that provided greater consistency in determining
                     which areas should be designated high risk and which areas would be
                     eligible for getting off the high risk list. Our 2003Update added the new high
                     risk issues Implementing and Transforming the New Department of
                     Homeland Security, Modernizing Federal Disability Programs, Federal Real
                     Property, and the Medicaid Program; subsequently, we added the Pension
                     Benefit Guaranty Corporation’s Single-Employer Insurer Program. We are
                     currently examining ways of improving on our Performance and
                     Accountability Series and High-Risk Update with an eye towards making
                     it even more strategic and foresight oriented.



Serving the Client   From the beginning of my tenure, I have sought to strengthen relations and
                     improve communications with our congressional clients. Addressing client
                     needs is critical to any organization’s success, and while GAO is unique in
                     that it must provide the Congress its best professional opinion in a political,
                     and sometimes contentious, environment, it must be perceived by its client
                     as meeting its needs. Both prior to and subsequent to my appointment as
                     Comptroller General, I consulted broadly with key Members and staff in
                     both houses and on both sides of the aisle as well as with a variety of other
                     parties. Based on this outreach, some believed or perceived that GAO may
                     have strayed from important values related to its mission, may have
                     become closer to one political party, and, may not have effectively
                     managed its staff details to certain congressional committees. Another
                     concern that I heard was that GAO’s basis for decision making on requests
                     was not very transparent, well known, or understood.

                     To address these issues, upon becoming the Comptroller General, I
                     immediately worked with GAO’s top management to establish and
                     communicate to all GAO staff our mission and core values, to guide what
                     we do and how we do our work. Our mission statement states: “GAO
                     exists to support the Congress in meeting its constitutional responsibilities
                     and to help improve the performance and ensure the accountability of the
                     federal government for the benefit of the American people.” After a lot of
                     discussion and debate, we agreed on an express set of core values to guide
                     our work. GAO’s core values are accountability, integrity, and reliability.
                     The values are further defined as follows:

                     • Accountability: We help the Congress oversee federal programs and
                       operations to ensure accountability to the American people. GAO’s
                       analysts, lawyers, auditors, economists, information technology



                     Page 13                                                           GAO-03-1167T
   specialists, investigators, and other multidisciplinary professionals seek
   to enhance the economy, efficiency, effectiveness, and credibility of the
   federal government both in fact and in the eyes of the American people.

• Integrity: We set high standards for ourselves in the conduct of GAO’s
  work. Our agency takes a professional, objective, fact-based
  nonpartisan, nonideological, fair and balanced approach to all activities.
  Integrity is the foundation of reputation and the GAO approach to work
  ensures both.

• Reliability: We at GAO want our work to be viewed by the Congress and
  the American public as reliable. We produce high-quality reports,
  testimony, briefings, legal opinions, and other products and services that
  are timely, accurate, useful, clear and candid.

These are values that represent our institutional beliefs and boundaries. I
use them every day in my internal and external decision making. Both our
mission and core values are communicated externally and internally
through many venues.

In addition, we also developed and implemented a set of Congressional
Protocols—policies and procedures—to guide our interactions with and
ensure our accountability to the Congress. These protocols, which
underwent a 9-month pilot test, set out clear, transparent, consistently
applied policies and practices for GAO’s relations with the Congress. They
are designed to help reduce miscommunications and ensure that our
congressional requesters are treated both consistently and equitably. The
final protocols were issued in November 2000 and have been well received.
We are in the process of updating our Congressional Protocols now and
will be vetting them with your Committee and others before finalizing the
revisions.

To respond more effectively to the Congress, we changed our process for
accepting congressional requests (if accepted, these requests are termed
engagements) and our approach to identifying related risk. We have
become increasingly sophisticated in meeting our clients’ needs within
available resources. We believe that our engagement acceptance process
has provided more structure; a broader institutional perspective; greater
internal collaboration; and additional awareness of the external
environment, including potential partnerships in connection with GAO
engagements. Annually, in addition to mandates established in law, we
receive over a thousand requests from the Congress, with most coming



Page 14                                                          GAO-03-1167T
from congressional committees and lesser numbers from individual
members of Congress and the senior leaders. To address these requests in
a timely basis and allow for prompt communication back to the requesters,
the requests are reviewed and discussed in a weekly meeting chaired by
Gene Dodaro, our Chief Operating Officer. During that meeting, members
of the Executive Committee and GAO’s managing directors discuss
congressional requests received during the previous week. As part of that
discussion, we determine whether to accept the request based on
consideration of factors such as our ability to carry out the work in terms
of both authority and resources available, work that may already be
ongoing, and the priority assigned to the requester based on those set forth
in our Congressional Protocols. Also, during that meeting, a risk factor is
assigned to the engagement that will, among other things, determine the
level of product review required before issuance. To facilitate the
timeliness of our response to our clients, I have delegated to our team
managing directors the authority to sign off on products with lower risk
designations.

In the interest of leading by example and promoting transparency and
accountability in government, we provide annual Performance and
Accountability reports to the Congress and the public. We have also
improved congressional access to GAO information on our active
assignments and our products. GAO’s first Accountability Report to the
Congress, which discusses our performance and accountability in serving
the Congress and the American people, was issued for fiscal year 1999. For
fiscal year 2001, we issued a performance plan that contained the
performance measures and annual performance targets we planned to use
to gauge progress towards accomplishing our strategic goals and
objectives. For 2002, we combined an assessment of our accomplishments
in fiscal year 2001 with our plans for continued progress through fiscal year
2003 into one performance and accountability report and issued a new and
condensed “highlights report.” George Mason University’s Mercatus
Center evaluated our fiscal year 2002 Performance and Accountability
report at our request and ranked GAO’s report number one in the federal
government. The report earned a Certificate of Excellence in
Accountability Reporting from the Association of Government Accountants
(AGA). It also earned honors for graphics design in the annual American
Graphics Design Award competition of 2003. The annual competition
attracts about 10,000 entries from advertising agencies, graphic design
firms, corporate creative departments, and publishers in a wide range of
categories, and fewer than 10 percent were selected for awards.




Page 15                                                          GAO-03-1167T
In the past, GAO has made several attempts to devise systems for
measuring how well it was meeting the needs of our congressional clients,
yet none of these attempts proved to be particularly successful. We now
seek direct client feedback through our continuous congressional outreach
effort and a Web-based client feedback survey on certain individual
products and testimonies. These initiatives are set forth as follows.

• Continuous congressional outreach. Since the mid-1990s, we have
  conducted a structured outreach to our key congressional clients—the
  Senate and House senior leaders and the congressional committees—in
  order to obtain feedback on our performance, discuss the legislative
  agenda for the coming year and how GAO can best support the
  Congress, and obtain information needed to update our strategic plan.

• Feedback on individual products. In fiscal year 2001, we developed a
  Web-based process to more effectively collect feedback from
  congressional clients on our reports and products. This new system,
  which we piloted for 7 months with our oversight committees and
  implemented in fiscal year 2002, used E-mail and a Web site to obtain
  client feedback on (1) product timeliness and (2) communications and
  professional conduct during the engagement for a sample of recently
  issued products. For example, of those who responded, we received a
  91 percent favorable response rate for our testimonies and a 93 percent
  favorable response rate for our written products for the period covering
  March through November 2002. Indications are that the favorable
  response rate for our products and testimonies is holding for this fiscal
  year as well.

• Congressional testimonies. Since the early 1980s, GAO’s testimonies at
  congressional hearings have increased. At one time, only the
  Comptroller General and a few others could testify. My predecessor, Mr.
  Bowsher, expanded the pool of potential GAO witnesses to our senior
  executive corps. During fiscal 2002, members of our senior executive
  service or I testified 216 times in fiscal year 2002 across a broad
  spectrum of congressional committees, sometimes on as little as 24
  hours notice.

• Timeliness. Given the time sensitive nature of the legislative process
  and the fact that information delivered after decisions have been made
  is not useful, we have worked hard to make sure that information is
  provided in a timely manner. In fiscal year 2002, our on-time delivery




Page 16                                                        GAO-03-1167T
                            rate was 96 percent. Of our seven agencywide annual performance
                            targets, timeliness was the only measure that we did not fully meet.

                         Recognizing that members and key staff are inundated with information
                         and pressed for time, we sought better ways of communicating information
                         to them. We initiated efforts in fiscal year 2001 to revamp our
                         communications strategy. We piloted and have now implemented for most
                         of our products and testimonies a new reporting product line entitled
                         Highlights—a one-page summary that provides the key findings and
                         recommendations from a GAO engagement. This summary has been
                         extremely well-received by our congressional audience as well as the press
                         and the general public. In addition, we continue seeking better ways to
                         communicate, including presenting information in a visual manner to
                         quickly convey the message.

                         We have applied technology and used our Website to issue and publicize
                         our products not only to the Congress, but also to the general public. Our
                         external website now logs about 130,000 hits each day and more than 1
                         million GAO products are downloaded every month by our congressional
                         clients, the public, and the press. Further, to better inform the client about
                         the work we have in progress, we have implemented a Web-accessible
                         active assignment list for congressional clients and to facilitate key
                         contacts, enhanced the search capability for GAO products on our external
                         Web site.

                         In yet another example of serving the Congress, GAO opened our doors to
                         Members of the House of Representatives and their staffs on October 23,
                         2001, in response to the anthrax incident on Capitol Hill. As an outgrowth
                         of that experience, the House of Representatives has designated GAO one
                         of its contingency sites in the event of an emergency in order to maintain
                         legislative continuity of operations.



Fostering Constructive   To better maximize our value to the Congress and work smarter, we have
Agency Relations         increased our constructive engagement efforts with other agencies. Rather
                         than deal with problems after the fact, piecemeal, or when they’ve reached
                         crisis proportions, we are working to prevent problems by pointing out
                         what is right, recognizing the progress made, and guiding agencies to
                         positive results by publishing self-assessment guides that provide tools
                         with which agencies can help themselves. One area in particular where
                         this has made a big difference is information technology. As we have
                         reported repeatedly, the federal government does not have the systems in



                         Page 17                                                           GAO-03-1167T
place that can provide accurate and real-time information for legislators
and policymakers to evaluate program effectiveness and efficiency.
However, our benchmarking and best practices studies are recognized
industrywide for their excellence. Other examples of our assisting
agencies include GAO’s work in strategic planning, human capital, and
financial management.

To this end, we have worked hard to cultivate good working relations with
the Office of Management and Budget (OMB) and Cabinet-level officials.
These relations have proven mutually beneficial. Because Congress’ need
for information is time sensitive, having good working relations with the
executive branch agencies has helped us overcome bureaucratic inertia or
resistance in their providing information in a timely manner. As part of our
constructive engagement efforts, we have assisted in the congressional and
presidential transitions and provided new legislators and officials with
information about the challenges facing them. These and other
constructive engagement efforts are helping focus increased attention on
major management challenges and high-risk issues, thus contributing to
good government. Our Performance and Accountability Series and High
Risk Update has proven useful in carrying out our responsibility under the
Presidential Transition Act in that it helped serve as a key source of
information for the incoming administration and Members of the 107th
Congress. In addition, the President’s Management Agenda (PMA) for
reforming the federal government mirrors many of the management
challenges and program risks that GAO reported on in its 2001
Performance and Accountability Series and High-Risk Update, including
a governmentwide initiative to focus on strategic management of human
capital.

To minimize misunderstanding and miscommunication between us and the
agencies relating to how we do our work and report the results, we piloted
a first-ever set of agency protocols for a 6-month period from December
2002 through June 2003, to guide our interactions with federal agencies and
provide clearly defined, consistently applied, well-documented, and
transparent policies for conducting our work with these federal agencies.
In developing the protocols, we sought comments from 28 federal
departments, agencies, and entities and are in the process of considering
their comments. After analyzing the comments from the pilot, we plan to
implement the agency protocols in fiscal year 2004.




Page 18                                                         GAO-03-1167T
Investing in People: Human   Given GAO’s role as a key provider of information and analyses to the
Capital Initiatives          Congress, maintaining the right mix of technical knowledge and expertise
                             as well as general analytical skills is vital to achieving our mission. We
                             spend about 80 percent of our resources on our people. I think it is fair to
                             say that while our people account for 80 percent of our costs, they
                             constitute 100 percent of our real assets. Without excellent human capital
                             management, we could still run the risk of being unable to deliver what the
                             Congress and the nation expects of us. For this and other reasons, we seek
                             the additional human capital flexibilities contained in S. 1522.

                             At the beginning of my term in fiscal year 1999, we completed a self-
                             assessment that profiled our human capital workforce and identified a
                             number of serious challenges facing our workforce, including significant
                             issues involving succession planning and imbalances in the structure,
                             shape, and skills of our workforce. As presented below, through a number
                             of strategically planned human capital initiatives over the past few years,
                             we have made significant progress in addressing these issues. The
                             flexibilities provided GAO in the GAO Personnel Flexibilities Act of 2001,
                             Public Law 106-303, enacted on October 26, 2000, was a contributing factor
                             in helping us reshape the organization. In fiscal years 2002 and 2003,
                             because of the authority granted us under the law, we granted voluntary
                             early retirement to 52 employees in fiscal year 2002 and 37 employees in
                             fiscal year 2003. As a result of our various human capital initiatives, as
                             illustrated in figure 1, by the end of fiscal year 2002, we had almost a 60
                             percent increase in the percentage of staff at the entry-level (Band I) as
                             compared with fiscal year 1998. Also, the proportion of our workforce at
                             the mid-level (Band II) decreased by 8 percent.




                             Page 19                                                         GAO-03-1167T
Figure 1: GAO’s Human Capital Profile
                              FY 1998                                FY 2002

    Mission    SES/SL               3.4                                   3.5

               Band III         12.2                                  12.0

               Band II          45.6                                  38.1

               Band I           13.1                                  22.8

               Othera               4.2                                  4.1

    Mission Supportb            21.5                                  19.5

    Figures in percentages
Source: GAO.
a
Attorneys and criminal investigators.
b
Mission support includes both mission and mission support offices.


One of my top priorities when I became Comptroller General was to
enhance internal communications as a means of empowering staff and
facilitating our agency transformation and our change management efforts.
This has been accomplished through various means. For example, any
GAO staff member can e-mail me with comments and concerns, and
believe me, I do respond. Since becoming Comptroller General, I have
provided employees throughout GAO the opportunity to provide me their
views through a periodic, now annual, confidential employee survey. An
independent contractor collects the survey results and aggregates them.
They then are provided to GAO’s managing directors and me. Employees
are also given the opportunity to provide written narrative comments that I,
and I alone, receive for review. I recently received the results of the 3rd
employee survey in which 89 percent of GAO’s workforce responded and
2,101 provided me with written narrative comments, which I personally
read. Highlights of this most recent employee survey are as follows.

• The results of the 2003 Employee Survey were by and large very
  positive. Of those questions with a basis for year-to-year comparisons,
  employee satisfaction (as measured by the number of strongly
  agree/agree responses) was up in 72 of the 83 areas, with one area
  remaining unchanged.

• Critical “People Measures Scores,” which are used in our balanced
  scorecard and reported externally, went up in all four areas (i.e.,




Page 20                                                                         GAO-03-1167T
   organizational climate, staff utilization, leadership, and staff
   development) in 2003 versus 2002. The increases in people measures
   were attributable to both new and experienced staff responses to the
   2002 survey.

• In comparing our results to OPM’s 2002 survey of executive branch
  agencies for 11 benchmark questions, our 2003 survey results were
  higher than the governmentwide benchmark numbers for 9 of 11
  comparable questions. GAO’s overall average positive score for these
  11 benchmark questions was about 10 percent higher than the OPM
  benchmark questions’ average. Similarly, for the four benchmark
  questions also applicable to the private sector, GAO’s scores were higher
  than both the private sector and government averages in all four areas,
  significantly so in three of the four questions.

• Some areas, such as encouraging innovation and creativity and soliciting
  and considering employee views, went up dramatically, which are big
  steps in the right direction with respect to our overall transformation
  effort.

• There was only one area where the positives went down and the
  negatives went up, and that was in the area of requiring our employees
  to prepare Individual Development Plans (IDP). As a result, we are
  reassessing and reconsidering our approach to IDPs.

I have also used periodic CG “Chats,” which are closed-circuit telecasts to
all agency staff. Through the years, I have used these telecasts on
numerous occasions to discuss critically important issues, such as GAO’s
strategic plan and congressional protocols, client service, employee survey
results, work processes, organizational alignment, information technology-
- including our most recent human capital initiative, which your committee
is considering today. In addition, we established an employee suggestion
program in October 1999 as a means of tapping the ideas and ingenuity of
GAO staff members to improve the agency’s processes, products, and
services. Since the start of the program, 2,348 suggestions have been
submitted, of which 345 have been accepted, with most of the remaining
either rejected or closed because they didn’t meet the program’s criteria or
had duplicated earlier suggestions.

One of the areas of which I am most proud is the establishment of our now
fully democratically elected Employee Advisory Council (EAC). This 23-
member Council represents virtually every group of GAO employees. The



Page 21                                                         GAO-03-1167T
members of the Executive Committee and I use this Council to discuss
current and emerging issues of mutual interest and concern and to
continuously improve GAO. While the EAC opted not to testify today, I
understand that they have submitted a statement for the record on GAO’s
human capital proposal.

Other major human capital initiatives include the following:

• Recruiting talented staff. Because of the budget reductions of the mid-
  1990s, GAO froze hiring, which created an over 5-year gap in its
  workforce pipeline. In fiscal year 1998, we resumed hiring, and in fiscal
  year 2002, we hired nearly 430 permanent staff and 140 interns. We also
  developed and implemented a strategy to place more emphasis on
  diversity in campus recruiting. A recent article in the Washington Post
  lauded GAO’s recruitment innovations and efforts as an example of a
  federal agency that is approaching recruiting right.

• Identifying and assessing skills. A modern professional services
  organization needs to know what skills its workforce possesses and be
  able to readily assess those skills in support of its clients. GAO has
  conducted an agencywide assessment and inventory of our workforce’s
  knowledge and skills that is updated periodically.

• Retaining staff with critical skills. A challenge facing the federal
  government is the retention of critical skills, particularly in the technical
  areas. Using the authority granted us by Public Law 106-303, we
  established a corps of senior level executives who have the pay and
  benefits of the Senior Executive Service but need not be generalist
  managers. To retain staff with critical skills and staff with less than 3
  years of GAO experience, we implemented legislation authorizing
  federal agencies to offer student loan repayments in exchange for
  certain federal service commitments. GAO ranks as one of the top
  agencies in providing student loan repayments. GAO also periodically
  administers an employee preference survey that is being used along
  with the results of the knowledge and skills inventory to meet our
  institutional work needs while accommodating staff preferences for
  types of work to the extent possible. In addition, we have recently
  instituted a new knowledge transfer and succession planning program
  that would allow select retirees to become reemployed annuitants for
  up to 2 years following retirement in order to facilitate the transfer of
  knowledge in critical areas and allow for a smooth transfer of
  responsibilities.



Page 22                                                           GAO-03-1167T
• Modernizing the performance assessment system. In fiscal year 2002,
  GAO completed an overhaul of its performance assessment system and
  implemented a new, modern, effective, and credible performance
  appraisal system for analysts and specialists; adapted the system for
  attorneys; and began modifying the system for administrative
  professional and support staff. Our performance standards were
  revised to incorporate our core values and strategic goals. We also
  updated descriptions of performance to better reflect the current nature
  of our work and implemented other key concepts, such as leadership-
  by-example, client service, measurable results, matrix management,
  open and constructive communications, and balancing people and
  product considerations.

• Investing in training. One of the down sides of the budget reductions of
  the mid-1990s was that GAO reduced its training investment in
  employees. World-class professional service organizations with staffs
  similar to GAO’s multidisciplinary workforce invest nearly 6 percent of
  their budgets in training staff. GAO’s investment in training its staff in
  fiscal year 1998 was less than that. We have resumed our training
  investment, but with an eye towards maximizing the efficiency and
  effectiveness of our investment. To this end, we have hired a Chief
  Learning Officer and established a new Learning Board to guide our
  Center for Performance and Learning in formulating its training
  priorities. We have also begun developing a new core training
  curriculum for managers and staff to provide additional training on the
  key competencies required to perform GAO’s work.

• Creating incentives and improving recognition. One of the areas that I
  have championed since coming into office has been establishing the
  allocation of pay on a more performance-oriented basis. We have been
  fortunate to be the beneficiaries of excellent recruits, due in part to the
  economic downturn, a renewed interest in public service following the
  events of September 11, 2001, and our innovative human capital
  strategies. Retaining these recruits, however, will require a range of
  efforts including providing a continuous learning environment, adequate
  technological support, and reasonably competitive compensation. Also,
  for those who have made GAO their careers, there should be rewards for
  outstanding performance. For example, during fiscal year 2003, we
  began providing performance bonuses to top performers who are “pay
  capped”—those who, because they have reached the pay ceiling, are
  ineligible for any permanent pay increases.




Page 23                                                          GAO-03-1167T
                             S. 1522 would help us continue to invest in our people and attract, recruit,
                             and retain staff with the critical skills we need.



Building an Integrated and   Information technology is critical to our productivity, success, and viability.
Reliable Information         As such, we have been working on a number of initiatives to enhance and
                             protect our investments in information technology. Specifically, we have
Technology Infrastructure
                             • completed a comprehensive review of our information technology;

                             • rechartered and reestablished our Information Technology Investment
                               Committee to provide high-level vision, review, and approval of program
                               initiatives to transition from the current technological environment to
                               the target one.

                             • developed, as required by the Clinger-Cohen Act, an enterprise
                               architecture program—a blueprint for operational and technological
                               change;

                             • expanded information systems security efforts and disaster recovery
                               systems that allow for continuity of operations;

                             • made progress to implement a risk-based, agencywide security program,
                               provide security training and awareness, and develop and implement an
                               enterprise disaster recovery solution; and

                             • begun implementing an information security program consistent with
                               the requirements in the Government Information Security Reform
                               provisions (commonly referred to as “GISRA”) enacted in the Floyd D.
                               Spence National Defense Authority Act for fiscal year 2001.

                             During 2002 and 2003, we acquired new hardware and software and
                             developed user-friendly systems that enhanced our productivity and
                             responsiveness to the Congress. Specifically, we replaced aging desktop
                             workstations with notebook computers that provided greater computing
                             power, speed, and mobility; developed new, integrated, user-friendly Web-
                             based systems that eliminate duplicate data entry while ensuring the
                             reusability of existing data; expanded the availability of cellular phones and
                             personal digital assistants to GAO’s senior management; and added video
                             broadcast capability to the desktop. In addition, we upgraded remote
                             access capability, improving the speed and reliability of dial-up connections
                             to GAO’s information technology facilities; completed communications



                             Page 24                                                            GAO-03-1167T
                         upgrades to the field to provide high-speed, reliable connectivity to the
                         GAO network; replaced aging videoconferencing equipment with current
                         technology; and began planning communications upgrades to support
                         evolving video technologies.

                         Recently, the CIO Magazine’s August 15, 2003, issue named GAO as a “CIO
                         100” organization, thereby recognizing GAO’s excellence in managing
                         information technology resources. Of the over 400 applicants from both
                         the public and private sectors, GAO was one of just three federal agencies
                         named a “CIO 100”. Specifically, GAO was recognized for asset
                         management (i.e., getting the most out of it existing systems), staffing and
                         sourcing (i.e., flexible and creative approaches to meeting personnel
                         needs), and partnerships (i.e., building internal and external relationships
                         to deliver new products and services). In addition, GAO was specifically
                         cited for a best practice—staffing new projects through internal “help
                         wanted” ads.



Reengineering Business   As part of the organizational realignment implemented in calendar year
Processes                2000, we established an internal group whose mandate was to focus on
                         business process reengineering as a tool for increased productivity and
                         knowledge management. One of the accomplishments of this group was
                         the launching of the Electronic Assistance Guide for Leading
                         Engagements—the EAGLE, which is the prototype of a comprehensive
                         Web-based guide to conducting GAO engagements. Recently, we have
                         established a Continuous Improvement Board to guide the activities of the
                         group that has been integrated into our Quality and Continuous
                         Improvement office.

                         Along with our realignment, we also implemented two new management
                         strategies: risk management and matrix management. GAO’s risk
                         management approach allows management to identify key stakeholders
                         throughout an engagement, to transcend traditional organizational
                         boundaries, to maximize value, and manage risks in connection with GAO’s
                         engagements and other activities. GAO’s matrix management approach
                         maximizes our value to the Congress by leveraging the knowledge, skills,
                         and experience of all employees to ensure the highest quality products and
                         services and to help the Congress address the challenging, complex, rapidly
                         changing, and multidimensional problems facing the nation.




                         Page 25                                                          GAO-03-1167T
Being Good Stewards of Our   As the leading performance and accountability organization in the public
Financial Resources          sector, it is vital that GAO set the example in the area of financial
                             management as well. GAO’s financial statements for fiscal years 2002, like
                             those for fiscal years past, received an unqualified opinion from an
                             independent auditor. No material weaknesses in internal control were
                             identified, and the auditor reported substantial compliance with the
                             requirements in the Federal Financial Management Improvement Act of
                             1996 (the Improvement Act) for financial systems. In addition, the auditor
                             did not find any instances of noncompliance with the laws or regulations
                             for which they tested.



Challenges                   As with any organization, we face a range of internal and external
                             challenges that could affect our ability to effectively support the Congress
                             in the future. Some of these challenges are those that require ongoing
                             management vigilance and attention (e.g., assuring product quality and
                             adherence to core values, human capital, physical security, and information
                             security) while others are special challenges that warrant monitoring
                             and/or congressional attention.

                             While we have put in place a good risk management system for our
                             engagements, whereby all the engagements are reviewed weekly and
                             categorized by a variety of factors including risk, we nevertheless must
                             always be vigilant that GAO does not stray from its values and therefore,
                             lose its reputation for being an “honest broker” on important government
                             operations and policy issues. Given that about 25 percent of our staff have
                             been with GAO for 3 years or less, it is vitally important that we inculcate
                             these values in our staff and train them in the proper conduct of our work.
                             Also, we need to make sure the staff who have been here for more than 3
                             years remain true to our values and our quality assurance standards and
                             practices. To ensure that we have an independent quality check in place,
                             GAO has had, beginning with its financial audits issued in 1995 and
                             continuing for every 3 years thereafter, an external group—an independent
                             CPA firm—performs a peer review of our work. We are currently in the
                             process of extending this practice to our non-financial work and expect our
                             products issued in 2004 to be peer reviewed by a team headed by the
                             Auditor General’s office of Canada who will conduct their work between
                             2004 and 2005. To prepare for this, we have invested much effort in
                             revamping our quality assurance framework.




                             Page 26                                                         GAO-03-1167T
                     We named in our fiscal year 2002 Performance and Accountability report
                     three risk areas—human capital, physical security, and information
                     security—as areas that could affect our ability to perform work for the
                     Congress. We have made progress in addressing each of these challenges,
                     but still have work to do.

                     In the human capital area, we are faced with a challenge because a
                     significant percentage of our workforce is nearing retirement age, while
                     marketplace, demographic, economic, and technological changes indicate
                     that competition for skilled workers will be greater in the future. We are
                     recruiting diverse, high-caliber staff with the skills and abilities we need to
                     achieve our strategic goals and objectives. Whether we will be able to
                     retain them when the economy improves remains to be seen, but I can
                     assure you that we are doing our best to do so. Given GAO’s role as a key
                     provider of information and analyses to the Congress, maintaining the right
                     mix of technical knowledge and expertise as well as general analytical
                     skills is vital to achieving our mission. Over the next several years, we need
                     to continue to address skill gaps, maximize staff productivity and
                     effectiveness, and reengineer our human capital policies, programs, and
                     processes to make them more user-friendly. We plan to address skill gaps
                     by further refining our recruitment and hiring strategies to target gaps
                     identified through our workforce planning efforts, while taking into
                     account the significant percentage of our workforce eligible for
                     retirement.

                     In the aftermath of the September 11 terrorist attacks and subsequent
                     anthrax incidents, the ability to provide a safe and secure workplace
                     emerged as a challenge for our agency. Protecting our people and our
                     assets is critical to our ability to carry out our mission to serve the
                     Congress and the American people. Also in light of these incidents, we
                     need to ensure information systems security and disaster recovery systems
                     that allow for the continuity of operations. We have made progress through
                     our efforts to, among other things, implement a risk-based, agencywide
                     security program; provide security training and awareness; and develop
                     and implement an enterprise disaster recovery solution.



Special Challenges   The following are some special challenges that we are carefully monitoring
                     and may need to work with the Congress on to address:

                     • Unfunded mandates. Since becoming the Comptroller General, I have
                       not asked for any increase in our staffing levels and have requested



                     Page 27                                                           GAO-03-1167T
   targeted investments in human capital, information technology and
   security, and physical security initiatives based on specific business
   cases. Last year, the Congress passed a 4.1 pay increase but did not
   provide funding for all of the increase. While we were able to reallocate
   our budget to cover these increases, we are concerned that if this
   becomes a regular practice, we will be unable to effective discharge our
   responsibilities in view of the fact that our employees’ salaries and
   related benefits comprise 80 percent of our budget. We have worked
   hard with available resources to cover mandatory expenses, including
   inflation and compensation costs. In addition, there has been recent
   interest in having GAO expand the scope of its activities in such areas as
   evaluating regulatory costs and benefits as well as conducting
   technology assessments. While I obviously want to be sure that we meet
   the changing needs of the Congress, I believe strongly that any
   significant expansion of the scope of our work should be coupled with
   appropriate funding. Doing otherwise would ultimately undermine our
   ability to carry out our core activities. Looking longer-term, we are
   concerned about the future fiscal outlook and its potential impact on
   our organization. We hope that the Congress will resist the tendency, in
   responding to budgetary constraints, to institute across the board
   budget reductions or reward the “basket cases” with additional
   flexibilities and appropriations, instead of rewarding organizations such
   as ours that generate positive results, do many things right, and are
   trying to do the right things.

• Supply and demand imbalances. While the overall number of
  congressional requests has decreased, the quality of these requests has
  improved which is reflected in the results we are achieving. Also, more
  requests are of a bipartisan nature. However, we are monitoring closely
  the number of engagements that we have accepted but not yet staffed,
  which has increased during the past 4 years. These engagements,
  totaling over a hundred, are spread among our 13 teams. The backlog is
  particularly acute in certain teams and areas (e.g., health care) because
  of increasing congressional demands. While we are working to achieve
  more flexibility in the way we staff and are reexamining our inventory,
  there is a limit to our ability to address these challenges by shifting
  resources from one area to another because of the specialized skills and
  knowledge required. We are concerned that we may not be able to
  respond to engagements we accept in a timely manner if the backlog
  builds. Also, if this supply and demand imbalance continues to grow, we
  will need to work with this Committee, the House Government Reform
  Committee, our appropriations committees, and senior leaders in



Page 28                                                          GAO-03-1167T
   making some tough choices, such as possibly reconsidering and
   reprioritizing any pending requests and not being able to accept requests
   from individual Members. Further, we may have to limit the small
   percentage of resources dedicated to research and development work
   (work that by law the Comptroller General is able to initiate on his own
   authority), which would hamper our ability to respond to urgent issues
   as we were able to do in the areas like national preparedness, homeland
   security, human capital, and Postal Service reform. I believe that it is
   important for GAO to be able to dedicate roughly 10 - 15 percent of its
   total resources to research and development work, which ultimately
   improves our ability to respond to longer-range issues. In this regard,
   the percentage of resources devoted to research and development work
   was 13 percent in FY 01, 11 percent in FY 02, and 9 percent year to date
   in FY 03.

• Access to records. Not surprisingly, GAO has faced access to record
  problems periodically in its history. Most of the time, we have been able
  to work with the executive branch. In my opinion, it was very
  unfortunate that we could not work out our information request relating
  to the National Energy Policy Development Group with the Vice
  President, who chaired the Group. We felt that we had no choice but to
  seek redress through the courts because the request was backed by four
  Senate committee or subcommittee chairmen, and as you know, we are
  required by law to perform work for committees. In addition, the
  administration did not exercise its option to withhold the information
  based on executive privilege or under the certification provision in
  GAO’s statute. The federal district court ruled in its decision that GAO
  did not have the standing to sue, but did not render an opinion on the
  merits of the case. We decided not to proceed with an appeal for a
  variety of reasons. Since then, we have monitored our access-to-record
  issues closely and have not experienced thus far a proliferation of
  access to records problems. In light of certain records access
  challenges during the past few years, and with concerns about national
  and homeland security unusually high at home and abroad, it may
  become more difficult for us to obtain information from the executive
  branch and report on certain issues. If this were to occur, it would
  hamper our ability to complete congressional requests in a timely
  manner. We are updating GAO’s engagement acceptance and review
  policies and practices to address this issue. However, we do not require
  legislative changes in this area at the present time.




Page 29                                                         GAO-03-1167T
• Selection process for the Deputy Comptroller General. GAO has only
  two political appointee positions—the Comptroller General and the
  Deputy Comptroller General. GAO has not had an official Deputy
  Comptroller General since the appointment process was changed by law
  in 1980. Under the law, the Deputy Comptroller General is nominated by
  the same 10 member board that nominates the Comptroller General (i.e.,
  Senate and House leaders and the Chairmen and Ranking Minority
  Members of the Senate Committee on Governmental Affairs and the
  House Committee on Government Reform) working with the
  Comptroller General. Under the current scheme, the Deputy
  Comptroller General is supposed to serve in the Comptroller General’s
  absence or after his 15-year term is completed. I believe the time has
  come to consider having the Comptroller General, in consultation with
  the aforementioned board, be able to pick the Deputy, which is how it
  works in most of our international counterpart organizations.

• Performance and accountability community coordination. Related to
  trying to do more with the resources we have in the performance and
  accountability area is determining how GAO and the Inspectors General
  should best complement each other and coordinate. The Inspectors
  General Act of 1978 as amended, Public Law 95-452, which established
  the Inspectors General, has been in existence for almost 25 years and
  merits a review. Given the challenges facing the federal government, I
  believe that the past should not be prologue in this arena. The law
  currently requires that the Inspectors General coordinate with GAO to
  ensure that they are not duplicating efforts. The traditional division of
  responsibilities has been that GAO looks horizontally at programs and
  functions across government, while the Inspectors General have been
  the “local cop” on the beat focusing on combating fraud, waste, abuse
  and mismanagement within their respective agencies. With OMB’s
  efforts to make performance and financial reports more relevant to
  management decision-making, our collaborative efforts in improving
  governmentwide financial management will merit review. Over the next
  few years, GAO will need to invest more resources, (through use of
  GAO’s own staff and/or through contractors) in assuring the work of the
  Inspectors General and external auditors in the financial statements
  area. This resource investment is necessary if we are to be able to
  render an opinion on the consolidated financial statements of the U.S.
  government.

• Additional bid protest volume. Over the past year, GAO has seen the
  number of bid protests filed increase by close to ten percent, and that



Page 30                                                        GAO-03-1167T
                      upward trend is continuing. In addition to its other roles, GAO also
                      serves as a quasi-judicial forum, hearing bid protests from disappointed
                      bidders seeking to obtain federal contracts. GAO provides an objective,
                      independent, and impartial forum for resolving protests, and GAO’s
                      decisions, which are published on our website, are relied on by the
                      courts, the contracting agencies, and the public. This means of
                      resolving disputes saves both time and money in that the parties need
                      not go through the federal court system. Two particularly significant
                      areas in which GAO has issued, and expects to continue issuing,
                      decision on bid protests are public/private competitions under OMB
                      Circular A-76 and procurements involving purchases under GSA’s
                      Federal Supply Schedules.

                   • Work involving other legislative branch entities. GAO is increasingly
                     being requested to provide assistance on work involving other
                     legislative branch entities such as the Architect of the Capitol, including
                     its Capitol Visitors Center project, the Capitol Police, the Government
                     Printing Office, and the Library of Congress. This assistance can take
                     different forms (e.g., direct assistance, contract procurement and
                     monitoring, or management and technical assistance) and can be of a
                     sensitive and high risk nature.



Need for S. 1522   I believe that it is vitally important to GAO’s future to continue modernizing
                   and updating its human capital policies and practices in light of the
                   changing environment and anticipated challenges ahead. GAO’s proposal
                   represents a logical incremental advancement in modernizing our human
                   capital policies. Given GAO’s human capital infrastructure and unique role
                   in leading by example in major management areas, the rest of the federal
                   government can also benefit from GAO’s pay system experience. We
                   respectfully request the Committee’s support of our request. We also
                   respectfully request prompt passage of S. 1522 by the Congress, since some
                   of our existing authorities are set to expire at the end of this calendar year.

                   GAO has used the narrowly tailored flexibilities granted by the Congress
                   previously in Public Law 106-303, the GAO Personnel Flexibilities Act,
                   responsibly, prudently, and strategically. GAO’s latest proposal combines
                   diverse initiatives that, collectively, should further GAO’s ability to enhance
                   its performance; assure its accountability; and help ensure that we can
                   attract, retain, motivate, and reward a top-quality and high-performing
                   workforce both now and in future years. Specifically, GAO is requesting
                   that the Congress (1) make permanent GAO’s 3-year authority to offer early



                   Page 31                                                            GAO-03-1167T
outs and buyouts, (2) allow GAO to set its own annual pay adjustment
system separate from the executive branch, (3) permit GAO to set the pay
of an employee demoted as a result of workforce restructuring or
reclassification to keep his/her basic pay but to set future increases
consistent with the new position’s pay parameters, (4) provide authority to
reimburse employees for some relocation expenses when that transfer has
some benefit to GAO but does not meet the legal requirements for
reimbursement, (5) provide authority to place upper-level hires with fewer
than 3 years of federal experience in the 6-hour leave category, (6)
authorize an executive exchange program with the private sector, and (7)
change GAO’s legal name from the “General Accounting Office” to the
“Government Accountability Office.”

We believe that our proposal is both well reasoned and reasonable.
Although GAO’s request for authority to adjust its annual pay system
separate from the executive branch may appear to be dramatic to some,
there are compelling reasons why GAO ought to be given this authority.
These include the fact that GAO already has a hybrid pay system
established by the authority the Congress granted it over two decades ago.
In addition, the proposal is modest if viewed in the light of authorities
already granted and requested by other agencies (e.g., DHS, DOD).
Further, GAO already has a number of key systems and safeguards in place
(e.g., a validated performance measurement system for its analysts and
attorneys; a grievance process which allows employees to appeal to an
independent Personnel Appeals Board; and opportunity periods for
employee improvement) and has plans to build in additional safeguards if
the additional authorities that we are seeking are granted.

Since submitting the proposal, I testified on July 16, 2003, before the House
Government Reform Subcommittee on Civil Service and Agency
Organization, along with Chris Keisling, the Employee Advisory Council’s
representative, Paul Light of Brookings Institution, and Pete Smith of the
Private Sector Council. See Appendix II for a copy of the statement that I
presented before the House. GAO’s proposal was introduced that same
day as H. 2751, the GAO Human Capital Reform Act of 2003, and was
subsequently marked up and reported out of the Subcommittee on July 23,
2003, with an amendment that added a requirement that we periodically
report on the status of certain provisions; modified the target group for the
increased annual leave benefit from upper-level hires to key officers and
employees; and limited our exchange program to no more than 30 people
coming to GAO from the private sector and no more than 30 people leaving
GAO for a detail to the private sector. We concurred with these



Page 32                                                          GAO-03-1167T
                amendments. The bill that Senator Voinovich introduced on July 31, 2003,
                S. 1522, which you co sponsored, Madam Chair, mirrors the bill that was
                marked up in the House.

                Based on employee feedback, there is little concern relating to most of our
                legislative proposal. Although some elements of GAO’s initial straw
                proposal were very controversial (e.g., GAO’s pay adjustment provision), I
                have made a number of changes, clarifications, and commitments to
                address employee concerns. While I believe that some employees remain
                concerned about the pay adjustment provision, I also believe that employee
                concerns have been reduced considerably due to the clarifications,
                changes, and commitments I have made. This view has been underscored
                by the results of the recent employee staff survey. Of the 2,101 GAO
                employees who provided narrative comments, only a small percentage
                commented on our legislative proposal.



Opportunities   Over the balance of my tenure, I will seek to continue the transformation of
                GAO into a world class professional services firm able to provide the
                Congress the best information and analyses possible delivered in a manner
                timely for appropriations, oversight, authorization, and legislative policy
                decision-making. While many think that this is a difficult goal to achieve, I
                believe that we are well on the way there. We will continue seeking to lead
                by example in all the aforementioned areas, including strategic planning,
                human capital management, process reengineering, information
                technology, and financial management. We will continue to examine what
                we do and how we do it focusing on achieving results. Some specific
                initiatives contemplated include the following:

                • Helping the Congress in addressing challenges relating to the long-term
                  fiscal outlook. GAO’s mission of assuring accountability has been and
                  will remain closely linked to supporting congressional oversight and
                  improving government efficiency and effectiveness. However, we
                  believe in the years ahead, this support will prove even more critical
                  because of the pressures that will be created by our country’s fiscal
                  outlook. These pressures will require the Congress to make tough
                  choices on what the government does, including how the government
                  does business and who does the government’s business in the future. I
                  believe that GAO can be of invaluable assistance in helping the Congress
                  review and reprioritize existing mandatory and discretionary spending
                  programs and tax policies.




                Page 33                                                          GAO-03-1167T
• Transforming government and how government does business. While
  supporting congressional oversight will remain a major part of our
  mission, we believe that the work GAO performs in the areas of insight
  (e.g., determining which programs and policies work and which don’t
  and sharing best practices and benchmarking information, both
  horizontally across government and vertically through different levels of
  government) and foresight (e.g., identifying key trends and emerging
  challenges before they reach crisis proportions and developing
  proposed frameworks for moving forward, including various options
  with related pros and cons) will be increasingly important and that our
  work in these areas needs to be further increased. I believe that GAO
  can do much to promote and facilitate government transformation,
  including how government does business. GAO’s work in the
  government transformation area (e.g., DOD business practices,
  information technology, human capital, Postal Service, and Social
  Security) has helped the Congress reexamine what the federal
  government does, what it should do, and how it does it best. An
  additional focus on foresight activities will be crucial in developing
  information for congressional decision makers facing the challenges
  and opportunities of the 21st century so that they can fully assess the
  long-term consequences of today’s policy choices.

• Making GAO the federal employer of choice and the gold standard for a
  world class professional services organization. Creating high-
  performing organizations often requires a cultural transformation that
  can take years to accomplish. GAO is no exception. GAO needs to
  continue its transformation process. We have made great progress in
  the past 3 years, but much remains to be done. For example, we have
  established task teams to examine how we staff our assignments and
  how we can best facilitate additional matrix management and
  knowledge sharing. As part of this cultural transformation, we are also
  hard at work in transforming GAO into a continuous learning
  organization. Opinion surveys of employees, such as our entry-level
  staff, indicate that one of the critical elements in their staying with an
  organization is the ability to continuously learn. Therefore, we must
  continue to strive to create such an environment through our training
  programs and employee development efforts. We must also continue,
  while addressing any skills imbalances and succession planning needs,
  to invest in our staff.




Page 34                                                         GAO-03-1167T
Concluding     Since its creation, GAO has demonstrated that it has been able to adapt to
               the changing needs of the nation, the Congress, and the American people.
Observations   Today, we live in a different world than even that of 2 years ago. The
               increasing interconnectedness of today’s world is demonstrated in the
               issues we care most about—our national security, our economic security,
               our financial security, our personal security, and our personal health. As
               evidenced by the testimony that I’ve delivered today, I have done my best,
               working closely with our congressional clients and all of GAO’s employees,
               to provide the best professional products and services to the Congress
               today and to position ourselves to continue to be able to do so in the future.
               We’ve also demonstrated that being “world class” doesn’t mean a
               substantial appropriation increase, but rather that an effective, efficient,
               and creative use of resources, aided by selected additional legislative
               authorities and flexibilities, can translate into significant pay-offs in the
               form of real and measurable positive results. However, we believe that
               GAO, similar to most public and private sector organizations, is only as
               good as our people. S. 1522 will help us address many of the challenges
               we face, particularly in the human capital arena, and we urge that this
               Committee mark up the legislation and, working with the House, enact it
               before the Congress adjourns for the year.

               Madam Chair Collins and Members of the Committee, this concludes my
               prepared statement. I would be happy to respond to any questions that you
               may have.



Contacts       For further information regarding the testimony, please contact David M.
               Walker, the Comptroller General of the United States, on (202) 512-5500 or
               at walkerd@gao.gov, Gene L. Dodaro, Chief Operating Officer (202) 512-
               5600 or at dodarog@gao.gov, or Helen H. Hsing, Director of Special
               Strategic Projects (202) 512-5500 or at hsingh@gao.gov




               Page 35                                                           GAO-03-1167T
Appendix I

GAO’s Strategic Plan 2002-2007                                      Append
                                                                         x
                                                                         Ii




                                  GAO’s Strategic Plan




         Source: GAO.




                        Page 36                          GAO-03-1167T
                         Appendix I
                         GAO’s Strategic Plan 2002-2007




 Annual Performance Measures
 (1998 and 2002)

                                                              Actual
  Performance measure                                     FY 1998      FY 2002
  Financial benefits (billions)                             $19.7        $37.7
  Other benefits                                             537          906
  Past recommendations implemented                           69%          79%
  Return on investment (ROI)                                 58:1         88:1
  Financial benefits per employee (millions)                 $6.1        $11.7
  Timeliness                                                 93%          96%

Source: GAO.




                         Page 37                                                 GAO-03-1167T
                                 Appendix I
                                 GAO’s Strategic Plan 2002-2007




 GAO’s 2002 Reports

                                     Selected Topics
           Food Safety                                            Private Pensions
                                                                  Social Security
           Performance-Based Budgeting
                                                                  Prescription Drugs
           Military Transformation
                                                                  Aviation Safety
           School Vouchers
                                                                  Welfare Reform
           Restructured Energy Markets
                                                                  Army Readiness
           Securities Regulation
                                                                  Water Quality
           Election Reform                                        Nuclear Waste
           Information Security                                   Export Controls
           FBI Reorganization                                     Tax Administration
           Nursing Homes                                          Drug Control
           Space Station                                          Postal Transformation
           Homeland Security                                      Corporate Governance &
                                                                    Auditing Failures

Source: GAO.




                                 Page 38                                                   GAO-03-1167T
                                Appendix I
                                GAO’s Strategic Plan 2002-2007




 The Nature of GAO’s Work




    FY 1966                     FY 1981                    FY 1998     FY 2002
                                             2                   22         15
                                     33                4               11
               90



   10                      65                         74              74



                    R& D                          Mandates            Requests


Source: GAO.




                                Page 39                                          GAO-03-1167T
                               Appendix I
                               GAO’s Strategic Plan 2002-2007




GAO’s          High Risk Areas


               Addressing Challenges in Broad-based Transformations
                                                                                                                    Designated High Risk




High           Protecting Information Systems Supporting the Federal Government and
                  The Nation’s Critical Infrastructures
                                                                                                                                1997



Risk           Strategic Human Capital Management*
               U.S. Postal Service Transformation Efforts and Long-Term Outlook*
                                                                                                                                2001
                                                                                                                                2001



List
               Implementing and Transforming the New Department of Homeland Security                                            2003
               Modernizing Federal Disability Programs*                                                                         2003
               Federal Real Property*                                                                                           2003


July 2003      Ensuring Major Technology Investments Improve Services

               FAA Air Traffic Control Modernization                                                                            1995
               IRS Business Systems Modernization                                                                               1995
               DOD Systems Modernization                                                                                        1995
               Providing Basic Financial Accountability
               DOD Financial Management                                                                                         1995
               IRS Financial Management                                                                                         1995
               Forest Service Financial Management                                                                              1999
               FAA Financial Management                                                                                         1999

               Reducing Inordinate Program Risks
               Medicare Program*                                                                                                1990
               Collection of Unpaid Taxes                                                                                       1990
               DOD Inventory Management                                                                                         1990
               Student Financial Aid Programs                                                                                   1990
               HUD Single-Family Mortgage Insurance and Rental Assistance Programs                                              1994
               Earned Income Credit Noncompliance                                                                               1995

               DOD Support Infrastructure Management                                                                            1997

               Medicaid Program*                                                                                                2003
               Pension Benefit Guaranty Corporation Single-Employer Insurance Program*                                          2003

               Managing Large Procurement Operations More Efficiently
               DOD Weapon Systems Acquisition                                                                                   1990
               Department of Energy Contract Management                                                                         1990
               NASA Contract Management                                                                                         1990
               DOD Contract Management                                                                                          1992
Source: GAO.
               *Additional authorizing legislation is likely to be required as one element of addressing this high risk area.




                               Page 40                                                                                                     GAO-03-1167T
                                Appendix I
                                GAO’s Strategic Plan 2002-2007




 Sources of Requested Work
 During Congressional Sessions
           Percent
           100
                                                                             Both
               80

               60
                                                                             Majority
               40

               20
                                                                             Minority
               0
                    1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
                      103rd     104th         105th          106th   107th
Note: As of 11-18-02
Source: GAO.




                                Page 41                                                 GAO-03-1167T
                                       Appendix I
                                       GAO’s Strategic Plan 2002-2007




 Engagements For Congressional Committees
 107th Congress

          House Committees                                       Senate Committees


                                                                                24%
                        35%
                 54%                                                     68%
                                                                                      7%

                          9%                                                                1%


                           2%
               House Committee on Government Reform                 Senate Committee on Governmental Affairs
               Appropriations                                       Appropriations
               Budget                                               Budget
               Authorizing and other                                Authorizing and other
Source: GAO.




                                       Page 42                                                                 GAO-03-1167T
                                                     Appendix I
                                                     GAO’s Strategic Plan 2002-2007




Engagements For Senate Committees
107th Congress

                        200

                                   161
                        150
                                                                                                                                     132


                        100                     87
                                                             80

                                                                        47           45
                          50                                                                     39          38           34


                           0
                                                                                             ns bo ,
                                                                       n A in g,




                                                                                                           or ce e,
                                                                                          Pe La th
                                                             e
                                        es




                                                                                                                                       r*
                                                                                                                or t &
                                  fai l




                                                                                   ns


                                                                                               ion r
                                Af enta




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                                                                                                              tat &
                                                          nc




                                                                                                        sp ien rc




                                                                                                                    ks
                                                                    ba us kin




                                                                                        & on, eal
                                      rs




                                                                                                                                    he
                                                                                                  s
                                                                                irs




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                                    vic




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                                                                                                            c W en
                                                                                                      an Sc me
                                                         a




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                                                                  Ur Ho Ban
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                                                                                                        bl i m
                                                                                                             m
                               rn


                              dS




                                                                                                      Pu on
                                                                        op




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                                                                     pr
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                                                                                       uc
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                                                                  Ap


                                                                   Ed
                         Ar




                                                                                                   Tr




*Other includes 12 committees: Small Business and Entrepreneurship (27), Judiciary (23), Aging (18), Agriculture, Nutrition and Forestry (14), Veterans Affairs (12),
International Narcotics Control (8), Foreign Relations (8), Intelligence (5), Indian Affairs (5), Energy and Natural Resources (5), Budget (4), and Rules and
Administration (3).
Source: GAO.




                                                     Page 43                                                                                                            GAO-03-1167T
                                                             Appendix I
                                                             GAO’s Strategic Plan 2002-2007




Engagements For House Committees
107th Congress
                        400
                                     341

                        300



                        200
                                                                                                                                                       148


                        100                             89              84        77             70            62               58         51


                            0
                                                                               er &




                                                                                           rv ed



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                                                                    y




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                                                                                                                                             s
                                rm



                                                  on




                                                                           mm rgy




                                                                                                                                                     he
                                                                                               s
                                                                                         Se Arm
                           R e me




                                                                                             ice


                                                                                                                           tat
                                                                                             an




                                                                                                                                     Se nan
                                                            dic
                                                   ti




                                                                                                                                                  Ot
                                                                                            a
                                                                         Co Ene
                             rn




                                               ria




                                                                                                                        or
                                                                                          W
                                                         Ju




                                                                                                                                      Fi
                          ve




                                                                                                                     sp
                                            op
                       Go




                                                                                                                   an
                                         pr




                                                                                                                Tr
                                       Ap




*Other includes 12 committees: Veterans Affairs (33), International Relations (26), Budget (18), Resources (17), Education and Workforce (17), Small
Business (13), Science (9), Agriculture (5), Intelligence (4), Administration (4), Homeland Security (1), and Rules (1).
Source: GAO.




                                                             Page 44                                                                                         GAO-03-1167T
                      Appendix I
                      GAO’s Strategic Plan 2002-2007




 Testimonies (91% Favorable Responses)


                                     Strongly Agree 70%

                                     Generally Agree 21%
          21%
                                     Neither Agree Nor Disagree 4%
                70%
                                     Generally Disagree 4%

                                     Strongly Disagree 1%
                                  March through November 2002
                                  Surveyed Senate Governmental Affairs and House Government Reform
                                  57 out of 113 Responses (50%)
Source: GAO.




                      Page 45                                                                        GAO-03-1167T
                       Appendix I
                       GAO’s Strategic Plan 2002-2007




 Written Products (93% Favorable)


                                   Strongly Agree 80%

           13%                     Generally Agree 13%

                                   Neither Agree Nor Disagree 4%
                 80%
                                   Generally Disagree 1%

                                   Strongly Disagree 2%
                                  March through November 2002
                                  Surveyed Senate Governmental Affairs and House Government Reform
                                  38 out of 80 Responses (48%)
Source: GAO.




                       Page 46                                                                       GAO-03-1167T
                                      Appendix I
                                      GAO’s Strategic Plan 2002-2007




GAO’s Budget Authority and FTE Levels
Fiscal Years 1992-2003

               6000       FTE level                              Dollars in millions   600

               5000                                                                    500

               4000                                                                    400

               3000                                                                    300

               2000                                                                    200

               1000                                                                    100

                    0                                                                  0
                                                               02
                           93



                           95
                           94




                                                               98



                                                               00
                                                               99



                                                               01
                           96




                                                              03
                           92




                          97




                                                            20
                        19



                        19
                        19




                                                            19



                                                            20
                                                            19



                                                            20
                        19




                                                            20
                        19




                        19




                        Fiscal years
                                                 FTE’s          Budget authority*
*Budget authority is shown in inflation-adjusted 1992 dollars
Source: GAO.




                                      Page 47                                                GAO-03-1167T
                           Appendix I
                           GAO’s Strategic Plan 2002-2007




 Strategic Perspectives of GAO and OIGs

  We both maximize government performance and ensure accountability

                 GAO                                              OIGs
 ƒ Government-wide scope                           ƒ Agency scope
 ƒ Horizontal and longer range issues              ƒ Vertical and immediate issues
 ƒ Proportionately more audits,                    ƒ Proportionately more
   evaluations, policy analyses                      investigations
 ƒ Renders opinion on consolidated                 ƒ Audit agency financial
   financial statements                              statements
 ƒ Performance/Accountability and                  ƒ Management challenges lists
   High Risk List
Source: GAO.




                           Page 48                                                   GAO-03-1167T
Appendix II

Comptroller General’s Testimony of July 16,
2003                                                                                              Appendx
                                                                                                        Ii




                                          United States General Accounting Office

              GAO                         Testimony
                                          Before the Subcommittee on Civil Service and Agency
                                          Organization, Committee on Government Reform, House
                                          of Representatives


              For Release on Delivery
              Expected at 2:00 p.m. EDT
              Wednesday, July 16, 2003
                                          GAO
                                          Additional Human Capital
                                          Flexibilities Are Needed
                                          Statement of David M. Walker
                                          Comptroller General of the United States




              GAO-03-1024T
                                          A
                          Page 49                                                      GAO-03-1167T
             Appendix II
             Comptroller General’s Testimony of July 16,
             2003




                                                July 16, 2003


                                                GAO
                                                Additional Human Capital Flexibilities Are
Highlights of GAO-03-1024T, a testimony         Needed
before the Subcommittee on Civil Service
and Agency Organization, Committee on
Government Reform, House of
Representatives




The Subcommittee seeks GAO’s                    As an arm of the legislative branch, GAO exists to support the Congress in
views on its latest human capital               meeting its constitutional responsibilities and to help improve the
proposal that is slated to be                   performance and ensure the accountability of the federal government for the
introduced as a bill entitled the               American people. Unlike many executive branch agencies, which have
GAO Human Capital Reform Act of                 either recently received or are just requesting new broad-based human
2003.
                                                capital tools and flexibilities, GAO has had certain human capital tools and
                                                flexibilities for over two decades. GAO’s latest proposal combines diverse
                                                initiatives that, collectively, should further GAO’s ability to enhance its
GAO believes that its proposal is               performance, assure its accountability, and help ensure that it can attract,
well reasoned and reasonable.                   retain, motivate, and reward a top-quality and high-performing workforce
Although GAO’s request for                      currently and in future years.
authority to adjust its annual pay
system separate from the executive              Specifically, GAO is requesting that the Congress (1) make permanent GAO’s
branch appears broad based, there
                                                3-year authority to offer early outs and buyouts, (2) allow GAO to set its own
are compelling reasons why GAO
ought to be given this authority.               annual pay adjustment system separate from the executive branch,
These include the fact that GAO                 (3) permit GAO to set the pay of an employee demoted as a result of
already has a hybrid pay system                 workforce restructuring or reclassification to keep his/her basic pay but to
established by the authority the                set future increases consistent with the new position’s pay parameters,
Congress granted it over two                    (4) provide authority to reimburse employees for some relocation expenses
decades ago, the proposed                       when that transfer has some benefit to GAO but does not meet the legal
authority is not radical if viewed in           requirements for reimbursement, (5) provide authority to place upper-level
the light of authorities already                hires with fewer than 3 years of federal experience in the 6-hour leave
granted and requested by other                  category, (6) authorize an executive exchange program with the private
agencies, and GAO already has a                 sector, and (7) change GAO’s legal name from the “General Accounting
number of key systems and
                                                Office” to the “Government Accountability Office.”
safeguards in place and has plans
to build in additional safeguards if
granted the authority.                          GAO has used the narrowly tailored flexibilities granted by the Congress
                                                previously in Public Law 106-303, the GAO Personnel Flexibilities Act,
GAO has conducted extensive                     responsibly, prudently, and strategically. GAO believes that it is vitally
external and internal outreach                  important to its future to continue modernizing and updating its human
efforts on its latest human capital             capital policies and system in light of the changing environment and
proposal. GAO respectfully                      anticipated challenges ahead. GAO’s proposal represents a logical
requests the Subcommittee’s                     incremental advancement in modernizing GAO’s human capital policies.
support and prompt passage by the               Based on employee feedback, there is little or no concern relating to most of
Congress.                                       the proposal’s provisions. Although some elements of GAO’s initial straw
                                                proposal were controversial (e.g., GAO’s pay adjustment provision), the
                                                Comptroller General has made a number of changes, clarifications, and
                                                commitments to address employee concerns. While GAO believes that some
                                                employees remain concerned about the pay adjustment provision, GAO also
                                                believes that employee concerns have been reduced considerably due to the
                                                clarifications, changes, and commitments the Comptroller General has
                                                made. Given GAO’s human capital infrastructure and unique role in leading
www.gao.gov/cgi-bin/getrpt?GAO-03-1024T.
                                                by example in major management areas, the rest of the federal government
To view the full product, including the scope   can benefit from GAO’s pay system experience.
and methodology, click on the link above.
For more information, contact Sallyanne
Harper at (202) 512-5800 or
harpers@gao.gov.




             Page 50                                                                                              GAO-03-1167T
      Appendix II
      Comptroller General’s Testimony of July 16,
      2003




                            Madam Chairwoman and Members of the Subcommittee:

                            I am pleased to be here today to discuss GAO’s latest human capital
                            proposal. Chairwoman Davis, we at GAO appreciate your support of our
                            proposal and your leadership in seeking additional sponsors for the bill you
                            plan to introduce, the GAO Human Capital Reform Act of 2003.

                            As I have testified on many occasions, strategic human capital management
                            must be the centerpiece of any serious government transformation effort.
                            A key component of this is modern, effective, and credible human capital
                            policies, which are critical to the successful functioning of any enterprise,
                            both public and private. As the Chief Executive Officer and primary
                            steward of GAO, I am not just responsible for GAO’s current economy,
                            efficiency, and effectiveness, I am also responsible for ensuring that we are
                            well positioned to serve our congressional clients, maximize our
                            performance, and assure our accountability in the future.

                            With this important responsibility in mind, I asked this committee and
                            others over 3 years ago to grant GAO certain additional narrowly tailored
                            human capital authorities. In enacting Public Law 106-303, known as the
                            GAO Personnel Flexibilities Act, the Congress granted GAO certain
                            flexibilities, which we have used responsibly to help strategically reshape
                            the organization in order to better support the Congress and the American
                            people. After reviewing the range and limits of our existing administrative
                            and legal authorities, I have concluded that we now need to seek from the
                            Congress additional human capital flexibilities in order for GAO to: ensure
                            quality service to the Congress; continue leading by example in the
                            government transformation, in general, and human capital reform areas in
                            particular; and continue to attract, retain, motivate, and reward a quality
                            and high- performing workforce, both currently and in future years. We
                            believe that our proposal is well reasoned and reasonable, especially if
                            viewed in the light of authorities already granted and requested by other
                            agencies and the extensive external and internal outreach efforts we have
                            conducted. We also respectfully request your support and prompt passage
                            by the Congress.



GAO: A Unique Agency        As an arm of the legislative branch, GAO exists to support the Congress in
                            meeting its constitutional responsibilities and to help improve the
with a Hybrid System        performance and ensure the accountability of the federal government for
                            the benefit of the American people. Today, GAO is a multidisciplinary
                            professional services organization, comprised of about 3,250 employees,



                            Page 1                                                           GAO-03-1024T




      Page 51                                                                                 GAO-03-1167T
Appendix II
Comptroller General’s Testimony of July 16,
2003




                      that conducts a wide range of financial and performance audits, program
                      evaluations, management reviews, investigations, and legal services
                      spanning a broad range of government programs and functions. GAO’s
                      work covers everything from the challenges of securing our homeland, to
                      the demands of an information age, to emerging national security threats,
                      and the complexities of globalization. We are committed to transforming
                      how the federal government does business and to helping government
                      agencies become organizations that are more results oriented and
                      accountable to the public. We are also committed to leading by example in
                      all major management areas.

                      Given GAO’s role as a key provider of information and analyses to the
                      Congress, maintaining the right mix of technical knowledge and subject
                      matter expertise as well as general analytical skills is vital to achieving the
                      agency’s mission. Carrying out GAO’s mission today is a multidisciplinary
                      staff reflecting the diversity of knowledge and competencies needed to
                      deliver a wide array of products and services to support the Congress. Our
                      mission staff—at least 67 percent of whom have graduate degrees—hold
                      degrees in a variety of academic disciplines, such as accounting, law,
                      engineering, public administration, economics, and social and physical
                      sciences. I am extremely proud of our GAO employees and the difference
                      that they make for the Congress and the nation. They make GAO the
                      world-class organization that it is, and I think it is fair to say that while they
                      account for about 80 percent of our costs, they constitute 100 percent of
                      our real assets.

                      Because of our unique role as an independent overseer of federal
                      expenditures, fact finder, and honest broker, GAO has evolved into an
                      agency with hybrid systems. This is particularly evident in GAO’s
                      personnel and performance management systems. Unlike many executive
                      branch agencies, which have either recently received or are just requesting
                      new broad-based human capital tools and flexibilities, GAO has had certain
                      human capital tools and flexibilities for over two decades. As a result, we
                      have been able to some extent to operate our personnel system with a
                      degree of independence that most agencies in the executive branch do not
                      have. For example, we are excepted from certain provisions of Title 5,
                      which governs the competitive service, and we are not subject to Office of
                      Personnel Management (OPM) oversight.

                      Until 1980, our personnel system was indistinguishable from those of
                      executive branch agencies—that is, GAO was subject to the same laws,
                      regulations, and policies as they were. However, with the expansion of



                      Page 2                                                               GAO-03-1024T




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Appendix II
Comptroller General’s Testimony of July 16,
2003




                      GAO’s role in congressional oversight of federal agencies and programs,
                      concerns grew about the potential for conflicts of interest. Could GAO
                      conduct independent and objective reviews of executive branch agencies,
                      such as OPM, when these agencies had the authority to review GAO’s
                      internal personnel activities? As a result, GAO worked with the Congress
                      to pass the GAO Personnel Act of 1980, the principal goal of which was to
                      avoid potential conflicts by making GAO’s personnel system more
                      independent of the executive branch.

                      Along with this independence, the act gave GAO greater flexibility in hiring
                      and managing its workforce. Among other things, it granted the
                      Comptroller General authority to

                      • appoint, promote, and assign employees without regard to Title 5
                        requirements in these areas;

                      • set employees’ pay without regard to the federal government’s General
                        Schedule (GS) pay system’s classification standards and requirements;
                        and

                      • establish a merit pay system for appropriate officers and employees.

                      By excepting our agency from the above requirements, the GAO Personnel
                      Act of 1980 allowed us to pursue some significant innovations in managing
                      our people. One key innovation was the establishment of a “broad
                      banding,” or “pay banding,” approach for classifying and paying our Analyst
                      and Attorney workforce in 1989. This was coupled with the adoption of a
                      pay for performance system for this portion of our workforce. Therefore,
                      while other agencies are only now requesting the authority to establish
                      broad banding and pay for performance systems, GAO has had almost 15
                      years of experience with such systems.

                      Although GAO’s personnel and pay systems are not similar to those of
                      many executive branch agencies, I must emphasize that in important ways,
                      our human capital policies and programs are very much and will continue
                      to remain similar to those of the larger federal community. GAO’s current
                      human capital proposal will not change our continued support for certain
                      national goals (e.g., commitment to federal merit principles, protection
                      from prohibited personnel practices, employee due process through a
                      specially created entity—the Personnel Appeals Board (PAB), and
                      application of veterans’ preference consistent with its application in the
                      executive branch for appointments and all appropriate reductions-in-



                      Page 3                                                          GAO-03-1024T




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Appendix II
Comptroller General’s Testimony of July 16,
2003




                      force). Furthermore, our pay system is and will continue to be consistent
                      with the statutory principle of equal pay for equal work while making pay
                      distinctions on the basis of an individual’s responsibilities and
                      performance. In addition, we are covered and will remain covered by Title
                      VII of the Civil Rights Act, which forbids employment discrimination. At
                      GAO, we also emphasize opportunity and inclusiveness for a diverse
                      workforce and have zero tolerance for discrimination of any kind. We have
                      taken and will continue to take disciplinary action when it “will promote
                      the efficiency of the service”—which for us includes such things as GAO’s
                      ability to do its work and accomplish its mission.

                      Although we are not subject to OPM oversight, we are nevertheless subject
                      to the oversight of the Congress including our appropriations
                      committees—the Senate Committee on Appropriations’ Subcommittee on
                      the Legislative Branch and the House Committee on Appropriations’
                      Subcommittee on Legislative—and our oversight committees—the Senate
                      Committee on Governmental Affairs and the House Committee on
                      Government Reform. In addition, GAO’s management actions are subject
                      to the review of an independent five member board, the Personnel Appeals
                      Board, which performs functions similar to those provided by the Merit
                      Systems Protection Board for federal executive branch employees’
                      personnel grievances. The Congress authorized the establishment of the
                      PAB specifically for GAO in order to protect GAO’s independence as an
                      agency. As with other federal executive branch employees, our employees
                      have the right to appeal certain kinds of management actions including
                      removal, suspension for more than 14 days, reductions in pay or grade,
                      furloughs of not more than 30 days, a prohibited personnel practice, an
                      action involving prohibited discrimination, a prohibited political activity, a
                      within-grade denial, unfair labor practices or other labor relations issue.
                      However, they do so to the PAB rather than the MSPB.

                      While we currently do not have any bargaining units at GAO, our
                      employees are free to join employee organizations, including unions. In
                      addition, we engage in a range of ongoing communication and coordination
                      efforts to empower our employees while tapping their ideas. For example,
                      we regularly discuss a range of issues of mutual interest and concern with
                      our democratically elected Employee Advisory Council (EAC). Chris
                      Keisling, who is a Band III field office representative of the EAC, is
                      testifying with me today. In addition, I consult regularly with our managing
                      directors on issues of mutual interest and concern. In that spirit, I will
                      consult with the managing directors and the EAC before implementing the
                      provisions related to our human capital proposal. As we did with the



                      Page 4                                                            GAO-03-1024T




Page 54                                                                                 GAO-03-1167T
       Appendix II
       Comptroller General’s Testimony of July 16,
       2003




                             flexibilities granted it under Public Law 106-303, the GAO Personnel
                             Flexibilities Act, we will implement the authorities granted under this
                             provision of our proposal only after issuing draft regulations and providing
                             all employees notice and an opportunity for comment. Specifically, for the
                             authorities granted to us under Public Law 106-303, we posted the draft
                             regulations on our internal Web site and sent a notice to all GAO staff
                             advising them of the draft regulations and seeking their comments.



Key Elements of GAO’s        GAO’s proposal combines diverse initiatives that, collectively, should
                             further GAO’s ability to enhance our performance, assure our
Proposal                     accountability, and help ensure that we can attract, retain, motivate, and
                             reward a top quality and high-performing workforce currently and in future
                             years. These initiatives should also have the benefit of helping guide other
                             agencies in their human capital transformation efforts. Specifically, we are
                             requesting that the Congress provide us the following additional human
                             capital tools and flexibilities:

                             • make permanent GAO’s 3-year authority to offer voluntary early
                               retirement and voluntary separation payments;

                             • allow the Comptroller General to adjust the rates of basic pay of GAO on
                               a separate basis than the annual adjustments authorized for employees
                               of the executive branch;

                             • permit GAO to set the pay of an employee demoted as a result of
                               workforce restructuring or reclassification at his or her current rate
                               with no automatic annual increase to basic pay until his or her salary is
                               less than the maximum rate of their new position;

                             • provide authority in appropriate circumstances to reimburse employees
                               for some relocation expenses when that transfer does not meet current
                               legal requirements for entitlement to reimbursement but still benefits
                               GAO;

                             • provide authority to put upper-level hires with less than 3 years of
                               federal experience in the 6-hour leave category;

                             • authorize an executive exchange program with private sector
                               organizations working in areas of mutual concern and involving areas in
                               which GAO has a supply-demand imbalance; and




                             Page 5                                                          GAO-03-1024T




       Page 55                                                                                GAO-03-1167T
       Appendix II
       Comptroller General’s Testimony of July 16,
       2003




                             • change GAO’s legal name from the “General Accounting Office” to the
                               “Government Accountability Office.”

                             I will go into more detail later in my testimony on the details and rationale
                             for each of these proposals.



Process for Developing       In developing our proposal, we used a phased approach that involved
                             (1) developing a straw proposal, (2) vetting the straw proposal broadly
the Proposal                 both externally and internally, and (3) making appropriate adjustments
                             based on comments and concerns raised during the vetting process. As we
                             have previously testified, many of the management tools and flexibilities
                             we needed to pursue modern human capital management approaches are
                             already available to us and we have used them. We have chosen to come to
                             the Congress for legislation only where the tools and flexibilities we have
                             were inadequate for addressing the challenges we faced. For example, the
                             Congress enacted Public Law 106-303 to provide us with certain narrowly
                             tailored flexibilities we needed to reshape our workforce and establish
                             senior-level technical positions in critical areas. These flexibilities were
                             needed to help GAO address the past decade’s dramatic downsizing
                             (approximately 40 percent from 1992 through 1997) combined with a
                             significant increase in the retirement-eligible workforce that jeopardized
                             our ability to perform our mission in the years ahead.

                             In developing our preliminary proposal, we gathered suggestions for
                             addressing GAO’s human capital challenges as well as challenges faced by
                             the rest of the federal government, discussed and debated them internally,
                             and compiled a preliminary list of proposals. We received a number of
                             viable proposals that we separated into two groups: (1) proposals that
                             would be more applicable government-wide and (2) proposals GAO should
                             undertake. I had our Office of General Counsel review the proposals GAO
                             should undertake to determine whether we needed to seek legislative
                             authority to implement them or whether I could implement them under the
                             Comptroller General’s existing authority.

                             Mindful of the need to keep the Congress appropriately informed, my staff
                             and I began our outreach to GAO’s appropriations and oversight
                             committees on the need for additional human capital flexibilities beginning
                             late last year. In early spring of this year, we shared with these committees
                             a confidential draft of a preliminary draft proposal. We also advised them
                             that we planned to conduct a broad range of outreach and consultation on
                             the proposal with our employees and other interested parties and that we



                             Page 6                                                           GAO-03-1024T




       Page 56                                                                                 GAO-03-1167T
Appendix II
Comptroller General’s Testimony of July 16,
2003




                      would send them our revised legislative proposal at a later date. We
                      conducted an extensive outreach and consultation effort with members of
                      the Congress, including chairmen and ranking minority members of our
                      appropriations and oversight committees and a number of local delegation
                      members; congressional staff; the Director of OPM; the Deputy Director for
                      Management of the Office of Management and Budget; public sector
                      employee associations and unions; and various “good government”
                      organizations.

                      Within GAO, members of the Executive Committee (EC), which includes
                      our Chief Operating Officer, our General Counsel, our Chief Mission
                      Support Officer and me, engaged in an extensive and unprecedented range
                      of outreach and consultation with GAO employees. This outreach included
                      numerous discussions with our managing directors, who manage most of
                      GAO’s workforce, and members of the EAC.

                      The EAC is an important source of input and a key communications link
                      between executive management and the constituent groups its members
                      represent. Comprising employees who represent a cross-section of the
                      agency, the EAC meets at least quarterly with me and members of our
                      senior executive team. The EAC’s participation is an important source of
                      front-end input and feedback on our human capital and other major
                      management initiatives. Specifically, EAC members convey the views and
                      concerns of the groups they represent, while remaining sensitive to the
                      collective best interest of all GAO employees; propose solutions to
                      concerns raised by employees; provide input to and comment on GAO
                      policies, procedures, plans, and practices; and help to communicate
                      management’s issues and concerns to employees.

                      I have also used my periodic “CG chats,” closed circuit televised broadcasts
                      to all GAO employees, as a means of explaining our proposal and
                      responding to staff concerns and questions. Specifically, I have held two
                      televised chats to inform GAO staff about the proposal. One of these chats
                      was conducted in the form of a general listening session, open to all
                      headquarters and field office staff, featuring questions from members of
                      the EAC and field office employees. I have also discussed the proposal
                      with the Band IIs (GS-13-14 equivalents) in sessions held in April 2003, and
                      with our Senior Executive Service (SES) and Senior Level members at our
                      May off-site meeting. In addition to my CG chats, I have personally held a
                      number of listening sessions, including a session with members of our
                      Office of General Counsel, two sessions with our administrative support
                      staff, and sessions with staff in several field offices. Furthermore, the Chief



                      Page 7                                                            GAO-03-1024T




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      Appendix II
      Comptroller General’s Testimony of July 16,
      2003




                            Operating Officer represented me in a listening session with Band I field
                            office personnel. Finally, I have also personally received and considered a
                            number of E-mails, notes, and verbal comments on the human capital
                            proposal.

                            I would like to point out to others seeking human capital flexibilities that
                            the outreach process, while necessary, is indeed time-consuming and
                            requires real and persistent commitment on the part of an agency’s top
                            management team. In order for the process to work effectively, it also
                            requires an ongoing education and dialogue process that will, at times,
                            involve candid, yet constructive, discussion between management and
                            employees. This is, however, both necessary and appropriate as part of the
                            overall change management process. To facilitate the education process on
                            the proposal, we posted materials on GAO’s internal website, including
                            Questions and Answers developed in response to employees’ questions and
                            concerns, for all employees to review. Unfortunately, others who have
                            sought and are seeking additional human capital flexibilities have not
                            employed such an extensive outreach process.



Nature of GAO               Based on feedback from GAO employees, there is little or no concern
                            relating to most of the provisions in our proposal. There has been
Employee Concerns           significant concern expressed over GAO’s proposal to decouple GAO’s pay
                            system from that of the executive branch. Some concerns have also been
                            expressed regarding the pay retention provision and the proposed name
                            change. As addressed below, we do believe, however, that these employee
                            concerns, have been reduced considerably due to the clarifications,
                            changes, and commitments resulting from our extensive outreach and
                            consultation effort.

                            On the basis of various forms of GAO employee feedback, it is not
                            surprising, since pay is important to all employees, that the provision that
                            has caused the most stir within GAO has been the pay adjustment
                            provision. Fundamentally, some of our employees would prefer to remain
                            with the executive branch’s GS system for various types of pay increases.
                            There are others close to retirement who are concerned with their “high
                            three” and how the modified pay system, when fully implemented, might
                            affect permanent base pay, which is the key component of their retirement
                            annuity computation. Overall, there is a great desire on the part of GAO
                            employees to know specifically how this authority would be implemented.




                            Page 8                                                          GAO-03-1024T




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Comptroller General’s Testimony of July 16,
2003




                      It is important to note that, even in the best of circumstances, it is difficult
                      to garner a broad-based consensus of employee support for any major pay
                      system changes. While it is my impression, based on employee feedback,
                      that we have made significant strides in allaying the significant initial
                      concerns expressed by employees regarding the pay adjustment provision,
                      I believe that some of these concerns will remain throughout
                      implementation. In addition, some can never be resolved because they
                      involve philosophical differences or personal interest considerations on
                      behalf of individual GAO employees.

                      GAO’s history with pay banding certainly is illustrative of how difficult it is
                      for an organization to allay employee fears even in the face of obvious
                      benefits. While history has proven that an overwhelming majority of GAO
                      employees have benefited from GAO’s decision to migrate our Analysts and
                      Attorneys into pay banding and pay for performance systems, there was
                      significant opposition by GAO employees regarding the decision to move
                      into these systems. The experience of the executive branch’s pay
                      demonstration projects involving federal science and technology
                      laboratories shows that employee support at the beginning of the pay
                      demonstration projects ranged from 34 percent to 63 percent. In fact, OPM
                      reports that it takes about 5 years to get support from two-thirds of
                      employees with managers generally supporting demonstrations at a higher
                      rate than employees.

                      Following the pay adjustment provision but a distant second in terms of
                      employee concern, has been the pay reclassification provision, which
                      would allow GAO employees demoted as a result of workforce
                      restructuring or reclassification to keep their basic pay rates; however,
                      future pay increases would be set consistent with the new positions’ pay
                      parameters. Currently, employees subject to a reduction-in-force or
                      reclassification can be paid at a rate that exceeds the value of their duties
                      for an extended period.

                      A distant third in terms of employee concern is the proposed name change
                      from the “General Accounting Office’ to the “Government Accountability
                      Office,” which would allow the agency’s title to more accurately reflect its
                      mission, core values, and work. My sense is that some GAO employees
                      who have been with GAO for many years have grown comfortable with the
                      name and may prefer to keep it. At the same time, I believe that a
                      significant majority of our employees support the proposed name change.
                      Importantly, all of our external advisory groups, including the Comptroller
                      General’s Advisory Council, consisting of distinguished individuals from



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                            the public and private sectors, and the Comptroller General’s Educators
                            Advisory Council, consisting of distinguished individuals from the
                            academic community, and a variety of “good government” groups strongly
                            support the proposed name change.



Changes Made in             The members of the EC and I took our employees’ feedback seriously and
                            have seriously considered their concerns. Key considerations in our
Response to Employee        decision making were our institutional responsibility as leaders and
Feedback                    stewards of GAO and the overwhelming support expressed through
                            anonymous balloting by our senior executives, who also serve as leaders
                            and stewards for GAO, for proceeding with all of the provisions of our
                            human capital proposal, including the pay adjustment provision.
                            Specifically, in a recent confidential electronic balloting of our senior
                            executives, support for each element of our proposal ranged from over 2 to
                            1 to unanimous, depending on the provision. Support for the proposed pay
                            adjustment provision was over 3 to 1, and support for the proposed pay
                            protection provision was over 4 to 1. Given this and other considerations,
                            ultimately, we decided to proceed with the proposal but adopted a number
                            of the suggestions made by employees in these sessions, including several
                            relating to the proposal to decouple GAO annual pay adjustments from
                            those applicable to many executive branch agencies.

                            A key suggestion adopted include a minimum 2-year transition period for
                            ensuring the smooth implementation of the pay provisions which would
                            also allow time for developing appropriate methodologies and issuing
                            regulations for notice and comment by all employees. Another key
                            suggestion adopted was the commitment to guarantee annual across the
                            board purchase power protection and to address locality pay
                            considerations to all employees rated as performing at a satisfactory level
                            or above (i.e., meeting expectations or above) absent extraordinary
                            economic circumstances or severe budgetary constraints. We have chosen
                            to implement this guarantee through a future GAO Order rather than
                            through legislative language because prior “pay protection” guarantees
                            relating to pay banding made by my predecessor, Comptroller General
                            Charles A. Bowsher, used this means effectively to document and
                            operationalize that guarantee. I have committed to our employees that I
                            would include this guarantee in my statement here today so that it could be
                            included as part of the legislative record. Additional safeguards relating to
                            our pay proposal are set forth below.




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                             The following represents additional information regarding our specific
                             proposal.



Voluntary Early              Section 2 of our proposal would make permanent the authority of GAO
                             under section 1 and 2 of Public Law 106-303, the GAO Personnel
Retirement and               Flexibilities Act of 2000, to offer voluntary early retirements (commonly
Separation Incentive         termed “early outs”) and voluntary separation payments (commonly
                             termed “buyouts”) to certain GAO employees when necessary to realign
Payment Authorities          GAO’s workforce in order to meet budgetary or mission needs, correct skill
                             imbalances, or reduce high-grade positions. We believe that we have
                             behaved responsibly in exercising the flexibilities that the Congress
                             granted us and deserve a permanent continuation of these authorities. In
                             addition, the two flexibilities which we would like to be made permanent
                             are narrowly drawn and voluntary in nature, since the employees have the
                             right to decide if they are interested in being considered for the benefits.
                             Further, the provisions also have built in limits: no more than 10 percent of
                             the workforce in any one year can be given early outs and no more than 5
                             percent can be given buyouts.

                             GAO’s transformation effort is a work in progress, and for that reason, the
                             agency is seeking legislation to make the voluntary early retirement
                             provision in section 1 of the law permanent. While the overall number of
                             employees electing early retirement has been relatively small, GAO
                             believes that careful use of voluntary early retirement has been an
                             important tool in incrementally improving the agency’s overall human
                             capital profile. Each separation has freed resources for other uses, enabling
                             GAO to fill an entry-level position or to fill a position that will reduce a skill
                             gap or address other succession concerns. Similarly, we are seeking
                             legislation to make section 2—authorizing the payment of voluntary
                             separation incentives—permanent. Although GAO has not yet used its
                             buyout authority and has no plans to do so in the foreseeable future, we are
                             seeking to retain this flexibility. The continuation of this provision
                             maximizes the options available to the agency to deal with future
                             circumstances, which cannot be reasonably anticipated at this time.
                             Importantly, this provision seems fully appropriate since the Homeland
                             Security Act of 2002 provides most federal agencies with permanent early
                             out and buyout authority.

                             Public Law 106-303 required that GAO perform an assessment of the
                             exercise of the authorities provided under that law, which included the
                             authority for the Comptroller General to provide voluntary early retirement



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                               and voluntary separation incentive payments. With your permission, I
                               would like to submit the assessment entitled Assessment of Public Law
                               106-303: The Role of Personnel Flexibilities in Strengthening GAO’s
                               Human Capital, issued on June 27, 2003, for the record. I will now
                               highlight for you our observations from that assessment on voluntary early
                               retirement and buyouts.



Voluntary Early Retirement     Public Law 106-303 also allows the Comptroller General to offer voluntary
                               early retirement to up to 10 percent of the workforce when necessary or
                               appropriate to realign the workforce to address budgetary or mission
                               constraints; correct skill imbalances; or reduce high-grade, supervisory, or
                               managerial positions. This flexibility represents a proactive use of early
                               retirement to shape the workforce to prevent or ameliorate future
                               problems. GAO Order 2931.1, Voluntary Early Retirement, containing the
                               agency’s final regulations, was issued in April 2001. Under the regulations,
                               each time the Comptroller General approves a voluntary early retirement
                               opportunity, he establishes the categories of employees who are eligible to
                               apply. These categories are based on the need to ensure that those
                               employees who are eligible to request voluntary early retirement are those
                               whose separations are consistent with one or more of the three reasons for
                               which the Comptroller General may authorize early retirements. Pursuant
                               to GAO’s regulations, these categories are defined in terms of one or more
                               of the following criteria:

                               • organizational unit or subunits,

                               • occupational series,

                               • grade or band level,

                               • skill or knowledge requirements,

                               • performance appraisal average,

                               • geographic location, or

                               • other similar factors that the Comptroller General deems necessary and
                                 appropriate.

                               Since it is essential that GAO retain employees with critical skills as well as
                               its highest performers, certain categories of employees have been ineligible



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                      under the criteria. Some examples of ineligible categories are employees
                      receiving retention allowances because of their unusually high or unique
                      qualifications; economists, because of the difficulty that the agency has
                      experienced in recruiting them; and staff in the information technology
                      area. In addition, employees with performance appraisal averages above a
                      specified level have not been eligible under the criteria.

                      To give the fullest consideration to all interested employees, however, any
                      employee may apply for consideration when an early retirement
                      opportunity is announced, even if he or she does not meet the stated
                      criteria. Furthermore, under our order, the Comptroller General may
                      authorize early retirements for these applicants on the basis of the facts
                      and circumstances of each case. The Comptroller General or his EC
                      designee considers each applicant and makes final decisions based on
                      GAO’s institutional needs. Only employees whose release is consistent
                      with the law and GAO’s objective in allowing early retirement are
                      authorized to retire early. In some cases, this has meant that an employee’s
                      request must be denied.

                      GAO held its first voluntary early retirement opportunity in July 2001.
                      Employees who were approved for early retirement were required to
                      separate in the first quarter of fiscal 2002. As required by the act,
                      information on the fiscal 2002 early retirements was reported in an
                      appendix to our 2002 Performance and Accountability Report. Another
                      voluntary early retirement opportunity was authorized in fiscal 2003, and
                      employees were required to separate by March 14, 2003. In anticipation of
                      the 3-year sunset on our authority to provide voluntary early retirements, I
                      have recently announced a final voluntary early retirement opportunity
                      under our current authority. Table 1 provides the data on the number of
                      employees separated by voluntary early retirement as of May 30, 2003.




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Table 1: Summary Data on Voluntary Early Retirements

                                              Fiscal 2002                 Fiscal 2003                  Totals
Applications/Status                                      Percentage                Percentage                   Percentage
of applications                            Number            of total   Number         of total   Number            of total
Total applications submitted                        78         100.0        39           100.0       117              100.0
Approved applications                               72          92.3        37            94.8       109               93.1
Disapproved applications                             6           7.7         2             5.1          8               6.8
Approved applications withdrawn by
employees                                           18          23.0        12            30.7        30               25.6
Applicants separated by voluntary early
retirement                                          54          69.3        25            64.1        79               67.5
Source: GAO.


                                          As you can see from the table, of the 79 employees who separated from
                                          GAO through voluntary early retirement, 66, or 83.5 percent, were high-
                                          grade, supervisory, or managerial employees. High-grade, supervisory, or
                                          managerial employees are those who are GS-13s or above, if covered by
                                          GAO’s GS system; Band IIs or above, if covered by GAO’s banded systems
                                          for Analysts and Attorneys; or in any position in GAO’s SES or Senior-Level
                                          system.

                                          In recommending that GAO’s voluntary early out authority be made
                                          permanent, I would like to point to our progress in changing the overall
                                          shape of the organization. The 1990s were a difficult period for ensuring
                                          that GAO’s workforce would remain appropriately sized, shaped, and
                                          skilled to meet client demands and agency needs. Severe downsizing of the
                                          workforce, including a suspension of most hiring from 1992 through 1997,
                                          and constrained investments in such areas as training, performance
                                          incentives, rewards, and enabling technology left GAO with a range of
                                          human capital and operational challenges to address. Over 3 years ago,
                                          when GAO sought additional human capital flexibilities, our workforce was
                                          sparse at the entry level and plentiful at the midlevel. We were concerned
                                          about our ability to support the Congress with experienced and
                                          knowledgeable staff over time, given the significant percentage of the
                                          agency’s senior managers and analysts reaching retirement eligibility and
                                          the small number of entry-level employees who were training to replace
                                          more senior staff.

                                          As illustrated in figure 1, by the end of fiscal year 2002, GAO had almost a
                                          74 percent increase in the proportion of staff at the entry level (Band I)



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                               compared with fiscal year 1998. Also, the proportion of the agency’s
                               workforce at the midlevel (Band II) decreased by 16 percent.



                               Figure 1: GAO’s Human Capital Profile
                                                         FY 1998                          FY 2002

                               Mission        SES/SL         3.4                               3.5

                                              Band III    12.2                              12.0

                                              Band II     45.6                              38.1

                                              Band I      13.1                              22.8

                                              Othera         4.2                               4.1

                               Mission    Supportb        21.5                              19.5

                               Figures in percentages
                               Source: GAO.




Voluntary Separation           In addition to authorizing voluntary early retirement for GAO employees,
Payments                       Public Law 106-303 permits the Comptroller General to offer voluntary
                               separation incentive payments—buyouts—when necessary or appropriate
                               to realign the workforce to meet budgetary constraints or mission needs;
                               correct skill imbalances; or reduce high-grade, supervisory, or managerial
                               positions. Under the act, up to 5 percent of employees could be offered
                               such an incentive, subject to criteria established by the Comptroller
                               General.

                               The act requires GAO to deposit into the U.S. Treasury an amount
                               equivalent to 45 percent of the final annual basic salary of each employee to
                               whom a buyout is paid. The deposit is in addition to the actual buyout
                               amount, which can be up to $25,000 for an approved individual. Given the
                               many demands on agency resources, these costs present a strong financial
                               disincentive to use the provision if at all. GAO anticipates little, if any, use
                               of this authority because of the associated costs. For this reason, as well as
                               to avoid creating unrealistic employee expectations, GAO has not
                               developed and issued agency regulations to implement this section of the
                               act. Nevertheless, as stated earlier, it is prudent for us to seek the
                               continuation of this provision because it maximizes the options available to
                               the agency to deal with future circumstances. Since GAO is also eligible to
                               request buyouts under the provisions of the Homeland Security Act, the



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                             agency will consider its options under this provision as well. However,
                             under the Homeland Security Act, GAO would have to seek OPM approval
                             of any buyouts, which raises serious independence concerns.



Annual Pay Setting           Section 3 and 4 of our proposal would provide GAO greater discretion in
                             determining the annual across the board and locality pay increases for our
Policy and                   employees. Under our proposal, GAO would have the discretion to set
Adjustments                  annual pay increases by taking into account alternative methodologies
                             from those used by the executive branch and various other factors, such as
                             extraordinary economic conditions or serious budgetary constraints.
                             While the authority requested may initially appear to be broad based, there
                             are compelling reasons why GAO ought to be given such authority. First, as
                             I discussed at the beginning of my testimony, GAO is an agency within the
                             legislative branch and already has a hybrid pay system established under
                             the authority the Congress granted over two decades ago. Therefore, our
                             proposal represents a natural evolution in GAO’s pay for performance
                             system. Second, GAO’s proposal is not radical if viewed from the vantage
                             point of the broad-based authority that has been granted the Department of
                             Homeland Security (DHS) under the Homeland Security Act of 2002;
                             agencies that the Congress has already granted the authority to develop
                             their own pay systems; the authorities granted to various demonstration
                             projects over the past two decades; and the authority Congress is currently
                             contemplating providing the Department of Defense (DOD). Third, GAO
                             already has a number of key safeguards and has plans to build additional
                             safeguards into our modified pay system if granted this authority.

                             Our proposal seeks to take a constructive step in addressing what has been
                             widely recognized as fundamental flaws in the federal government’s
                             approach to white-collar pay. These flaws and the need for reform have
                             been addressed in more detail in OPM’s April 2002 White Paper, A Fresh
                             Start For Federal Pay: A Case for Modernization, and more recently the
                             National Commission on the Public Service’s January 2003 report on
                             revitalizing the public service. The current federal pay and classification
                             system was established over 60 years ago for a federal workforce that was
                             made up largely of clerks performing routine tasks which were relatively
                             simple to assess and measure. Today’s federal workforce is composed of
                             much higher graded and knowledge-based workers.

                             Although there have been attempts over the years to refine the system by
                             enacting such legislation as the Federal Employees Pay Comparability Act
                             (FEPCA) which sought to address, among other things, the issue of pay



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                      comparability with the nonfederal sector, the system still contains certain
                      fundamental flaws. The current system emphasizes placing employees in a
                      relative hierarchy of positions based on grade; is a “one size fits all
                      approach” since it does not recognize changes in local market rates for
                      different occupations; and is performance insensitive in that all employees
                      are eligible for the automatic across the board pay increases regardless of
                      their performance. Specifically, the annual across the board base pay
                      increase, also commonly referred to as the cost of living adjustment
                      (COLA) or the January Pay Increase which the President recommends and
                      the Congress approves, provides a time driven annual raise keyed to the
                      Employment Cost Index (ECI) to all employees regardless of performance.
                      In certain geographic areas, employees receive a locality adjustment tied to
                      the local labor markets. However, in calculating the locality adjustment,
                      for example, it is my understanding that FEPCA requires the calculation of
                      a single average, based on the dominant federal employer in an area, which
                      does not sufficiently recognize the differences in pay rates for different
                      occupations and skills. In view of the fact that today we are in a knowledge-
                      based economy competing for the best knowledge workers in the job
                      market, I believe that new approaches and methodologies are warranted.
                      This is especially appropriate for GAO’s highly educated and skilled
                      workforce.

                      Our proposed pay adjustment provision along with the other provisions of
                      GAO’s human capital proposal are collectively designed to help GAO
                      maintain a competitive advantage in attracting, motivating, retaining, and
                      rewarding a high performing and top-quality workforce both currently and
                      in future years. First, under our proposal, GAO would no longer be
                      required to provide automatic pay increases to employees who are rated as
                      performing at a below satisfactory level. Second, when the proposal is fully
                      implemented, GAO would be able to allocate more of the funding—
                      currently allocated for automatic across-the-board pay adjustments to all
                      employees—to permanent base pay adjustments that would vary based on
                      performance. In addition, our proposal would affect all GAO, non-wage
                      grade employees, including the SES and Senior Level staff.

                      Ultimately, if GAO is granted this authority, all GAO employees who
                      perform at a satisfactory level will receive an annual base pay adjustment
                      composed of purchase power protection and locality based pay increases
                      absent extraordinary economic circumstances or severe budgetary
                      constraints. GAO will be able to develop and apply its own methodology
                      for annual cost-of-living and locality pay adjustments. The locality pay
                      increase would be based on compensation surveys conducted by GAO and



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                               which would be tailored to the nature, skills, and composition of GAO’s
                               workforce. The performance part of an employee’s annual raise would
                               depend on the level of the employee’s performance and that employee’s pay
                               band. We estimate that at least 95 percent of the workforce will qualify for
                               an additional performance-based increase. However, under this provision,
                               employees who perform below a satisfactory level will not receive an
                               annual increase of either type.



How GAO Plans to Use This      GAO’s major non-SES pay groups include (1) Analysts and Attorneys which
Authority                      comprises the majority of our workforce and is our mission group, (2) the
                               Professional Development Program staff (PDP) which is our entry level
                               mission group, (3) the Administrative Professional Support Staff (APSS),
                               which is our mission support group for the most part, and (4) Wage Grade
                               employees who primarily operate our print plant. Each of these groups
                               currently operate in a different pay system. Generally, our mission staff are
                               all in pay bands whereby they currently receive the annual across-the-
                               board base pay increase and locality pay increase similar to the GS pay
                               system, along with performance-based annual increases that are based on
                               merit. Generally, our mission support staff, with some exceptions, remain
                               in a system similar to the GS pay system with its annual across- the-board
                               pay increases, locality pay, quality step increases, and within grade
                               increases. We are currently in the process of migrating the mission support
                               staff into pay bands and a pay for performance system. Our Wage Grade
                               staff will continue to be covered by the federal compensation system for
                               trade, craft, and laboring employees. Because of the small number of
                               employees and the nature of their work, we have no plans to apply the pay
                               adjustment provision authority to this group.

                               I would like to point out the tables in appendices I through IV, which
                               succinctly describe how GAO plans to operationalize our authority under
                               our proposed annual pay adjustment provision over time.



GAO’s Proposed Pay             GAO’s proposal for additional pay flexibility is reasonable in view of the
Authority Is Reasonable        authority the Congress has already granted DHS through the Homeland
                               Security Act of 2002; the other agencies for whom the Congress has granted
                               the authority to develop their own pay systems; the demonstration projects
                               that OPM has authorized; and the authorities that other agencies in the
                               executive branch are currently seeking (e.g., DOD).




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                      While we are aware that the passage of the Homeland Security Act of 2002
                      was not without its difficult moments, particularly with respect to the
                      broad-based authorities granted the department, we are also aware that the
                      process employed by DOD and certain of its human capital proposals are
                      highly controversial. It is important to point out that GAO’s proposal and
                      proposed pay flexibilities pale in respect to those granted to the DHS and to
                      those requested by the DOD in the Defense Transformation for the 21st
                      Century Act of 2003. Collectively, these two agencies represent almost 45
                      percent of the non-postal federal civilian workforce. Specifically, in
                      November 2002, the Congress passed the Homeland Security Act of 2002,
                      which created DHS and provided the department with significant
                      flexibilities to design a modern human capital management system, which
                      could have the potential, if properly developed, for application
                      governmentwide. DOD’s proposed National Security Personnel System
                      (NSPS) would provide wide-ranging changes to its civilian personnel pay
                      and performance management systems, collective bargaining, rightsizing,
                      and a variety of other human capital areas. NSPS would enable DOD to
                      develop and implement a consistent, DOD-wide civilian personnel system.

                      In addition to DHS, there are a number of federal agencies with authority
                      for their own pay systems. Some of these agencies are, for example, the
                      Congressional Budget Office, which is one of our sister agencies in the
                      legislative branch; the Federal Aviation Administration (FAA); the
                      Securities and Exchange Commission (SEC) ; and the Office of the
                      Comptroller of the Currency (OCC) within the Department of the Treasury.
                      When the Congress created the CBO in 1974, it granted that legislative
                      branch agency significant flexibilities in the human capital area. For
                      example, CBO has “at will” employment. In addition, CBO is not subject to
                      the annual executive branch pay adjustments. Further, CBO has extensive
                      flexibility regarding its pay system subject only to certain statutory annual
                      compensation limits.

                      Furthermore, there are twelve executive branch demonstration projects
                      involving pay for performance. These projects have taken different
                      approaches to the sources of funding for salary increases that are tied to
                      performance and not provided as entitlements. Many of the demonstration
                      projects reduce or deny the annual across the board base pay increase for
                      employees with unacceptable ratings (e.g., the Department of Navy’s China
                      Lake demonstration, DOD’s Civil Acquisition Workforce demonstration, the
                      Department of Air Force’s Research Laboratory demonstration, and the
                      Department of Navy’s Research Laboratory demonstration, among others.)
                      Others, including the National Institute of Standards and Technology and



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                              the Department of Commerce demonstration projects, deny both the
                              annual across the board base pay increase and the locality pay adjustment
                              for employees with unacceptable ratings.

                              Currently, this Congress is considering a NASA human capital proposal.
                              This proposal would provide NASA with further flexibilities and authorities
                              for attracting, retaining, developing, and reshaping a skilled workforce.
                              These include a scholarship-for-service program; a streamlined hiring
                              authority for certain scientific positions; larger and more flexible
                              recruitment, relocation, and retention bonuses; noncompetitive
                              conversions of term employees to permanent status; a more flexible critical
                              pay authority; a more flexible limited-term appointment authority for the
                              SES; and greater flexibility in determining annual leave accrual rate for
                              new hires.



Safeguards Provided           As we have testified, agencies should have modern, effective, credible, and
                              as appropriate, validated performance management systems in place with
                              adequate safeguards, including reasonable transparency and appropriate
                              accountability mechanisms, to ensure fairness and prevent politicization
                              and abuse. While GAO’s transformation is a work in progress, we believe
                              that we are in the lead compared to executive branch agencies in having
                              the human capital infrastructure in place to provide such safeguards and
                              implement a modified pay system that is more performance oriented.
                              Specifically, for our Analyst pay group, we have gone through the first cycle
                              of a validated performance management system that has adequate
                              safeguards, including reasonable transparency and appropriate
                              accountability mechanisms. We have learned from what has worked and
                              what improvements can and should be made with respect to the first cycle.
                              In fact, we have adopted many of the recommendations and suggestions of
                              our managing directors and EAC and are now in the process of
                              implementing these suggestions.

                              The following is an initial list of possible safeguards, developed at the
                              request of Congressman Danny Davis, for Congress to consider to help
                              ensure that any pay for performance systems in the government are fair,
                              effective, and credible. GAO’s current human capital infrastructure has
                              most of these safeguards built in, and the others are in the process of being
                              incorporated.

                              • Assure that the agency’s performance management systems (1) link to
                                the agency’s strategic plan, related goals, and desired outcomes and



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                                  (2) result in meaningful distinctions in individual employee
                                  performance. This should include consideration of critical
                                  competencies and achievement of concrete results.

                               • Involve employees, their representatives, and other stakeholders in the
                                 design of the system, including having employees directly involved in
                                 validating any related competencies, as appropriate.

                               • Ensure that certain predecisional internal safeguards exist to help
                                 achieve the consistency, equity, nondiscrimination, and
                                 nonpoliticization of the performance management process (e.g.,
                                 independent reasonableness reviews by the human capital offices
                                 and/or the offices of opportunity and inclusiveness or its equivalent in
                                 establishing and implementing a performance appraisal system, as well
                                 as reviews of performance rating decisions, pay determinations, and
                                 promotion actions before they are finalized to ensure that they are
                                 merit-based; internal grievance processes to address employee
                                 complaints; and pay panels predominately made up of career officials
                                 who would consider the results of the performance appraisal process
                                 and other information in making final pay decisions).

                               • Assure reasonable transparency and appropriate accountability
                                 mechanisms in connection with the results of the performance
                                 management process (e.g., publish overall results of performance
                                 management and pay decisions while protecting individual
                                 confidentiality, and report periodically on internal assessments and
                                 employee survey results).



Transition Period              We have provided a statutory period minimum to allow for a smooth
                               implementation of the law as it applies to both our mission and mission
                               support staff. Specifically, for our Analyst and Attorney communities, we
                               plan to allow for at least a two-year period, during which they will continue
                               to receive their annual across the board pay raise and their locality pay, if
                               applicable, based on the amount set by the GS system. Once the proposal
                               is fully implemented, the new across-the-board increase, which provides
                               for inflation protection and locality pay where applicable, would be
                               computed based on GAO compensation studies, and the performance-
                               based merit pay would be provided based on an employee’s performance.

                               For our APSS employees, the transition period of at least 2 years would
                               allow for a smooth migration to the pay bands and the implementation of at



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         2003




                               least one performance cycle of a newly validated competency based
                               performance appraisal system for that component of GAO’s workforce.
                               Our APSS employees are currently still in the GS system, but we are in the
                               process of moving them into pay bands. We will allow time for the group
                               to migrate to broad bands and to have at least one performance cycle under
                               pay bands before moving it into the new pay system. Therefore, as with the
                               analysts and attorneys, the administrative support staff will move into a
                               hybrid pay system once they migrate to pay bands. Also, as with the
                               analysts and attorneys, I have committed to providing them “pay
                               protection.” This guarantee would continue even after GAO’s authority to
                               adjust pay is fully implemented.

                               We have a small Wage Grade community of under 20 employees. As
                               mentioned earlier, we do not contemplate having the pay adjustment
                               provision apply to them.



“Pay Protection” Guarantee     My predecessor, Comptroller General Charles A. Bowsher, provided the
                               analysts and attorneys a “pay protection” guarantee at the time of their
                               conversion to broad bands. This guarantee, later spelled out in a GAO
                               order, provided that the analyst and attorneys rated as meeting
                               expectations in all categories would fare at least as well under pay bands as
                               under the GS system. This guarantee would not apply to employees who
                               are promoted after conversion or demoted, and to new employees hired
                               after the conversion. It is my understanding that this guarantee provided
                               by my predecessor is unique to GAO and has generally not been applied by
                               other agencies that have migrated their employees to pay bands.

                               Currently, 535 GAO employees are still covered by this “pay protection”
                               guarantee, while less than 10 employees annually have their pay readjusted
                               after the merit pay process. I have committed to GAO employees that even
                               if we receive the new pay adjustment authority, I would still honor my
                               predecessor’s pay protection guarantee. In addition, our mission support
                               staff will also receive this guarantee upon conversion to pay bands. This
                               guarantee will continue through the implementation period for our new
                               human capital authority.



Pay Retention                  Section 5 of our proposal would allow GAO not to provide any automatic
                               increase in basic pay to an employee demoted as a result of workforce
                               restructuring or reclassification at his or her current rate until his or her



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                             salary is less than the maximum rate of the new position. Under current
                             law, the grade and pay retention provisions allow employees to continue to
                             be paid at a rate that exceeds the value of the duties they are performing for
                             an extended period. Specifically, employees who are demoted (e.g., incur a
                             loss of grade or band) due to, among other things, reduction-in-force
                             procedures or reclassification receive full statutory pay increases for 2
                             years and then receive 50 percent of the statutory pay increases until the
                             pay of their new positions falls within the range of pay for those positions.
                             We believe that this antiquated system is inconsistent with the merit
                             principle that there should be equal pay for work of equal value.

                             In granting GAO this authority, we would be able to immediately place
                             employees in the band or grade commensurate with their roles and
                             responsibilities. It is important to note that we have a key safeguard—
                             employees whose basic pay exceeds the maximum rate of the grade or
                             band in which the employee is placed will not have their basic pay reduced.
                             These employees, who would still be eligible to increase their overall pay
                             through certain types of performance-based awards (e.g., incentive
                             awards), would retain this rate until their basic pay is less than the
                             maximum for their grade or band. As with all the provisions in our
                             proposal, we will not implement this pay retention provision until we have
                             consulted with the EAC and managing directors and have provided all GAO
                             employees an opportunity for notice and comment on any regulations.



Relocation Expenses          Section 6 would provide GAO the authority, in appropriate circumstances,
                             to reimburse employees for some relocation expenses when transfers do
                             not meet current legal requirements for entitlement to reimbursement but
                             still benefit GAO. Under current law, employees who qualify for relocation
                             benefits are entitled to full benefits; however, employees whose transfer
                             may be of some benefit or value to the agency would not be eligible to
                             receive any reimbursement. This provision would provide these employees
                             some relief from the high cost of relocating while at the same time allowing
                             GAO the flexibility to promulgate regulations in order to provide such
                             relief. This authority has been previously granted to other agencies,
                             including the FAA.



Leave for Upper Level        Section 7 of the proposal provides GAO the authority to provide 160 hours
                             (20 days) of annual leave to appropriate employees in high-grade,
Hires                        managerial or supervisory positions who have less than 3 years of federal



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                            service. This is narrowly tailored authority that would apply only to GAO
                            and not to executive branch agencies. While it is been a long-standing tenet
                            that all federal employees earn annual leave based on years of federal
                            service, we believe that there is substantial merit in revisiting this in view
                            of today’s human capital environment and challenges. We have found that,
                            in recruiting experienced mid- and upper-level hires, the loss of leave they
                            would incur upon moving from the private to the federal sector is a major
                            disincentive. For example, an individual, regardless of the level at which
                            he enters first enters the federal workforce, is eligible to earn 4 hours of
                            annual leave for each pay period and, therefore, could accrue a total of 104
                            hours (13 days) annually so long as they do not use any of that leave during
                            the year. This amount increases to 6 hours of annual leave after 3 years of
                            federal service. By increasing the annual leave that certain newly hired
                            officers and employees may earn, this provision is designed to help attract
                            and retain highly skilled employees needed to best serve the Congress and
                            the country.



Executive Exchange          Section 8 would authorize GAO to establish an executive exchange
                            program between GAO and private sector entities. Currently, GAO has the
Program                     authority to conduct such an exchange with public entities and non profit
                            organizations under the Intergovernmental Personnel Act; there is no such
                            authority for private sector exchanges. Under this program, high-grade,
                            managerial or supervisory employees from GAO may work in the private
                            sector, and private sector employees may work at GAO. While GAO will
                            establish the details of this program in duly promulgated regulations, we
                            have generally fashioned, with exceptions where appropriate, the legal
                            framework for this program on the Information Technology Exchange
                            Program authorized by Public Law 107-347, the E-Government Act of 2002,
                            which the Congress enacted to address human capital challenges within
                            the executive branch in the information technology area.

                            While the Information Technology Exchange Program only involves
                            technology exchanges, GAO’s exchange program will cover not only those
                            who work in information technology fields, but also accountants,
                            economists, lawyers, actuaries, and other highly skilled professionals. This
                            program will help us address certain skills imbalances in such areas as well
                            as a range of succession planning challenges. Specifically, by fiscal year
                            2007, 52 percent of our senior executives, 37 percent of our management-
                            level analysts, and 29 percent of our analysts and related staff will be
                            eligible for retirement. Moreover, at a time when a significant percentage
                            of our workforce is nearing retirement age, marketplace, demographic,



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                             economic, and technological changes indicate that competition for skilled
                             employees will be greater in the future, making the challenge of attracting
                             and retaining talent even more complex.

                             One of the key concerns raised in the past regarding private sector
                             exchange programs has been the issue of conflict of interest. We believe
                             that in this regard GAO differs from executive branch agencies in that, as
                             reviewers, we are not as subject to potential conflicts of interest.
                             Nevertheless, it is important to note in requesting this authority that we
                             have made clear that the private sector participants would be subject to the
                             same laws and regulations regarding conflict of interest, financial
                             disclosure, and standards of conduct applicable to all employees of GAO.
                             Under the program, private sector participants would receive their salaries
                             and benefits from their employers and GAO need not contribute to these
                             costs. We also believe that this will also encourage private sector
                             individuals to devote a portion of their careers to the public sector without
                             incurring substantial financial sacrifice.



Changing GAO’s Name          Section 9 would change the name of our agency from the “General
                             Accounting Office” to the “Government Accountability Office.” At the
to the “Government           same time, the well-known acronym “GAO,” which has over 80 years of
Accountability Office”       history behind it, will be maintained. We believe that the new name will
                             better reflect the current mission of GAO as incorporated into its strategic
                             plan, which was developed in consultation with the Congress. As stated in
                             GAO’s strategic plan, our activities are designed to ensure the executive
                             branch’s accountability to the American people. Indeed, the word
                             accountability is one of GAO’s core values along with integrity and
                             reliability. These core values are also incorporated in GAO’s strategic plan
                             for serving the Congress.

                             The GAO of today is a far cry from the GAO of 1921, the year that the
                             Congress established it through the enactment of the Budget and
                             Accounting Act. In 1921, GAO pre-audited agency vouchers for the legality,
                             propriety, and accuracy of expenditures. In the 1950s, GAO’s statutory
                             work shifted to the comprehensive auditing of government agencies. Later,
                             beginning during the tenure of Comptroller General Elmer B. Staats, GAO’s
                             work expanded to include program evaluation and policy analysis.
                             Whereas GAO’s workforce consisted primarily of accounting clerks during
                             the first three decades of its existence, today it is a multidisciplinary
                             professional services organization with staff reflecting the diversity of




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       2003




                             knowledge and skills needed to deliver a wide range of services to the
                             Congress.

                             Although currently less than 15 percent of agency resources are devoted to
                             traditional auditing and accounting activities, members of the public, the
                             press, as well as the Congress often incorrectly assume that GAO is still
                             solely a financial auditing organization. In addition, our name clearly
                             confuses many potential applicants, who assume that GAO is only
                             interested in hiring accountants. We believe that the new name will help
                             attract applicants and address certain “expectation gaps” that exist outside
                             of GAO.



Concluding                   In conclusion, I believe that GAO’s human capital proposal merits prompt
                             passage by this committee and, ultimately, the Congress. We have used the
Observations                 narrowly tailored flexibilities the Congress provided us previously in Public
                             Law 106-303 responsibly, prudently, and strategically to help posture GAO
                             to ensure the accountability of the federal government for the benefit of the
                             Congress and the American people. Although some elements of our initial
                             straw proposal were controversial, we have made a number of changes,
                             clarifications, and commitments to address various comments and
                             concerns raised by GAO employees. We recognize that the pay adjustment
                             provision of this proposal remains of concern to some of our staff.
                             However, we believe that it is vitally important to GAO’s future that we
                             continue modernizing and updating our human capital policies and system
                             in light of the changing environment and anticipated challenges ahead. We
                             believe that the proposal as presented and envisioned is well reasoned and
                             reasonable with adequate safeguards for GAO employees. Given our
                             human capital infrastructure and our unique role in leading by example in
                             major management areas, including human capital management, the
                             federal government could benefit from GAO’s experience with pay for
                             performance systems. Overall, we believe that this proposal represents a
                             logical incremental advancement in modernizing GAO’s human capital
                             policies, and with your support, we believe that it will make a big difference
                             for the GAO of the future.

                             Chairwoman Jo Ann Davis, Mr. Davis, and Members of the Committee, this
                             concludes my prepared statement. I would be pleased to respond to any
                             questions you may have.




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       2003




Contacts                     For further information regarding this testimony, please contact Sallyanne
                             Harper, Chief Mission Support Officer, on (202) 512-5800 or at
                             harpers@gao.gov or Jesse Hoskins, Chief Human Capital Officer, on (202)
                             512-5553 or at hoskinsj@gao.gov.




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Appendix I

Analysts and Attorneys: Pay Increases under
GAO’s Current System and Human Capital
Proposal                                                                                                                                              Append
                                                                                                                                                           x
                                                                                                                                                           Ii




         Types of Pay             Current Pay Systemb                           Transition Periodc                     Implementation Periodd
          Increasesa                 (Broad band)                            (Guaranteed Minimum;                    (Pay Protection from Band
                                                                      Pay Protection from Band Conversion)                  Conversion)

                                Included            Permanent                     Included         Permanent            Included          Permanent
                                                    base pay                                       base pay                               base pay

    Annual across-the-board
           base pay                                                      (Same percentage as                          (Percentage
                                                                         executive branch GS;                       decoupled from
                                                                           for all satisfactory                  executive branch GS;
                                                                               performers)                         for all satisfactory
                                                                                                                      performers)

           Locality pay
                                                                                                                      (Percentage
                                                                         (Same percentage as
                                                                                                                    decoupled from
                                                                         executive branch GS;
                                                                                                                 executive branch GS;
                                                                           for all satisfactory
                                                                                                                   for all satisfactory
                                                                               performers)
                                                                                                                      performers)


   Performance-based pay
      (Merit increases)                                                (Percentages determined                        (Percentages
                               (Percentages                              by EC annually; initial                   determined by EC
                               determined by                            additional performance-                     annually; actual
                                EC annually)                            based funds limited due                   incremental amount
                                                                          to transition period                     will vary over time)
                                                                               guarantee)

    Performance bonusesb-d
    (for individuals who are                                                                        One-time                               One-time
           pay capped)                               One-time


         Dividendsb-d                                 One-time                                      One-time                               One-time


      Incentive awards                               One-time                                       One-time                               One-time


                                                     This element is applicable

                                               N/A This element is not applicable
Source: GAO.

                                                a
                                                    The percentage allocated to each type of pay increase varies annually.
                                                b
                                                 Under our current pay system, GAO is linked to the executive branch for annual base and locality pay
                                                adjustments; however, since the implementation of broad banding, has not been linked to the executive
                                                branch for performance-based merit pay increases, performance bonuses/dividends, and other
                                                incentive award pay increases. The Executive Committee determines on an annual basis which pay
                                                categories, if any, are eligible for bonuses and dividends. For example, individuals in pay categories
                                                one and two received dividends for their FY 02 performance.
                                                c
                                                 During the transition period, GAO staff rated as performing at a satisfactory level (i.e., meeting
                                                expectations or higher) will be guaranteed, at a minimum, barring extraordinary economic




                                                Page 28                                                                                   GAO-03-1024T




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2003




                      Appendix I
                      Analysts and Attorneys: Pay Increases under
                      GAO’s Current System and Human Capital
                      Proposal




                      circumstances or serious budgetary constraints, base pay and locality pay according to the same
                      adjustment provided to executive branch employees. All such GAO staff will also be eligible for
                      additional performance-based merit pay increases, performance bonuses (if pay capped)/dividends,
                      and incentive awards. During the transition period, GAO will continue to raise the pay cap for its pay
                      bands commensurate with executive branch pay cap increases absent extraordinary economic
                      circumstances or serious budgetary constraints. The Executive Committee will determine on an
                      annual basis which categories, if any, are eligible for bonuses and dividends.
                      d
                       Under its human capital proposal, GAO proposes to decouple itself from the executive branch for base
                      and locality pay adjustments after a 2 plus year transition period. After the transition period, GAO will
                      fully implement a modified pay system in which absent extraordinary economic conditions or serious
                      budgetary constraints, all GAO staff rated as performing at a satisfactory level (i.e., meeting
                      expectations or higher) can expect to receive at a minimum an annual adjustment designed to protect
                      purchasing power (e.g., the Consumer Price Index) and address differences in compensation ranges
                      by localities. In addition, all such staff will continue to be eligible for performance-based merit pay
                      increases, performance bonuses (if pay capped)/dividends, and incentive awards. Before finalizing
                      and implementing a modified pay system, GAO will seek the advice of the managing directors and
                      GAO’s Employee Advisory Council. We will also draft revised pay regulations and publish them for
                      review and comment by all employees.




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                    2003




Appendix II

Professional Development Program (PDP)                                                                                                                  Appendx
                                                                                                                                                              ies




Staff: Pay Increases under GAO’s Current
System and Human Capital Proposal                                                                                                                        Appendx
                                                                                                                                                               Ii




           Types of Pay               Current Pay Systemb                         Transition Periodc                       Implementation
                                       (Broad band/PDP)                          Guaranteed Minimum                           Periodd
            Increasesa
                                                         Permanent                                Permanent                            Permanent
                                     Included             base pay              Included          base pay          Included
                                                                                                                                       base pay


     Annual across-the-board                                                                                        (Percentage
            base pay                                                      (Same percentage                           decoupled
                                                                              as executive                        from executive
                                                                               branch GS;                            branch GS;
                                                                           for all satisfactory                 for all satisfactory
                                                                               performers)                          performers)

               Locality pay                                               (Same percentage                          (Percentage
                                                                              as executive                           decoupled
                                                                               branch GS;                         from executive
                                                                           for all satisfactory                      branch GS;
                                                                               performers)                      for all satisfactory
                                                                                                                    performers)



      Performance-based pay      (Percentages                                 (Percentages                       (Percentages
                                 determined by                                determined by                      determined by
                                  EC annually)                                 EC annually)                       EC annually)


      Performance bonusesb-e
      (for individuals who are                             One-time                               One-time                             One-time
             pay capped)
               Dividendsc-e          N/A                     N/A                  N/A               N/A               N/A                N/A

         Incentive awards                                  One-time                               One-time                             One-time

                                                 This element is applicable

                                           N/A This element is not applicable
Source: GAO.

                                                 Note: PDP Staff who are Band IF (full performance) are covered by the merit pay system. See chart for
                                                 Analysts & Attorneys.
                                                 a
                                                     The percentage allocated to each type of pay increase varies annually.
                                                 b
                                                  Under our current pay system, GAO is linked to the executive branch for base and locality pay. Band I
                                                 staff in the PDP are eligible for periodic performance based PDP pay increases that are not available in
                                                 the executive branch. PDP staff are not eligible for performance based merit increases and dividends.
                                                 c
                                                  During the transition period, PDP staff rated as performing at a satisfactory level (i.e., meeting
                                                 expectations or higher) will be guaranteed, at a minimum, barring extraordinary economic
                                                 circumstances or serious budgetary constraints, base pay and locality pay according to the same
                                                 adjustment provided to the executive branch employees. PDP staff rated as performing at the
                                                 satisfactory level (i.e., meeting expectations or higher) will be eligible for performance-based PDP pay
                                                 increases. During and after the transition period, PDP staff will not be eligible for dividends because
                                                 PDP staff are evaluated every 6 months for performance based PDP increases. During the transition
                                                 period, GAO will raise the pay cap for its Band I pay band commensurate with executive branch pay
                                                 cap increases absent extraordinary economic circumstances or serious budgetary constraints. The




                                                 Page 30                                                                                 GAO-03-1024T




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2003




                      Appendix II
                      Professional Development Program (PDP)
                      Staff: Pay Increases under GAO’s Current
                      System and Human Capital Proposal




                      Executive Committee will determine on an annual basis which pay categories, if any, are eligible for
                      PDP bonuses.
                      d
                       Under its human capital proposal, GAO proposes to decouple itself from the executive branch for base
                      and locality pay after a 2 plus year transition period. After the transition period, GAO will fully
                      implement a modified pay system in which absent extraordinary economic conditions or serious
                      budgetary constraints, all PDP staff rated as performing at a satisfactory level (i.e., meeting
                      expectations or higher) can expect to receive at a minimum, an annual adjustment designed to protect
                      purchasing power (e.g., the Consumer Price Index) and address differences in compensation ranges
                      by localities. In addition, PDP staff rated as performing at a satisfactory level (i.e., meeting
                      expectations or higher) will continue to be eligible for additional performance-based compensation,
                      including performance-based PDP pay increases and incentive awards. Before finalizing and
                      implementing a modified pay system, GAO will seek the advice of the managing directors and GAO’s
                      Employee Advisory Council. We will also draft revised pay regulations and publish them for review and
                      comment by all employees.




                      Page 31                                                                               GAO-03-1024T




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                 2003




Appendix III

Administrative Professional Support Staff
(APSS): Pay Increases under GAO’s Current
System and Human Capital Proposal                                                                                                                  Appendx
                                                                                                                                                         iI




       Types of Pay                                                 Transition Periodc                    Implementation Periodd
        Increasesa            Current Pay Systemb                     (Broad band)                 Pay Protection from Band Conversion
                                      (GS)                      Pay Protection from Band
                                                                       Conversion
                             Included      Permanent            Included         Permanent                  Included               Permanent
                                            base pay                             base pay                                          base pay

  Annual across-the-board
         base pay                                           (Same percentage                     Percentage decoupled from
                                                               as executive                          executive branch GS;
                                                                branch GS)                      for all satisfactory performers)
          Locality pay
                                                            (Same percentage                     Percentage decoupled from
                                                               as executive                          executive branch GS;
                                                                branch GS)                      for all satisfactory performers)
   Quality step increase
           (QSI)                                                     N/A           N/A                        N/A                      N/A

  Within grade increase
          (WIG)                                                      N/A           N/A                        N/A                      N/A

                               N/A              N/A
  Performance-based pay
      (merit increases)                                       (Percentages                      (Percentages determined by
                                                              determined by                    EC annually; actual incremental
                                                               EC annually)                      amount will vary over time)

  Performance bonusesb-d
  (for individuals who are     N/A              N/A                              One-time                                           One-time
         pay capped)

         Dividendsb-d          N/A              N/A                                N/A

     Incentive awards                      One-time                             One-time                                            One-time

                                                This element is applicable
                                           N/A This element is not applicable
Source: GAO.
                                            a
                                             The percentage allocated to each type of pay increase varies annually. This chart applies only to
                                            APSS employees who are under the General Schedule (GS) system. APSS employees who are
                                            already in broad bands should see the chart for Analysts and Attorneys.
                                            b
                                             Under our current pay system, GAO is linked to the executive branch for annual base, locality, QSI,
                                            and WIG pay adjustments. APSS staff are eligible for performance incentive award pay increases;
                                            however, they are not eligible for performance bonuses (if pay capped) or dividends.
                                            c
                                             During the transition period, GAO will implement broad banding for the APSS community between
                                            April – June 2004 and allow at least one full cycle of a new competency-based performance appraisal
                                            system before implementing any additional performance-based pay adjustments envisioned under HC
                                            II. Upon conversion to broad bands, GAO, as it did with its Analyst and Attorney communities, will
                                            replace QSIs and WIGs with performance pay increases that are not linked to the executive branch.
                                            Also, as it did with its Analyst and Attorney communities when they were converted to bands, GAO will
                                            provide a pay protection guarantee. Specifically, APSS staff who perform at the meets expectations
                                            level on any performance rating will earn a salary at least as high as they would have received had
                                            they remained under the General Schedule at their grade at the time of conversion. However, this




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2003




                      Appendix III
                      Administrative Professional Support Staff
                      (APSS): Pay Increases under GAO’s Current
                      System and Human Capital Proposal




                      guarantee will not apply to staff who are promoted after conversion or demoted and to new employees
                      hired after the conversion. APSS staff will be eligible for performance-based merit increases,
                      performance bonuses (if pay capped) /dividends, and incentive awards. During the transition period,
                      GAO will continue to raise the pay cap for its pay bands commensurate with executive branch pay cap
                      increases. The Executive Committee will determine on an annual basis which pay categories, if any,
                      are eligible for bonuses and dividends.
                      d
                       Under its human capital proposal, GAO proposes to decouple itself from the executive branch for base
                      and locality pay after a two plus year transition for the broad band conversion. After the transition
                      period, GAO will fully implement a modified pay system in which absent extraordinary economic
                      conditions or serious budgetary constraints, all GAO staff rated as performing at a satisfactory level
                      (i.e., meeting expectations or higher) can expect to receive at a minimum, an annual adjustment
                      designed to protect purchasing power (e.g., the Consumer Price Index) and address differences in
                      compensation ranges by localities. In addition, all APSS staff will continue to be eligible for
                      performance-based merit pay increases, performance bonuses (if pay capped)/dividends, and
                      incentive awards. Before finalizing and implementing a modified pay system, GAO will seek the advice
                      of the managing directors and GAO’s Employee Advisory Council. We will also draft revised pay
                      regulations and publish them for review and comment by all employees. In addition, APSS staff
                      receiving the pay protection guarantee from their conversion into pay bands will continue to be eligible
                      for pay protection during the implementation period.




                      Page 33                                                                                 GAO-03-1024T




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                      2003




           Appendix IV

           Wage Grade (WG) Staff: Pay Increases under
           GAO’s Current System and Human Capital
           Proposal                                                                                                                               Appendx
                                                                                                                                                        IiV




                                                                                                                 Current Pay Systemb
                                                                 Types of Pay Increasesa                            (Wage Grade)
                                                                                                               System Same Under HC II
                                                                                                           Included              Permanent

                                                        Annual across-the-board base pay
                                                                      Locality pay                             N/A                   N/A
                                                               Quality step increase (QSI)                     N/A                   N/A
                                                               Within grade increase (WIG)


                                                                    Incentive awardsc                                             One-time

                                                 · This element is applicable
                                                N/A This element is not applicable
                                                Source: GAO.

                                            Note: HC II refers to GAO’s human capital proposal.
                                            a
                                                The percentage allocated to each type of pay increase varies annually.
                                            b
                                             Under its current wage grade pay system, GAO is linked to the executive branch for base, locality, and
                                            WIG pay increases. Wage grade employees are not eligible for QSIs and locality pay increases in
                                            GAO or anywhere in the federal government. Because its wage grade community is so small, GAO
                                            does not plan to include the wage grade community in the modified pay system under its human
                                            capital proposal.
                                            c
                                                Wage grade staff are not eligible for bonuses and dividends.




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