United States General Accounting Office GAO January 2003 High-Risk Series An Update GAO-03-119 a This Series This report entitled High-Risk Series: An Update is part of a special GAO series, first issued in 1993 and periodically updated. In this 2003 report, GAO identifies areas at high risk due to either their greater vulnerabilities to waste, fraud, abuse, and mismanagement or major challenges associated with their economy, efficiency, or effectiveness. This series also includes reports on three crosscutting high-risk areas: strategic human capital management, protecting information systems supporting the federal government and the nation’s critical infrastructures, and federal real property. A companion series, Performance and Accountability Series: Major Management Challenges and Program Risks, contains separate reports covering each cabinet department, most major independent agencies, and the U.S. Postal Service. It also includes a governmentwide perspective on transforming the way the government does business in order to meet 21st century challenges and address long-term fiscal needs. A list of all of the reports in this series is included at the end of this report. Print This Page January 2003 HIGH-RISK SERIES An Update Highlights of GAO-03-119, a report to Congress on GAO's High-Risk Series GAO’s audits and evaluations In 2001, GAO identified 23 high-risk areas. Since then, demonstrable identify federal programs and progress has been made in virtually all of them. Federal departments and operations that are high risk, in agencies, and the Congress as well, have shown a growing commitment to some cases, due to their greater addressing management challenges and have taken new steps to correct the vulnerabilities to fraud, waste, root causes of the problems. In two areas, the Supplemental Security abuse, and mismanagement. Increasingly, we also are Income program and the asset forfeiture programs managed by the identifying high-risk areas to focus Departments of Justice and the Treasury, GAO has determined that on major economy, efficiency, or sufficient progress has been made to remove the high-risk designation. effectiveness challenges. GAO has increasingly used the high-risk designation to draw attention to the Since 1990, GAO has periodically challenges faced by government programs and operations in need of broad- reported on government operations based transformation. For example, in 2001, GAO designated as high risk that it has designated as high risk. strategic human capital management across government and the U.S. Postal In this 2003 update for the new Service’s transformation and fiscal outlook. Since then, the President has 108th Congress, GAO presents the made human capital a top initiative of his Management Agenda, while the status of high-risk areas included in Congress enacted key governmentwide human capital reforms as it created our last report made in January 2001 and identifies new high-risk the Department of Homeland Security (DHS). In addition, a promising areas warranting attention by the Postal Service transformation plan has been produced and the President Congress and the administration. formed a commission to focus on Postal Service transformation. Lasting solutions to high-risk With these positive results in mind, for 2003, GAO has designated three problems offer the potential to save additional areas as high risk based on challenges involving broad-based billions of dollars, dramatically transformation and/or the need for legislative solutions. The first new high- improve service to the American risk area is implementing and transforming DHS, which is high risk because public, strengthen public of the sheer size of the undertaking, the fact that DHS’s proposed confidence and trust in the components already face a wide array of existing challenges, and the performance and accountability of prospect of serious consequences for the nation should DHS fail to our national government, and ensure the ability of government to adequately address its management challenges and program risks. A related deliver on its promises. homeland security challenge will be to protect information systems supporting the federal government as well as the nation’s critical infrastructures; information security has been a high-risk area since 1997 and has been expanded this year to include both of these concerns. The second This report contains GAO’s views new high-risk area involves federal disability programs, primarily those at on what remains done for each the Social Security Administration and the Department of Veterans Affairs. high-risk area to bring about lasting Already growing, disability programs are poised to surge as baby-boomers solutions. Perseverance by the age, yet the programs remain mired in outdated economic, workforce, and administration in implementing medical concepts and are not well-positioned to provide meaningful and GAO’s recommended solutions and timely support to disabled Americans. The third new high-risk area involves continued oversight by the federal real property, based on long-standing problems such as excess and Congress both will be important. underutilized property and deteriorating facilities, as well as increased security challenges from the threat of terrorism. www.gao.gov/cgi-bin/getrpt?GAO-03-119. As appropriate, GAO also continues to identify more traditional high-risk To view the full report, click on the link above. For more information, contact George H. areas. For example, this year’s fourth new high-risk area involves the Stalcup at (202) 512-9490 or Medicaid program, in part because of growing concerns about inadequate firstname.lastname@example.org. fiscal oversight to prevent inappropriate program spending. GAO’s 2003 High-Risk GAO’s 2003 high-risk list is shown in the following table. Information on each of these areas is presented in separate highlights pages included at the List end of this report. These highlights pages show the names of GAO executives to contact for more information on the high-risk areas and Internet links to reports in the accompanying GAO series, Performance and Accountability Series: Major Management Challenges and Program Risks, where the high-risk areas are also discussed. Year designated 2003 high-risk areas high-risk Addressing Challenges In Broad-based Transformations • Strategic Human Capital Managementa 2001 • U.S. Postal Service Transformation Efforts and Long-Term Outlooka 2001 • Protecting Information Systems Supporting the Federal Government 1997 and the Nation’s Critical Infrastructures • Implementing and Transforming the New Department of Homeland 2003 Security • Modernizing Federal Disability Programsa 2003 • Federal Real Propertya 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 • Forest Service Financial Management 1999 • FAA Financial Management 1999 • IRS Financial Management 1995 Reducing Inordinate Program Management Risks • Medicare Programa 1990 • Medicaid Programa 2003 • Earned Income Credit Noncompliance 1995 • Collection of Unpaid Taxes 1990 • DOD Support Infrastructure Management 1997 • DOD Inventory Management 1990 • HUD Single-Family Mortgage Insurance and Rental Assistance 1994 Programs • Student Financial Aid Programs 1990 Managing Large Procurement Operations More Efficiently • DOD Weapon Systems Acquisition 1990 • DOD Contract Management 1992 • Department of Energy Contract Management 1990 • NASA Contract Management 1990 Source: GAO. a Additional authorizing legislation is likely to be required as one element of addressing this high-risk area. Page 1 GAO-??-?? Document Name Contents Transmittal Letter 1 Historical Perspective 3 Overview of Progress 6 High-Risk Designations Removed 7 in Addressing Progress Being Made in Remaining High-Risk Areas 8 High-Risk Areas Progress in Addressing Transformation Challenges 11 New High-Risk Areas 18 Adding Three Broad-Based High-Risk Areas 18 New High-Risk Area Identified Based on Fiscal Oversight Vulnerabilities 25 Highlights of High-Risk 28 Areas Performance and Accountability and High-Risk Series This is a work of the U.S. Government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. It may contain copyrighted graphics, images or other materials. Permission from the copyright holder may be necessary should you wish to reproduce copyrighted materials separately from GAO’s product. Page i GAO-03-119 High-Risk Update A United States General Accounting Office Washington, D.C. 20548 Comptroller General of the United States January 2003 T ransmL ta ileter The President of the Senate The Speaker of the House of Representatives Since 1990, GAO has periodically reported on government operations that it identifies as “high risk.” This effort, which was supported by the Senate Committee on Governmental Affairs and the House Committee on Government Reform, has brought a much needed focus to problems that are impeding effective government and costing the government billions of dollars. To help, GAO has made hundreds of recommendations to improve these high-risk operations. Moreover, GAO’s focus on high- risk problems contributed to the Congress enacting a series of governmentwide reforms to address critical human capital challenges, strengthen financial management, improve information technology practices, and instill a more results-oriented government. GAO’s high-risk status reports are provided at the start of each new Congress. This update should help the Congress and the administration in carrying out their responsibilities while improving government for the benefit of the American people. It summarizes progress made in correcting high- risk problems, actions under way, and further actions that GAO believes are needed. In this update, GAO has determined that sufficient progress has been made to remove the high-risk designation from two areas, and has designated four new areas as high risk. GAO’s high-risk program has increasingly focused on those major programs and operations that need urgent attention and transformation in order to ensure that our national government functions in the most economical, efficient, and effective manner possible. Further, the administration has looked to GAO’s program in shaping governmentwide initiatives such as the President’s Management Agenda, which has at its base many of the areas GAO had previously designated as high risk. As in prior GAO high-risk update reports, federal programs and operations are also emphasized when they are at high risk because of their greater vulnerabilities to fraud, waste, abuse, and mismanagement. The high- risk program has served to bring “light” to these areas as well as “heat” to prompt needed “actions.” This has been clearly evidenced by the many actions that have occurred in connection with strategic human capital management and Postal Service transformation, the two most recent additions to GAO’s high-risk list prior to this update. Page 1 GAO-03-119 High-Risk Update Copies of this series are being sent to the President, the congressional leadership, other Members of the Congress, the Director of the Office of Management and Budget, and the heads of major departments and agencies. David M. Walker Comptroller General of the United States Page 2 GAO-03-119 High-Risk Update Historical Perspective In 1990, we began a program to report on government operations that we identified as “high risk.” Since then, generally coinciding with the start of each new Congress, we have periodically reported on the status of progress to address high-risk areas and updated our high-risk list. Our previous high-risk update was in January 2001.1 Overall, our high-risk program has served to identify and help resolve serious weaknesses in areas that involve substantial resources and provide critical services to the public. Since our program began, the government has taken high-risk problems seriously and has made long-needed progress toward correcting them. In some cases, progress has been sufficient for us to remove the high-risk designation. The overall changes to our high-risk list over the past 13 years are shown in table 1. Areas removed from the high-risk list over that same period are shown in table 2. Table 1: Overall Changes to GAO’s High-Risk List, 1990 to 2003 Number of Changes 1990–2003 areas Original high-risk list in 1990 14 High-risk areas added since 1990 24 High-risk areas removed since 1990 13 High-risk list in 2003 25 Source: GAO. 1 U.S. General Accounting Office, High-Risk Series: An Update, GAO-01-263 (Washington, D.C.: Jan. 2001). Page 3 GAO-03-119 High-Risk Update Historical Perspective Table 2: Areas Removed from GAO’s High-Risk List, 1990 to 2003 Year designated Year Area high risk removed Pension Benefit Guaranty Corporation 1990 1995 State Department Management of Overseas Real 1990 1995 Property Federal Transit Administration Grant Management 1990 1995 Bank Insurance Fund 1991 1995 Resolution Trust Corporation 1990 1995 Customs Service Financial Management 1991 1999 The Year 2000 Computing Challenge 1997 2001 The 2000 Census 1997 2001 Superfund Program 1990 2001 Farm Loan Programs 1990 2001 National Weather Service Modernization 1995 2001 Supplemental Security Income 1997 2003 Asset Forfeiture Programs 1990 2003 Source: GAO. Seven of the 13 areas removed from the list over the years were among the 14 programs and operations we determined to be high risk at the outset of our efforts to monitor such programs. These results demonstrate that the sustained attention and commitment by the Congress and agencies to resolve serious, long-standing high-risk problems has paid off, as root causes of the government’s exposure for half of our original high-risk list have been successfully addressed. Historically, high-risk areas have involved traditional vulnerabilities due to their greater susceptibility to fraud, waste, abuse, and mismanagement. As our high-risk program has evolved, we have increasingly designated areas as high risk to draw attention to areas associated with the economy, efficiency, effectiveness, and accountability of government programs and operations. Perseverance by the administration is needed in implementing our recommended solutions for addressing these high-risk areas. Continued congressional oversight and, in some cases, additional authorizing legislative action will also be key to achieving progress, particularly in addressing challenges in broad-based transformations. Page 4 GAO-03-119 High-Risk Update Historical Perspective To determine which federal government programs and functions should be designated as high risk, we used our guidance document, Determining Performance and Accountability Challenges and High Risks.2 In determining whether a government program or operation is high risk, we consider whether it involves national significance or a management function that is key to performance and accountability. We also consider whether the risk is • inherent, which may arise when the nature of a program creates susceptibility to fraud, waste, and abuse; or • a systemic problem, which may arise when the programmatic; management support; or financial systems, policies, and procedures established by an agency to carry out a program are ineffective, creating a material weakness. Further, we consider qualitative factors, such as whether the risk • involves public health or safety, service delivery, national security, national defense, economic growth, or privacy or citizens’ rights; or • could result in significantly impaired service; program failure; public injury or loss of life; or significantly reduced economy, efficiency, or effectiveness. Before making a high-risk designation, we also consider the corrective measures an agency may have planned or under way to resolve a material control weakness and the status and effectiveness of these actions. When legislative and agency actions, including those in response to our recommendations, result in significant progress toward resolving a high- risk problem, we remove the high-risk designation. Key determinants here include a demonstrated strong commitment to and top leadership support for addressing problems, the capacity to do so, a corrective action plan, and demonstrated progress in implementing corrective measures. The next section discusses how we applied these criteria in determining what areas to remove and to add since our last update in January 2001. 2 U.S. General Accounting Office, Determining Performance and Accountability Challenges and High Risks, GAO-01-159SP (Washington, D.C.: Nov. 2000). Page 5 GAO-03-119 High-Risk Update Overview of Progress in Addressing High-Risk Areas Since our January 2001 report, federal departments and agencies and the Congress have taken additional steps to address areas we designated as high risk. In two cases, progress has been sufficient for the high-risk designation to be removed. For virtually every other high-risk area, important steps have been taken to resolve risks and implement our recommendations, but more needs to be done before these areas can be removed from the high-risk list. Overall, we are impressed with the level of commitment shown by top officials and anticipate continued progress. Importantly, our high-risk program has helped the executive branch and the Congress to galvanize efforts to seek lasting solutions to high-risk problems. For example, our program helped shape the administration’s focus on governmentwide initiatives such as the President’s Management Agenda (PMA), which has at its base many of the areas we had previously designated as being high risk. Moreover, our program has helped draw attention to the need to effectively manage the risks associated with several important broad-based transformations under way in government today, such as those at the Department of Defense (DOD), Internal Revenue Service (IRS), Postal Service, Department of Education, Department of Housing and Urban Development (HUD), and Federal Aviation Administration (FAA), where success will be critical to the nation and its citizens. For 2003, we have designated four new high-risk areas. Three of these involve major challenges in addressing broad-based transformations, or are areas where legislative solutions may be called for. The fourth area, Medicaid, is being added to the high-risk list, in part because of growing concern about inadequate fiscal oversight efforts to prevent inappropriate program spending. Table 3: Changes to GAO’s High-Risk List, 2001 to 2003 Number of Changes 2001–2003 areas High-risk list in 2001 23 High-risk areas added in 2003 4 High-risk areas removed in 2003 2 High-risk list in 2003 25 Source: GAO. Page 6 GAO-03-119 High-Risk Update Overview of Progress in Addressing High-Risk Areas High-Risk Designations For this 2003 high-risk update, we determined that two high-risk areas warranted removal from the list. They are the Social Security Removed Administration’s (SSA) Supplemental Security Income (SSI) program and the asset forfeiture programs managed by the Departments of Justice and the Treasury. We will, however, continue to monitor these programs, as appropriate, to ensure that the improvements we have noted are sustained. Supplemental Security We designated SSI a high-risk program in 1997, after several years of Income reporting on specific instances of abuse and mismanagement, increasing overpayments, and poor recovery of outstanding SSI overpayments. SSA’s actions since then included developing a major SSI legislative proposal with numerous overpayment deterrence and recovery provisions. The ensuing enacted legislation directly addressed a number of our prior recommendations and provides SSA with additional tools to obtain applicant income and resource information from financial institutions; imposes a period of ineligibility for applicants who transfer assets to qualify for SSI benefits; and authorizes the use of credit bureaus, private collection agencies, interest levies, and other means to recover overpayments. SSA also obtained separate legislative authority to recover overpayments from former SSI recipients who currently receive Social Security benefits. In addition, SSA initiated a number of internal administrative actions to further strengthen SSI program integrity, including using tax refund offsets for collecting SSI overpayments and more frequent automated matches to identify ineligible SSI recipients living in nursing homes and other institutions. In addition, SSA increased the number of SSI financial redeterminations that it conducted and the level of resources and staff in the Office of Inspector General devoted to investigating SSI fraud and abuse. Finally, SSA revised its field office work credit and measurement system to better reward staff for time spent developing fraud referrals. In fiscal year 2002, SSA increased its collection of overpayments by $150 million over the prior fiscal year. (See our Performance and Accountability report on the Social Security Administration.3) 3 U.S. General Accounting Office, Major Management Challenges and Program Risks: Social Security Administration, GAO-03-117 (Washington, D.C.: Jan. 2003). Page 7 GAO-03-119 High-Risk Update Overview of Progress in Addressing High-Risk Areas Asset Forfeiture Programs We first reported asset forfeiture programs operated by the Departments of Justice and the Treasury as a high-risk area in 1990 because of shortcomings in the management of and accountability for seized and forfeited property and the potential for cost reduction through administrative improvements and consolidation of the programs’ postseizure management and disposition of noncash seized property. We have subsequently reported that actions taken by Treasury’s Customs Service and Justice’s Marshals Service to address our recommendations have improved the management of and accountability for seized and forfeited property. We also reported that Justice’s Drug Enforcement Administration and Federal Bureau of Investigation (FBI) have taken many actions to address our recommendations to improve physical safeguards over drugs and firearms evidence and strengthen accountability for such evidence. In addition, the Treasury Forfeiture Fund and Justice's Asset Forfeiture Fund and Seized Asset Deposit Fund have strengthened their financial management and accountability over seized and forfeited property, in part evidenced by the unqualified opinions on these entities’ financial statements over the past several years. With respect to consolidating noncash asset management and disposition activities, Treasury and Justice are moving toward sharing Web site locations for Internet sales, sharing selected vehicle storage and warehouse facilities, and exploring opportunities to jointly contract for specific services in high- volume areas. The departments’ substantial progress in improving the management of and accountability for seized and forfeited property, and their demonstrated commitment to communicate and coordinate where joint efforts could help reduce costs and eliminate duplicative activities, are sufficient for us to remove the high-risk designation from asset forfeiture programs. (See our Performance and Accountability reports on the Departments of Justice and the Treasury.4) Progress Being Made in For virtually all other areas that remain on our 2003 high-risk list, there has been important progress, although not yet enough progress to remove Remaining High-Risk these areas from the list. Top administration officials have expressed their Areas commitment to maintaining momentum in seeing that high-risk areas 4 U.S. General Accounting Office, Major Management Challenges and Program Risks: Department of Justice, GAO-03-105 (Washington, D.C.: Jan. 2003); and Major Management Challenges and Program Risks: Department of the Treasury, GAO-03-109 (Washington, D.C.: Jan. 2003). Page 8 GAO-03-119 High-Risk Update Overview of Progress in Addressing High-Risk Areas receive adequate attention and oversight. A concerted effort by agencies and ongoing attention by the Office of Management and Budget (OMB) is critical, as our experience over the past 13 years has shown that perseverance is required to fully resolve high-risk areas. The Congress, too, will continue to play an important role through its oversight and, where appropriate, through legislative action targeted at the problems and designed to address high-risk areas. Examples of agencies’ progress follow: • DOD has undertaken a number of initiatives to transform its forces and improve its business operations. As part of its transformation process, the Secretary of Defense and senior civilian and military leaders have committed to adopt a capabilities-based approach to planning based on clear goals and to improve the linkage between strategy and investments. At the same time, DOD has embarked on a series of efforts to improve its business processes, including support infrastructure reforms to include base closures, information technology modernization, and logistics reengineering. Further, in acknowledging DOD’s numerous ongoing financial difficulties, the Secretary of Defense has laid out an 8-year plan to reform financial management and accountability and instituted new contract management policies and programs aimed at increasing the importance given to these processes. Although DOD recognizes the need for internal transformation and budget reform, its goals are challenging, and its strategic plan is currently not set up to allow DOD to implement and measure progress toward achieving its performance goals in an integrated fashion. Additionally, DOD has not kept pace with the changing capabilities and productivity of the modern business environment. Effecting departmental transformation also requires cultural transformation and business process reengineering, which take years to accomplish, and a commitment from both the executive and legislative branches of government. (See “Highlights of High-Risk Areas,” p. 28.) • IRS continues to make important progress. For example, IRS (1) has developed and is using a modernization blueprint, commonly called an enterprise architecture, to guide and constrain its systems modernization projects and (2) is investing incrementally in them; both of which are leading practices of successful public- and private-sector organizations. In other actions, IRS has worked aggressively to address financial management issues not solely dependent on systems modernization for resolution and, in 2002, produced reliable annual financial statements (for the third consecutive year) only 6 weeks after Page 9 GAO-03-119 High-Risk Update Overview of Progress in Addressing High-Risk Areas the end of the fiscal year. Also, IRS has made progress in revamping both its organizational performance and human capital management systems. It has implemented and used a new strategic planning, budgeting, and performance management process. It has also rolled out a new employee evaluation system designed to align performance expectations and incentives with agencywide strategic goals. Top management has further demonstrated its commitment by taking actions to address other problems. For example, IRS is in various stages of planning and implementing a strategy to improve productivity in collecting taxes, and the Commissioner of Internal Revenue and the Treasury Assistant Secretary for Tax Policy have convened a joint task force to develop recommendations to better administer the earned income credit. However, more needs to be done to address risks associated with the growing scope and complexity of modernization and the internal control weaknesses in IRS’s financial management. Further, concerns remain about trends in the collection of unpaid taxes and the level of earned income credit noncompliance. Finally, IRS needs to continue its efforts to strengthen its approaches to managing its human capital. (See “Highlights of High-Risk Areas,” p. 28.) • The Department of Education has made important progress in, and demonstrated its commitment to, addressing long-standing issues that have made student financial aid programs vulnerable to fraud, waste, abuse, and mismanagement. Education established a team of senior managers to formulate strategies and direct initiatives to address key financial and management problems throughout the agency. Under one financial aid program initiative, names of defaulted borrowers were matched with the Department of Health and Human Services’ National Directory of New Hires database. This resulted in the collection of $269 million in fiscal year 2002 alone. Education has also conducted sample matches of income reported on student aid applications with federal tax returns. Expanding this initiative is contingent upon legislation that would increase IRS’s ability to share information with other agencies. Progress has also been made in other areas. Education’s Office of Federal Student Aid can now better integrate and use its existing data on student loans and grants, and changes have been implemented aimed at strengthening financial management departmentwide. However, additional work is needed to both prevent and collect defaulted student loans and to better demonstrate systems integration progress. Furthermore, it is too soon to determine whether changes made to improve financial management and address internal control weaknesses will prove effective. (See “Highlights of High-Risk Areas,” p. 28.) Page 10 GAO-03-119 High-Risk Update Overview of Progress in Addressing High-Risk Areas • HUD continues to work at overcoming weaknesses in its Single-Family Mortgage Insurance and Rental Housing Assistance program areas. HUD’s progress in its single-family insurance programs includes, for example, implementation of new processes to review lenders and appraisers and new incentives to improve the performance of its property disposition contractors. In its rental housing assistance programs, HUD has, among other things, initiated efforts to ensure that rental housing assistance is properly calculated and recipients are eligible, and improved processes to ensure that housing providers comply with the department’s housing quality standards. However, many of HUD’s strategies for resolving its high-risk problems represent new initiatives in the early stages of implementation, and significant problems remain. For example, HUD has not yet fully implemented an assessment system for calculating key financial indicators to determine lenders’ soundness and risk exposure. Further, HUD now estimates that rental assistance overpayments—some $2 billion out of $19 billion in assistance in fiscal year 2000—are greater than previously estimated. (See “Highlights of High-Risk Areas,” p. 28.) FAA is moving to rectify serious, long-standing material weaknesses in its financial management systems. Its new general, property, and cost accounting systems—a departmentwide initiative—are expected to give FAA the ability to produce reliable financial statements that accurately assign costs to its programs and projects and account for the cost of its property. Whether the new accounting system will fully remedy FAA's financial management deficiencies will not be determined until it is fully implemented and subsequently subjected to a financial statement audit. FAA has also worked to address weaknesses in its Air Traffic Control Modernization efforts. For example, the agency has implemented a framework for improving its software processes, developed a systems architecture, institutionalized cost estimating practices, and improved its investment management practices. However, more needs to be done in each of these areas to achieve needed improvements. (See “Highlights of High-Risk Areas,” p. 28.) Progress in Addressing As part of our move toward focusing on broad-based management challenges, we have designated as high risk key areas where Transformation transformation was needed or under way and where legislative action Challenges would be helpful. We have seen important progress in three of these areas as well. Page 11 GAO-03-119 High-Risk Update Overview of Progress in Addressing High-Risk Areas Strategic Human Capital Since we designated strategic human capital management as a Management governmentwide high-risk area in January 2001, the Congress and the executive branch have taken a number of steps to address the challenges identified. Among these steps were the following: • In August 2001, the President placed the strategic management of human capital at the top of the President’s Management Agenda (PMA). • OMB began assessing agencies according to standards for success for each part of the PMA, including the strategic management of human capital. The first agency assessment was published in February 2002. Subsequent assessments, published in June and September 2002, reported on both the status and progress of agencies’ efforts in strategic human capital management. • In December 2001, the Office of Personnel Management (OPM) released a human capital scorecard to assist agencies in responding to the human capital standards for success contained in the PMA. • In the fall of 2002, OPM began realigning its organizational structure and appointed four new associate directors with proven human capital expertise to lead federal efforts. • In October 2002, OMB and OPM approved revised standards for success in the human capital area of the PMA, reflecting language developed in collaboration with us. • In November 2002, the Congress passed the Homeland Security Act of 2002, which created the Department of Homeland Security and provided the department with significant flexibility to design a modern human capital management system. This legislation also included additional significant provisions relating to governmentwide human capital management, such as direct hire authority, the ability to use categorical ranking in the hiring of applicants instead of the “rule of three,” the creation of Chief Human Capital Officers (CHCO) positions and a CHCO Council, expanded voluntary early retirement and buy-out authority, a requirement to discuss human capital approaches in Government Performance and Results Act reports and plans, a provision allowing executives to receive their total performance bonus in the year in which it is awarded, and other flexibilities. Page 12 GAO-03-119 High-Risk Update Overview of Progress in Addressing High-Risk Areas Although considerable momentum is building and progress has been made over the past 2 years, it remains clear that today’s federal human capital strategies are not yet appropriately constituted to meet current and emerging challenges or to drive needed transformation across the federal government. The basic problem, which continues today, has been the long- standing lack of a consistent strategic approach to marshalling, managing, and maintaining the human capital needed to maximize government performance and assure its accountability. Specifically, agencies across the federal government continue to face challenges in four key areas: • Leadership: Top leadership in the agencies must provide the sustained, committed, and inspired attention needed to address human capital and related organization transformation issues. • Strategic Human Capital Planning: Agencies’ human capital planning efforts need to be more fully and demonstrably integrated with mission and critical program goals. • Acquiring, Developing, and Retaining Talent: Additional efforts are needed to improve recruiting, hiring, professional development, and retention strategies to ensure that agencies have needed talent. • Results-Oriented Organizational Cultures: Agencies continue to lack organizational cultures that promote high performance and accountability, and that empower and include employees in setting and accomplishing programmatic goals. Importantly, although strategic human capital management remains high risk governmentwide, federal employees are not the problem. Rather, the problem is a set of policies that are viewed by many as outdated, over- regulated, and not strategic. Human capital weaknesses in the federal government did not emerge overnight and will not be quickly or easily addressed. Committed, sustained, and inspired leadership and persistent attention on behalf of all interested parties will continue to be essential to build on the progress that has been and is being made, if lasting reforms are to be successfully implemented. Reaching and maintaining a strategic approach to human capital management will take considerable effort on the part of the Congress, agency leadership, OPM, and OMB. Ultimately, the Congress may wish to consider legislative reforms to existing civil service laws. Key questions include the degree to which legislative changes are needed to design a Page 13 GAO-03-119 High-Risk Update Overview of Progress in Addressing High-Risk Areas modern human capital management system for the federal government. Although momentum continues to build for comprehensive reform, agencies need to use currently available flexibilities. (See “Highlights of High-Risk Areas,” p. 28.) U.S. Postal Service In April 2001, we identified the U.S. Postal Service's transformation efforts and long-term outlook as high risk due to growing financial, operational, and human capital challenges. Since then, these challenges have continued, and the Service has struggled to fulfill its primary mission of providing universal postal service at reasonable rates while remaining self- supporting from postal revenues. The events of September 11, 2001, and subsequent use of the mail to transmit anthrax have introduced new issues related to mail safety and security that also must be addressed. These challenges, as well as the need to address the uncertainty about the Service's future role, require urgent attention to ensure that the Service will be able to fulfill its mission in the 21st century. In response to our high-risk designation, the Service released its Transformation Plan in April 2002. In this plan, the Service outlined actions it deemed necessary to deal with transformation issues both (1) in the short term, under its current authority and through moderate regulatory and legislative reforms, and (2) in the longer term, through fundamental structural transformation. To achieve its fundamental structural transformation, the Service proposed moving to a Commercial Government Enterprise business model. We reported that the development of the Transformation Plan was a good first step in raising key postal reform issues. Implementing the plan is a new challenge for the Service—in part because consensus has yet to be reached on legislative reforms—and therefore we have now added this implementation to the list of the Service’s major challenges. The other challenges include (1) controlling costs and improving productivity under the Service’s existing authority, (2) addressing unresolved financial issues, (3) developing strategies to address human capital issues, and (4) providing complete and reliable financial and performance information in a timely and transparent manner. Opportunities exist for the Service to address these major management challenges and make further progress in its transformation efforts. For example, the results of a recent financial analysis by OPM may lead to a reduction in the Service’s pension liability and related annual payments if Page 14 GAO-03-119 High-Risk Update Overview of Progress in Addressing High-Risk Areas the Congress takes legislative action in this area. This additional “breathing room” could allow the Service to address other financial challenges, such as its outstanding debt, substantial postretirement health obligations, and its capital freeze. The Service also anticipates a large number of upcoming retirements, which would provide an opportunity to realign the Service’s workforce and infrastructure to meet its future operational needs. Committed leadership and sustained attention to addressing the Service’s management challenges will be critical to achieving its transformation. Addressing the Service’s various challenges through comprehensive legislative reform will require consensus among various stakeholders— something that has been very difficult to achieve, in part because the Service’s numerous stakeholders have divergent needs and concerns. Since 1996, the Congress has considered postal reform legislation many times; however, none of the reform proposals has been passed. More recently, in December 2002, the President established a nine-member Commission on the United States Postal Service to propose a vision for the future of the Postal Service and recommend the legislative and administrative reforms needed to ensure the viability of postal services. The Commission is expected to submit its report to the President by July 31, 2003. (See “Highlights of High-Risk Areas,” p. 28.) Protecting Information We have designated information security as a high-risk area across Systems Supporting the government since 1997 because of continuing evidence indicating significant, pervasive weaknesses in the controls over computerized Federal Government and federal operations. Moreover, related risks continue to escalate, in part the Nation’s Critical due to the government’s increasing reliance on the Internet and on Infrastructures commercially available information technology. In addition, we continue to report significant information security weaknesses in 24 major federal agencies.5 Since our last high-risk report, efforts to correct information security weaknesses and improve federal information security have accelerated both at individual agencies and at the governmentwide level, including 5 U.S. General Accounting Office, Computer Security: Improvements Needed to Reduce Risk to Critical Federal Operations and Assets, GAO-02-231T (Washington, D.C.: Nov. 9, 2001); and Computer Security: Progress Made, but Critical Federal Operations and Assets Remain at Risk, GAO-03-303T (Washington, D.C.: Nov. 19, 2002). Page 15 GAO-03-119 High-Risk Update Overview of Progress in Addressing High-Risk Areas implementing government information security reform legislation enacted by the Congress in October 2000, implementing a related annual reporting process, and developing guidance and tools for agencies to self-assess their information security programs. On December 17, 2002, the Federal Information Security Management Act of 2002 was enacted, to permanently authorize and strengthen the information security program, evaluation, and reporting requirements established by government information security reform legislation. This legislation is an essential step to sustaining agency efforts to identify and correct significant weaknesses. Nonetheless, further information security improvement efforts are needed at the agency level and governmentwide. It is important that these efforts be guided by a comprehensive strategy and that this strategy address certain key issues including: • delineating the roles and responsibilities of the numerous entities involved in federal information security; • providing more specific guidance to agencies on the controls that they need to implement; • having agencies’ performance monitored by the agencies themselves, as well as by the Congress and the executive branch; • providing adequate technical expertise and allocating sufficient resources; and • expanding research in the area of information systems protection. In our January 2001 high-risk update report, we also began to highlight the increasing importance of the federal government’s efforts to protect our nation’s critical public and private computer-dependent infrastructure (such as national defense, power distribution, and water supply), as outlined in Presidential Decision Directive 63. This year, we are broadening this high-risk issue to highlight the increased importance of protecting the information systems that support these critical infrastructures, referred to as cyber critical infrastructure protection or cyber CIP. Since our 2001 report, terrorist attacks and threats have further underscored the need to manage CIP activities that enhance the security of the cyber and physical public and private infrastructures that are essential to national security, national economic security, and/or national public health and safety. At the Page 16 GAO-03-119 High-Risk Update Overview of Progress in Addressing High-Risk Areas federal level, cyber CIP activities are perhaps the most critical component of a department or agency’s overall information security program. Since 2001, a number of significant actions have occurred to better position the nation to protect its critical infrastructures, including the following: • In October 2001, the President established the President’s Critical Infrastructure Protection Board to coordinate cyber-related federal efforts for protecting our nation’s critical infrastructures. • In July 2002, the President and his Office of Homeland Security issued the National Strategy for Homeland Security, which identifies protecting critical infrastructures and intelligence and warning as critical components. • In September 2002, the Protection Board released a comment draft of a National Strategy to Secure Cyberspace. The board issued this draft because the National Strategy for Homeland Security states that the administration will complete cyber and physical infrastructure protection plans to serve as the baseline for a future comprehensive national infrastructure protection plan. • On November 25, 2002, the President signed the Homeland Security Act of 2002, which established the Department of Homeland Security and, within it, the Directorate of Information Analysis and Infrastructure Protection. Although these actions taken are major steps to more effectively protect our nation’s critical infrastructures, further actions are needed to fully address our recommendations concerning CIP challenges, including • completing a comprehensive and coordinated national CIP strategy, • improving analysis and warning capabilities, and • improving information sharing on threats and vulnerabilities. (See “Highlights of High-Risk Areas,” p. 28.) Page 17 GAO-03-119 High-Risk Update New High-Risk Areas Adding Three Broad- The new use of the high-risk designation to draw attention to the challenges faced by government programs and operations in need of broad- Based High-Risk Areas based transformation has led to important progress. With these positive results in mind, for 2003, we have designated three additional such areas as high risk: implementing and transforming the new Department of Homeland Security (DHS), modernizing federal disability programs, and federal real property. Implementing and We designated implementation and transformation of the new Department Transforming the New of Homeland Security as high risk based on three factors. First, the implementation and transformation of DHS is an enormous undertaking Department of Homeland that will take time to achieve in an effective and efficient manner. Second, Security components to be merged into DHS already face a wide array of existing challenges. Finally, failure to effectively carry out its mission would expose the nation to potentially very serious consequences. In the aftermath of September 11, invigorating the nation’s homeland security missions has become one of the federal government’s most significant challenges. DHS, with an anticipated budget of almost $40 billion and an estimated 170,000 employees, will be the third largest government agency; not since the creation of DOD more than 50 years ago has the government sought an integration and transformation of this magnitude. In DOD’s case, the effective transformation took many years to achieve, and even today, the department continues to face enduring management challenges and high-risk areas that are, in part, legacies of its unfinished integration. Effectively implementing and transforming DHS may be an even more daunting challenge. DOD at least was formed almost entirely from agencies whose principal mission was national defense. DHS will combine 22 agencies specializing in various disciplines: law enforcement, border security, biological research, disaster mitigation, and computer security, for instance. Further, DHS will oversee a number of non-homeland-security activities, such as Coast Guard’s marine safety responsibilities and the Federal Emergency Management Agency’s (FEMA) natural disaster response functions. Yet only in the effective integration and collaboration of these entities will the nation achieve the synergy that can help provide better security against terrorism. The magnitude of the responsibilities, combined with the challenge and complexity of the transformation, Page 18 GAO-03-119 High-Risk Update New High-Risk Areas underscores the perseverance and dedication that will be required of all DHS’s leaders, employees, and stakeholders to achieve success. Further, it is well recognized that mergers of this magnitude in the public and private sector carry significant risks, including lost productivity and inefficiencies. Generally, successful transformations of large organizations, even those undertaking less strenuous reorganizations and with less pressure for immediate results, can take from 5 to 7 years to achieve. Necessary management capacity and oversight mechanisms must be established. Moreover, critical aspects of DHS’s success will depend on well-functioning relationships with third parties that will take time to establish and maintain, including those with state and local governments, the private sector, and other federal agencies with homeland security responsibilities, such as the Department of State, the FBI and the Central Intelligence Agency, DOD, and the Department of Health and Human Services (HHS). Creating and maintaining a structure that can leverage partners and stakeholders will be necessary to effectively implement the national homeland security strategy. The new department is also being formed from components with a wide array of existing major management challenges and program risks. For instance, one DHS directorate’s responsibility includes the protection of critical information systems that we already consider a high risk. In fact, many of the major components merging into the new department, including the Immigration and Naturalization Service (INS), the Transportation Security Administration (TSA), Customs Service, FEMA, and the Coast Guard, face at least one major problem, such as strategic human capital risks, critical information technology challenges, or financial management vulnerabilities; they also confront an array of challenges and risks to program operations. For example, TSA has had considerable challenges in meeting deadlines for screening baggage, and the agency has focused most of its initial security efforts on aviation security, with less attention to other modes of transportation. INS has had difficulty in tracking aliens due to unreliable address information. Customs must meet challenges from the potential threats of weapons of mass destruction smuggled in cargo arriving at U.S. ports, and the Coast Guard faces the challenges inherent in a massive fleet modernization. DHS’s national security mission is of such importance that the failure to address its management challenges and programs risks could have serious consequences on our intergovernmental system, our citizens’ health and safety, and our economy. Overall, our designation of the implementation Page 19 GAO-03-119 High-Risk Update New High-Risk Areas and transformation of DHS as a high-risk area stems from the importance of its mission and the nation’s reliance on the department’s effectiveness in meeting its challenges for protecting the country against terrorism. (See “Highlights of High-Risk Areas,” p. 28.) Modernizing Federal This new high-risk area encompasses a range of federal disability Disability Programs programs. Federal disability programs have experienced significant growth over the past decade and are expected to grow even more steeply as more baby boomers reach their disability-prone years. In particular, SSA and the Department of Veterans Affairs (VA) oversee five major disability programs providing cash assistance to individuals with physical or mental conditions that reduced their earnings capacity, collectively paying more than $100 billion in cash benefits to more than 13 million beneficiaries in 2001.6 In recent years, scientific advances and economic and social changes, paradoxically, have redefined the relationship between impairments and work. Advances in medicine and technology have reduced the severity of some medical conditions and have allowed individuals to live with greater independence and function in work settings. Moreover, the nature of work has changed in recent decades as the national economy has moved away from manufacturing-based jobs to service- and knowledge-based employment. Yet federal disability programs remain mired in concepts from the past and are poorly positioned to provide meaningful and timely support for Americans with disabilities. Indeed, SSA and VA are struggling to provide accurate, timely, and consistent disability decisions to program applicants. We have added modernizing federal disability programs to our 2003 high-risk list based on the following concerns. Federal disability programs are grounded in outmoded concepts. Despite opportunities afforded by medical and technological advancements and the growing expectations that people with disabilities can and want to work, federal disability programs remain grounded in an approach that equates medical conditions with the incapacity to work. The legislation for SSA’s and VA’s disability programs requires that the assessment of eligibility be based on the presence of medically determinable physical and mental impairments. However, these assessments do not always reflect recent medical and technological advances and their impact on medical 6 Total beneficiaries represents the sum of participants in each program and does not account for potential participation in more than one program. Page 20 GAO-03-119 High-Risk Update New High-Risk Areas conditions that affect the ability to work. Likewise, the criteria used to assess disability have not incorporated changes in the labor market that have affected the skills needed to perform work and the settings in which work occurs. By using outdated information, the agencies risk overcompensating some individuals while undercompensating or denying compensation entirely to others. While relying upon outmoded assumptions about impairment and work, the agencies have experienced difficulty in managing disability programs. In spite of years of efforts to improve the management of their disability programs, both SSA and VA continue to face significant challenges. The processes these agencies use to determine disability adversely affect each agency’s ability to efficiently, equitably, and effectively serve their beneficiaries. Both SSA and VA have experienced increasing processing times for disability claims over the past several years, with claimants waiting more than 4 months for an initial decision and for more than 1 year for a decision on appeal of a denied claim. Although SSA has recently implemented several short-term initiatives not requiring statutory or regulatory changes to reduce processing times, it is still evaluating strategies for longer-term solutions. VA has demonstrated some recent progress based on newly implemented initiatives, but the agency is far from achieving its own goals for timeliness. The inconsistencies in disability decisions across adjudicative levels and locations in both agencies have raised questions about the fairness, integrity, and cost of these programs. Although both agencies have taken steps to provide training and enhance communication to improve the consistency of decisions, variations in allowances rates continue and a significant number of denied claims are still awarded on appeal. In addition, both SSA and VA have experienced challenges with implementing effective quality assurance systems. After failing in its attempts since 1994 to redesign a more comprehensive quality assurance system, SSA has recently begun a new quality management initiative. VA has taken a number of recent actions to correct problems with its quality assurance system and its measure of decision accuracy in 2002 has shown improvement. However, it is still well below the agency’s strategic goal for accuracy. Both SSA and VA lack comprehensive plans for addressing program growth. For example, between 1991 and 2001, the number of beneficiaries Page 21 GAO-03-119 High-Risk Update New High-Risk Areas and their family members receiving Disability Insurance (DI) benefits, the largest of the five disability programs administered by SSA and VA, increased from 4.5 million to 6.9 million, as total cash benefits increased more than 70 percent (in 2001 dollars) during this time period to nearly $60 billion. By 2010, SSA expects that the number of DI beneficiaries and their eligible family members will increase by more than one-third over 2001 levels. (See figure 1.) Similarly, VA expects the number and complexity of its disability claims to increase due to veterans’ increased awareness of service-connected disabilities and recent legislative changes. Likewise, the disability rolls have been increasingly characterized by conditions that result in extended entitlement periods. Mental impairments and musculoskeletal conditions—conditions that people can survive with for decades—are currently more common qualifying conditions for people receiving benefits than in years past. However, SSA and VA have not sufficiently prepared for this growth and need specific plans for addressing future disability needs. Figure 1: Growth in DI Beneficiaries 10 DI beneficiaries (in millions) 9 8 7 6 5 4 3 2 1 0 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Calendar year Source: 2002 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and the Federal Disability Insurance Trust Funds. Note: Figures after 2001 are estimates based on the intermediate assumptions of the Trustees of the Social Security trust funds. SSA also faces the challenge of supporting disability beneficiaries’ return to work. SSA has experienced limited success in doing so, in spite of changes Page 22 GAO-03-119 High-Risk Update New High-Risk Areas in medicine, technology, society, and the nature of work, all of which have increased the potential for some people with disabilities to return to the labor force. Although SSA has taken a number of actions to improve its return-to-work practices, the agency still needs to develop, as we have recommended, a comprehensive return-to-work strategy that focuses at the outset on an evaluation of what is needed for an individual to return to work. Given the projected slowdown in the growth of the nation's labor force, it is imperative that those who can work are supported in their efforts to do so. Developing comprehensive and sustainable solutions to the problems facing federal disability programs in the 21st century will require agencies to significantly broaden their current efforts. Indeed, no single agency has the span of authority to fully address the issues involved. Although some solutions can be developed and implemented within the regulatory process, others will require legislative action. Fundamentally, agencies’ efforts need to be marked by consultation and cooperation with the legislative branch and by cross-agency cooperation. Success in improving operations and key outcomes—such as increased employment—will involve partnerships with agencies such as the Department of Labor, the Department of Education, HHS, and perhaps between SSA and VA themselves. (See “Highlights of High-Risk Areas,” p. 28.) Federal Real Property Over 30 federal agencies control hundreds of thousands of real property assets—including both facilities and land—in the United States and abroad. These assets are worth about $328 billion, according to the fiscal year 2001 financial statements of the U.S. government.7 Unfortunately, much of this vast and valuable asset portfolio presents significant management challenges and reflects an infrastructure based on the business model and technological environment of the 1950s. Many assets are no longer effectively aligned with, or responsive to, agencies’ changing missions and are therefore no longer needed. Furthermore, many assets are in an alarming state of deterioration; restoration and repair needs are estimated by agencies to be in the tens of billions of dollars. For example, the Department of the Interior has a deferred maintenance backlog that its Inspector General estimated in April 2002 to be as much as $8 billion to $11 billion, and General Services Administration (GSA) data has shown a $5.7 7 This value does not include stewardship assets—such as wilderness areas, scenic river systems, and monuments. Page 23 GAO-03-119 High-Risk Update New High-Risk Areas billion repair and maintenance backlog in its buildings. Compounding these problems are the lack of reliable governmentwide data for strategic asset management, a heavy reliance on costly leasing instead of ownership to meet new space needs, and the cost and challenge of protecting these assets against potential terrorism. To address these challenges, the Congress and the administration have undertaken several efforts, including Defense Base Realignment and Closures Commissions and the President’s Commission to Study Capital Budgeting. In addition, the Congress, OMB, and GSA have also recognized the need for and developed legislative proposals in recent years that were designed to address some of the problems. Although some of these efforts and other work by individual real-property-holding agencies have had some success, much remains to be done governmentwide. In most cases, the effectiveness of current and planned initiatives has yet to be determined. Despite these efforts and the sincerity with which the federal real property community has embraced the need for reform, the problems have persisted and have been exacerbated by competing stakeholder interests in real property decisions, various legal and budget-related disincentives to achieving businesslike outcomes, the need for better capital planning among real-property-holding agencies, and the lack of a strategic governmentwide focus on federal real property issues. Given the persistence of these problems and the various obstacles that have impeded progress in resolving them, we are designating federal real property as a new high-risk area. Resolving these long-standing problems will require high-level attention and effective leadership by the Congress and the administration. Also, because of the breadth and complexity of the issues involved, the long-standing nature of the problems, and the intense debate about potential solutions that will likely ensue, current structures and processes may not be adequate to address the problems. Given this, there is a need for a comprehensive and integrated transformation strategy for federal real property, and an independent commission or governmentwide task force may be needed to develop this strategy. Such a strategy could be based on input from agencies, the private sector, and other interested groups. The strategy should also reflect the lessons learned and leading practices of public and private organizations that have attempted to reform their real property practices. These organizations have recognized that real property, like capital, people, technology, and information, is a valuable resource that, if managed well, can support the accomplishment of their missions and the achievement of their business Page 24 GAO-03-119 High-Risk Update New High-Risk Areas objectives. In addition, as these organizations are recognizing, the workplace of the future will differ from today’s work environment. For the federal government, technological advancements, electronic government, flexible workplace arrangements, changing public needs, opportunities for resource sharing, and security concerns will call for a new way of thinking about the federal workplace and the government’s real property needs. Realigning the government’s real property assets with agency missions, taking into account the requirements of the future federal role and workplace, will be critical to improving the government’s performance and ensuring accountability within expected resource limits. If actions resulting from the transformation strategy comprehensively address the problems and are effectively implemented, agencies will be better positioned to recover asset values, reduce operating costs, improve facility conditions, enhance safety and security, and achieve mission effectiveness. (See “Highlights of High-Risk Areas,” p. 28.) New High-Risk Area In addition to our expanded focus on challenges associated with the economy, efficiency, and effectiveness of government programs and Identified Based on operations in need of broad-based transformation, we will continue to Fiscal Oversight identify high-risk areas based on the more traditional focus on fraud, waste, abuse, and mismanagement. For such problems, our focus will continue to Vulnerabilities be on identifying the root causes behind the vulnerabilities, as well as actions needed on the part of the agencies involved and, if appropriate, the Congress. For this update, we have designated one such new high-risk area. Medicaid Program Growing concern about the size, growth, and fiscal oversight of the Medicaid program has led us to include the program on our 2003 high-risk list. Medicaid pays for both acute health care and long-term care services for over 44 million low-income Americans and is the third largest social program in the federal budget (after Social Security and Medicare). Financed jointly by the federal government and the states, Medicaid consists of more than 50 distinct “state” programs that together cost $228 billion in fiscal year 2001, accounts for more than 20 percent of states’ total expenditures, and is projected to double in spending in a decade. The federal government pays from half to more than three-fourths of each state’s Medicaid expenditures. Page 25 GAO-03-119 High-Risk Update New High-Risk Areas The Centers for Medicare & Medicaid Services (CMS) faces major challenges in managing this program of vast size, growth, and diversity. Protecting the program’s fiscal integrity is critically important. It is especially challenging because the federal government’s financial liability for the Medicaid program is linked to reported state expenditures. Our work in recent years finds that federal and state oversight efforts have often been inadequate to prevent inappropriate spending, thereby increasing federal spending unnecessarily. Over the last decade, for example, some states have found ways to inappropriately leverage federal funds. Although CMS and the Congress have acted to curb certain financing schemes, states have found new statutory and regulatory loopholes to create the illusion that they have made large Medicaid payments to certain health care providers in order to generate excessive federal matching payments. Some of the schemes have cost the federal government several billions of dollars each year. We are also concerned that states’ receipt of waivers—where the Secretary of HHS waives certain statutory provisions and allows testing of new health care delivery and coverage ideas—may continue to increase the federal government’s financial liability beyond what it would have been without the waivers.8 For example, two states’ waivers approved in 2002 are estimated to cost the federal government an extra $330 million or more than it would have paid in the absence of the waivers. HHS is currently considering approval of similar waivers by additional states. Another area of concern involves federal and state efforts to ensure that payments are accurate and appropriate. Like other health care payers, Medicaid is vulnerable to waste, fraud, and abuse by providers who submit inappropriate claims. The hundreds of millions of dollars in improper payments that a few states have identified in recent years suggests that states have the potential for considerable savings through increased efforts to safeguard program payments. The exploitation of Medicaid not only penalizes taxpayers, but also jeopardizes the viability of a program that over 44 million low-income Americans depend on for essential health and long-term care services. To 8 U.S. General Accounting Office, Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver Projects Raise Concerns, GAO-02-817 (Washington, D.C.: July 12, 2002). Page 26 GAO-03-119 High-Risk Update New High-Risk Areas better protect Medicaid dollars, CMS must take the steps needed to strengthen federal and state fiscal oversight to ensure that the federal government pays only its valid share of proper program expenditures. (See “Highlights of High-Risk Areas,” p. 28.) Page 27 GAO-03-119 High-Risk Update Highlights of High-Risk Areas Overall, the government continues to take high-risk problems seriously and is making long-needed progress toward correcting them. The Congress has also acted to address several individual high-risk areas through hearings and legislation. Continued perseverance in addressing high-risk areas will ultimately yield significant benefits. Lasting solutions to high-risk problems offers the potential to save billions of dollars, dramatically improve service to the American public, strengthen public confidence and trust in the performance and accountability of our national government, and ensure the ability of government to deliver on its promises. We have prepared highlights of each of the 25 current high-risk areas showing (1) why the area is high risk, (2) the actions that have been taken and that are under way to address the problem since our last update report and the issues that are yet to be resolved, and (3) what remains to be done to address the risk. These highlights are presented on the following pages. Also, comprehensive discussions of 22 of the high-risk areas are included in the relevant department or agency report in the accompanying special GAO series entitled the Performance and Accountability Series: Major Management Challenges and Program Risks. The individual high-risk area highlights provide a link to the relevant reports in this series. Comprehensive discussions of the 3 crosscutting high-risk areas—strategic human capital management, protecting information systems supporting the federal government and the nation’s critical infrastructures, and federal real property—are presented in separate reports as part of this series. Page 28 GAO-03-119 High-Risk Update January 2003 HIGH-RISK SERIES Strategic Human Capital Management Highlights of a high-risk area discussed in the GAO report entitled High-Risk Series: Strategic Human Capital Management (GAO-03-120) In its January 2001 High-Risk Leading public organizations here and abroad have found that strategic Update (GAO-01-263), GAO human capital management must be the centerpiece of any serious change designated strategic human capital management initiative and efforts to transform the cultures of government management as a governmentwide agencies. Unfortunately, the federal government’s strategic human capital high-risk area. The basic problem, approaches are not yet well positioned to enable the needed transformation. which continues today, has been the long-standing lack of a consistent strategic approach to Since we designated strategic human capital management as a marshaling, managing, and governmentwide high-risk area in January 2001, Congress has taken a maintaining the human capital number of steps to address the challenges identified, including granting needed to maximize government agencies significant new authorities for managing their human capital as part performance and assure its of the Homeland Security Act of 2002. The strategic management of human accountability. capital was also placed at the top of the President’s Management Agenda. Individual agencies have also taken action to address their specific This report is part of a special challenges. series of reports on governmentwide and agency- Despite the considerable progress over the past 2 years, it remains clear that specific challenges. today’s federal human capital strategies are not appropriately constituted to meet current and emerging challenges or to drive the needed transformation across the federal government. Specifically, agencies continue to face challenges in four key areas: Reaching and maintaining an approach to human capital • Leadership: Top leadership in the agencies must provide the committed management that is strategic will and inspired attention needed to address human capital and related take considerable effort from the organization transformation issues. Congress, agencies, the Office of • Strategic Human Capital Planning: Agencies’ human capital planning Personnel Management, and the efforts need to be more fully and demonstrably integrated with mission Office of Management and Budget. and critical program goals. Ultimately, Congress will need to • Acquiring, Developing, and Retaining Talent: Additional efforts are consider additional legislative reforms to existing civil service needed to improve recruiting, hiring, professional development, and laws. While momentum continues retention strategies to ensure that agencies have the needed talent. to build for comprehensive civil • Results-Oriented Organizational Cultures: Agencies continue to lack service reform, agencies need to organizational cultures that promote high performance and use currently available flexibilities accountability and empower and include employees in setting and to recruit, hire, develop, retain, and accomplishing programmatic goals. hold employees accountable for mission accomplishment. Importantly, although strategic human capital management remains high – risk governmentwide, federal employees are not the problem. Rather, the problem is a set of policies and practices that are not strategic, and viewed by many as outdated and over-regulated. In the final analysis, modern, effective, and credible human capital strategies will be essential in order to maximize the performance and assure the accountability of the government www.gao.gov/cgi-bin/getrpt?GAO-03-120. for the benefit of the American people. For additional information about this high-risk area, click on the link above or contact J. Christopher Mihm at (202) 512-6806 or email@example.com. January 2003 HIGH-RISK SERIES U.S. Postal Service: Transformation Highlights of a high-risk area discussed in Efforts and Long-Term Outlook GAO’s Performance and Accountability Series report on the U.S. Postal Service (GAO-03-118) In April 2001, GAO designated the The Service’s current business model, which relies on increasing mail U.S. Postal Service’s (the Service) volumes to mitigate rate increases and cover costs, is at risk as competition transformation and long-term and technological alternatives increase. In fiscal years 2001 and 2002, despite outlook as high risk because of multiple rate increases and cost-cutting efforts, the Service incurred large growing financial and operational deficits as total mail volume declined. The figure below shows that mail difficulties, including the following: • The fiscal year 2001 outlook volume growth for First-Class Mail and Standard Mail—mail classes that changed from a $480 million to generate over three-fourths of the Service’s revenue—has been slowing. a $2 billion–$3 billion deficit. • Growth in expenses outpaced Growth in Key Mail Classes Is Slowing the growth in revenues. • Capital spending was deferred. • Weakened cash flow increased borrowing pressures, as debt levels approached the statutory borrowing limit. Also, human capital issues, such as the wave of impending retirements, performance-based compensation, and labor-management relations, needed to be addressed. GAO believes the Service should: Other major challenges facing the Service include: • Work with Congress, the • Long-standing difficulty in cutting costs, particularly related to its Presidential Commission, and workforce and infrastructure, and in sustaining productivity gains; stakeholders to implement its • Unknown safety and security needs; Plan, including legislation to • Cash flow from operations that is insufficient to fund capital address issues related to its expenditures and reduce borrowing pressure; mission and role for the 21st • Liabilities that continue to exceed assets, and postretirement health century; governance structure; obligations that are growing; accountability mechanisms; • Succession planning for the large number of upcoming retirements. and human capital matters. • Develop strategies to align its To address its high-risk designation, the Service issued its Transformation infrastructure and workforce Plan (the Plan) in April 2002. The Plan outlined steps to guide it in carrying to support its business model; • Continue efforts to cut costs out its future mission and proposed a new business model to achieve its and improve productivity; and long-term transformation. The Plan was a good first step; however, • Address long-term financial concerns remain about its full implementation, as no consensus has been concerns, such as outstanding reached on the Service’s future. Effective leadership and sustained attention debt and postretirement health by the Service will be key to effectively carrying out its transformation. obligations. Opportunities exist (for example, the upcoming retirements) for the Service www.gao.gov/cgi-bin/getrpt?GAO-03-118 and its leadership to address these challenges. A recent analysis may lead to For additional information about this high-risk a significant reduction in its pension liability, which would improve the area, click on the link above or contact Service’s financial outlook and allow it to address other financial challenges Bernard L. Ungar at (202) 512-2834 or firstname.lastname@example.org. and align its workforce and infrastructure to meet future needs. January 2003 HIGH-RISK SERIES Protecting Information Systems Highlights of a high-risk area discussed Supporting the Federal Government and later in this report (GAO-03-121) the Nation’s Critical Infrastructures Since GAO designated computer Since January 2001, efforts to improve federal information security have security in the federal government accelerated at individual agencies and at the governmentwide level. For as high risk in 1997, evidence of example, implementation of Government Information Security Reform pervasive weaknesses has been legislation (GISRA) enacted by the Congress in October 2000 was a continuing. Also, related risks have significant step in improving federal agencies’ information security programs been escalating, in part because of the dramatic increases in computer and addressing their serious, pervasive information security weaknesses. In interconnectivity and increasing implementing GISRA, agencies have noted benefits, including increased dependence on computers to management attention to and accountability for information security. support critical operations and Although improvements are under way, recent audits of 24 of the largest infrastructures, such as power federal agencies continue to identify significant information security distribution, water supply, national weaknesses that put critical federal operations and assets in each of these defense, and emergency services. agencies at risk (see figure below). This year, GAO expanded this high risk area to include protecting the Over the years, various working groups have been formed, special reports information systems that support written, federal policies issued, and organizations created to address the our nation’s critical infrastructures, nation’s critical infrastructure challenges. In 1998, the President issued referred to as cyber critical infrastructure protection or cyber Presidential Decision Directive 63 (PDD 63), which described a strategy for CIP. Among other reasons for cooperative efforts by government and the private sector to protect the designating cyber CIP high risk is physical and cyber-based systems essential to the minimum operations of that terrorist groups and others the economy and the government. To accomplish its goals, PDD 63 have stated their intentions of designated and established organizations to provide central coordination attacking our critical and support. This directive has since been supplemented by Executive Order infrastructures, and failing to 13231, which established the President’s Critical Infrastructure Protection protect these infrastructures could Board and the President’s National Strategy for Homeland Security. While adversely affect our national the actions taken to date are major steps to more effectively protect our security, economic security, and/or nation’s critical infrastructures, GAO has made numerous recommendations public health and safety. over the last several years concerning CIP challenges. In response to these challenges, improvements have been made and efforts are in progress, but more work is needed to address them. Among other actions essential to Information Security Weaknesses at 24 Major Agencies sustaining federal information security improvements are the agencies’ development of effective risk management programs and the development of a comprehensive strategy to guide agencies’ efforts. Further actions to improve CIP include developing a national CIP strategy and improving analysis and warning capabilities and information sharing on threats and vulnerabilities. www.gao.gov/cgi-bin/getrpt?GAO-03-121. For additional information about this high-risk area, click on the link above or contact Robert F. Dacey at (202) 512-3317 or email@example.com. January 2003 HIGH-RISK SERIES Implementing and Transforming the New Highlights of a high-risk area discussed in Department of Homeland Security GAO’s Performance and Accountability Series report on the Department of Homeland Security (GAO-03-102) GAO has designated implementing Effectively implementing and transforming the Department of Homeland and transforming the new Security will be a daunting challenge. The Department will combine 22 Department of Homeland Security agencies with an estimated 170,000 employees specializing in various (DHS) as a high risk area for three disciplines: law enforcement, border security, biological research, disaster reasons. First, the implementation mitigation, and computer security, for instance. Further, DHS will oversee a and transformation of DHS is an enormous undertaking that will number of non-homeland security activities, such as the Coast Guard’s take time to achieve in an effective marine safety responsibilities and the Federal Emergency Management and efficient manner. Second, Agency’s (FEMA) natural disaster response functions. Yet, only in the components being merged into effective integration and collaboration of these entities will the nation DHS already face a wide array of achieve the synergy that can help provide better security. The magnitude of existing challenges. Finally, the responsibilities, combined with the challenge and complexity of the failure to effectively carry out its transformation, underscore the perseverance and dedication that will be mission exposes the nation to needed from DHS’s leaders, employees, and stakeholders to achieve success. potentially very serious consequences. It is well recognized that mergers of this magnitude in the public and private sector carry significant risks, including lost productivity and inefficiencies. Generally, successful transformations of large organizations, even those The long-term solution to this high undertaking less strenuous reorganizations and with less pressure for risk area necessitates that DHS immediate results, can take from 5 to 7 years to achieve. Necessary effectively integrate the 22 management capacity and oversight mechanisms must be established. incoming agencies and nearly $40 Moreover, critical aspects of DHS’s success will depend on well-functioning billion budget in order to achieve relationships with third parties that will take time to establish and maintain, the synergy for providing better including those with states and local governments, the private sector, and security against terrorism. other federal agencies with homeland security responsibilities, such as the Necessary management capacity, State Department, the Federal Bureau of Investigation, the Central priority setting, and oversight Intelligence Agency, the Defense Department, the Transportation mechanisms must be established to Department, and the Department of Health and Human Services. Creating cope with inherent risks associated and maintaining a structure that can leverage partners and stakeholders will with major mergers. In addition, creating and maintaining a be needed to effectively implement the national homeland security strategy. structure that can leverage partners and stakeholders will be essential The new department also is being formed from components with a wide to effectively implementing the array of existing major management challenges and program risks. For national homeland security instance, one DHS directorate’s responsibility includes the protection of strategy. Finally, DHS must critical information systems that GAO already considers a high risk. In fact, confront a wide array of existing many of the major components merging into the new department— major management challenges and including the Immigration and Naturalization Service, the Transportation program risks in its incoming Security Administration, Customs Service, FEMA, and the Coast Guard— agencies to ensure success. face at least one major problem, such as strategic human capital risks, information management technology challenges, or financial management vulnerabilities; they also confront an array of program operations challenges and risks. www.gao.gov/cgi-bin/getrpt?GAO-03-102. DHS’s national security mission is of such importance that the failure to For additional information about this high-risk area, click on the link above or contact effectively address its management challenges and program risks could have Randall Yim at (202) 512-3580 or serious consequences on our intergovernmental system, our citizens’ health firstname.lastname@example.org, or Patricia Dalton at (202) and safety, and our economy. 512-6806 or email@example.com. January 2003 HIGH-RISK SERIES Modernizing Federal Disability Programs Highlights of a high-risk area discussed in GAO’s Performance and Accountability Series report on the Social Security Administration (GAO-03-117) and the Department of Veterans Affairs (GAO-03-110) Disability programs have been GAO’s work examining the challenges facing federal disability programs has growing and are poised to grow found that these programs are not well positioned to provide meaningful and even more rapidly as more baby timely support for Americans with disabilities. In particular, SSA’s and VA’s boomers reach their disability programs are based on concepts from the past. These outdated concepts prone years. This growth is taking persist despite scientific advances and economic and social changes that place despite greater opportunities for people with disabilities to work. have redefined the relationship between impairments and the ability to Moreover, this growth is occurring work. Advances in medicine and technology have reduced the severity of at the same time that agencies such some medical conditions and have allowed individuals to live with greater as the Social Security independence and function in work settings. Moreover, the nature of work Administration (SSA) and the has changed as the national economy has become increasingly knowledge- Department of Veterans Affairs based. At the same time, the projected slowdown in growth of the nation's (VA) are struggling to provide labor force makes it imperative that those who can work are supported in timely and consistent disability their efforts to do so. Beyond these outmoded design issues, the agencies decisions. While the agencies are also face longstanding challenges to improve the quality and timeliness of taking some actions to address disability decisions. As the result of this work, GAO has added modernizing these problems in the short term, federal disability programs to its 2003 high-risk list based on the following longer-term solutions are likely to require fundamental changes concerns: including legislative action. • SSA and VA Programs Remain Grounded in Outmoded Concepts of Disability. Disability criteria have not been updated to reflect the current state of science, medicine, technology and labor market GAO believes that SSA and VA conditions. As a result, both agencies need to reexamine the medical and should take the lead in examining vocational criteria they use to determine whether individuals are eligible the fundamental causes of program for benefits. Using outdated information, the agencies risk problems such as outmoded overcompensating some individuals while undercompensating or disability criteria and seek both denying compensation entirely to others. management and legislative solutions as appropriate to bring • Agencies Have Difficulties Managing Disability Programs. Both their programs in line with the SSA and VA have experienced (1) lengthy processing times for disability current state of science, medicine, claims, (2) inconsistencies in disability decisions across adjudicative technology and labor market levels and locations, and (3) challenges with implementing effective conditions. quality assurance systems. The agencies have made some progress At the same time, these agencies addressing some of these challenges, but much more work needs to be should continue to develop and done. implement strategies for improving the accuracy, timeliness, and • Agencies Need Adequate Plans for Addressing Program Growth. consistency of disability decision- Between 1991 and 2001, the SSA Disability Insurance rolls increased by making. Further, both agencies more than 50 percent and growth is expected to continue. Similarly, VA should pursue more effective expects the number of its disability claims to increase. However, SSA quality assurance systems. and VA have not sufficiently prepared for this growth and will need specific plans for addressing future disability needs. www.gao.gov/cgi-bin/getrpt?GAO-03-117. www.gao.gov/cgi-bin/getrpt?GAO-03-110. Developing effective and sustainable solutions to problems facing federal For additional information about this high-risk area, click on the link above or contact Robert E. disability programs will require consultation and cooperation between the Robertson (SSA programs) at (202) 512-7215 or executive and legislative branches as well as cross-agency efforts, and will firstname.lastname@example.org or Cynthia Bascetta (VA likely require statutory as well as regulatory and management actions. programs) at (202) 512-7101 or email@example.com. January 2003 HIGH-RISK SERIES Federal Real Property Highlights of a high-risk area discussed in the GAO report entitled High-Risk Series: Federal Real Property (GAO-03-122) • Long-standing problems with Over 30 agencies control hundreds of thousands of real property assets excess and underutilized real worldwide, including facilities and land, which are worth hundreds of property, deteriorating billions of dollars. Unfortunately, much of this vast, valuable portfolio facilities, unreliable real reflects an infrastructure based on the business model and technological property data, and costly space environment of the 1950s. Many of the assets are no longer effectively challenges are shared by several agencies. These aligned with, or responsive to, agencies’ changing missions and are therefore factors have multibillion-dollar no longer needed. Further, many assets are in an alarming state of cost implications and can deterioration; agencies have estimated restoration and repair needs to be in seriously jeopardize mission the tens of billions of dollars. Compounding these problems are the lack of accomplishment. reliable governmentwide data for strategic asset management, a heavy • Federal agencies face many reliance on costly leasing instead of ownership to meet new needs, and the challenges securing real cost and challenge of protecting these assets against potential terrorism. property due to the threat of terrorism. To address these challenges, Congress and the administration have undertaken several efforts, including Defense Base Realignment and Closures Commissions, the President’s Commission to Study Capital Budgeting, and various legislative initiatives. While some of these efforts and There is a need for a other work by individual real property-holding agencies have had some comprehensive and integrated real property transformation strategy success, much remains to be done governmentwide. Furthermore, despite that could identify how best to these efforts, the problems have persisted and have been exacerbated by realign and rationalize federal real competing stakeholder interests in real property decisions; various legal and property and dispose of unneeded budget-related disincentives to businesslike outcomes; the need for better assets; address significant real capital planning among agencies; and the lack of a strategic, property repair and restoration governmentwide focus on real property issues. needs; develop reliable, useful real property data; resolve the problem Given the persistence of the problems and related obstacles, we have added of heavy reliance on costly leasing; federal real property as a new high-risk area. Resolving these problems will and minimize the impact of require high-level attention and effective leadership by both Congress and terrorism on real property. the administration. Also, because of the breadth and complexity of the issues, the long-standing nature of the problems, and the intense debate that An independent commission or will likely ensue, current structures and processes may not be adequate to governmentwide task force may be address the problems. Thus, there is a need for a comprehensive, integrated needed to develop this strategy. If transformation strategy for real property. Realigning the government’s real resulting actions address the property, taking into account future workplace needs, will be critical to problems and are effectively improving the government’s performance and ensuring accountability within implemented, agencies will be expected resource limits. better able to recover asset values, reduce operating costs, improve facility conditions, enhance safety and security, and achieve mission effectiveness. www.gao.gov/cgi-bin/getrpt?GAO-03-122. For additional information about this high-risk area, click on the link above or contact John H. Anderson, Jr. at (202) 512-2834 or AndersonJ@gao.gov. January 2003 HIGH-RISK SERIES Federal Aviation Administration Air Traffic Highlights of a high-risk area discussed in Control Modernization GAO’s Performance and Accountability Series report on the Department of Transportation (GAO-03-108) After 2 decades and $35 billion, Faced with growing air traffic and aging equipment, in 1981 FAA initiated an FAA’s air traffic control ambitious effort to modernize its air traffic control system. This effort modernization program is far from involves acquiring a vast network of radar, navigation, communications, and complete. While FAA has made information processing systems, as well as new air traffic control facilities— important progress in addressing and is expected to cost over $50 billion through fiscal year 2007. However, weaknesses that GAO identified, more remains to be done. In the over the past 2 decades, many of the projects that make up the meantime, major FAA projects modernization program have experienced cost overruns, schedule delays, continue to face challenges that and performance shortfalls of large proportions. GAO initially designated could affect the agency’s ability to FAA’s modernization program as high risk in 1995. meet cost, schedule, and/or performance expectations. Key GAO’s work over the years has identified root causes of the modernization projects include the program’s problems, including • Standard Terminal Automation • immature software acquisition capabilities, Replacement System, • lack of a complete systems architecture, • Next-Generation Air/Ground • inadequate cost estimating and accounting practices, Communications System, and • ineffective investment management practices, and • Wide Area Augmentation System. • an organizational culture that impaired the acquisition process. FAA has made important progress in addressing these weaknesses. For example, the agency has implemented a framework for improving its software processes, developed a systems architecture, institutionalized cost estimating practices, and improved its investment management practices. GAO has made over 30 specific However, more remains to be done in each of these areas. recommendations to address the root causes of FAA’s problems. While the agency has made progress on these recommendations, more must be done to institutionalize mature software acquisition processes, enforce the systems architecture, and implement effective investment management processes. With FAA expecting to spend about $16 billion through fiscal year 2007 on new air traffic control systems, these actions are as critical as ever. www.gao.gov/cgi-bin/getrpt?GAO-03-108. For additional information about this high-risk area, click on the link above or contact Joel C. Willemssen at (202) 512-6408 or firstname.lastname@example.org. January 2003 HIGH-RISK SERIES Internal Revenue Service Business Highlights of a high-risk area discussed in Systems Modernization GAO’s Performance and Accountability Series report on the Department of the Treasury (GAO-03-109) The Internal Revenue Service’s In 1995, after finding numerous and severe management and technical (IRS) multibillion-dollar Business program control weaknesses, GAO designated IRS’s systems modernization Systems Modernization program is activities as high risk. At that time, GAO made a series of recommendations, critical to the success of the including limiting modernization activities and spending until the agency’s efforts to transform its weaknesses were corrected. IRS responded slowly. In light of IRS’s response manual, paper-intensive business operations and fulfill its obligations and additional recommendations made by GAO as part of its ongoing under the IRS Restructuring and support to Congress in overseeing systems modernization, GAO’s 2001 high- Reform Act. While IRS has made risk report noted that despite improvements, key management controls were important progress in establishing still lacking. GAO also observed that until they were in place, the risks of long overdue modernization project cost, schedule, and performance shortfalls would remain and would, management capabilities, and in in fact, increase as IRS began to build and deploy systems. Since that time acquiring the foundational system IRS has made significant progress. For example, IRS has developed and is infrastructure and the system using a modernization blueprint, commonly called an enterprise applications that will permit the architecture, to guide and constrain its modernization projects, and is agency to operate more effectively investing incrementally in its projects, both of which are leading practices of and efficiently, significant successful public and private-sector organizations. Nevertheless, the challenges and risks remain. program remains at risk for two reasons: • Scope and complexity of modernization are growing. As IRS IRS acknowledges its challenges proceeds, the number of projects underway and the complexity of the and risks, and it is taking action to tasks associated with those projects that are moving beyond design and address them. It is important for into development, continue to expand. IRS to fully implement essential modernization management • Modernization management capacity is still maturing. IRS has yet capabilities, including cost to fully implement a strategic approach to ensuring that it has sufficient estimation, performance based human capital resources, and it has yet to fully implement process contracting, and strategic controls in such areas as estimating costs and defining performance management of human capital. This based contracts. is especially important now, as IRS’s fiscal year 2003 spending plan aims to fund the later, more complex and demanding stages of several key projects. It is therefore essential that IRS move quickly to fully implement our remaining recommendations. www.gao.gov/cgi-bin/getrpt?GAO-03-109. For additional information about this high-risk area, click on the link above or contact Robert F. Dacey at (202) 512-3317 or email@example.com. January 2003 HIGH-RISK SERIES Department of Defense Systems Highlights of a high-risk area discussed in Modernization GAO’s Performance and Accountability Series report on the Department of Defense (GAO-03-98) To transform its business Since GAO first designated DOD’s systems modernization as a high risk in operations, the Department of 1995, DOD has had limited success in modernizing its information Defense (DOD) is spending billions technology environment because it has yet to fully implement GAO’s of dollars to modernize its recommendations aimed at addressing its underlying modernization information technology systems. management weaknesses. DOD acknowledges that it needs to correct these However, pervasive modernization management weaknesses increase weaknesses and has agreed to implement most of GAO’s recommendations. the risk that these efforts will not However, progress in doing so since GAO’s 2001 high-risk report has been be successful. Within some mixed. To its credit, DOD is taking steps to develop integrated components of DOD, modernization blueprints, commonly called enterprise architectures, and it modernization management has revised its investment management guidance. Also, it has engaged improvements have occurred, but DOD’s executive leadership in the modernization through such bodies as the the department as a whole remains Defense Practice Implementation Board. However, much remains to be far from where it needs to be in accomplished before DOD will have effectively mitigated the risks it faces in order to effectively and efficiently modernizing its systems. At the same time, DOD continues to invest heavily manage something the size and in information technology, with about $26 billion planned for fiscal year significance of its DOD-wide 2003. systems modernization program. Key modernization management improvements that DOD needs to make include: As GAO has reported, the key to effecting meaningful change is • Establish and use enterprise architectures. DOD lacks an executive management leadership integrated set of enterprise architectures for its financial and related and commitment to and use of a business functions, which is a recognized best practice, thus preventing proven management framework. DOD and its component organizations from investing billions of dollars Accordingly, DOD needs to (1) in a way that promotes system interoperability, limits duplication, and treat these areas as management optimizes institutional performance. priorities and (2) implement frameworks for modernizing its • Institute effective investment management practices. DOD systems that are grounded in components are not consistently following best practices in managing its legislative requirements, federal information technology investments as portfolios of competing guidance, and the practices and successes of leading public and investment options. Also, DOD is committing to billion-dollar private-sector institutions. information technology projects without adequate economic justification and without reducing the investments’ inherent risk by breaking them Although DOD agrees with these into a series of smaller projects. recommendations, its progress in implementing them has been • Consistently implement effective acquisition processes. DOD mixed. The backing of senior components’ implementation of acquisition management best practices management, as shown by DOD’s is uneven, as are its proactive efforts to improve these processes, which successful Year 2000 effort, will limits DOD’s ability to consistently deliver promised system capabilities play a large role in what is on time and within budget. accomplished. www.gao.gov/cgi-bin/getrpt?GAO-03-98. For additional information about this high-risk area, click on the link above or contact Randolph C. Hite at (202) 512-3439 or firstname.lastname@example.org. January 2003 HIGH-RISK SERIES Department of Defense Financial Highlights of a high-risk area discussed in Management GAO’s Performance and Accountability Series report on the Department of Defense (GAO-03-98) Since 1995, the Department of GAO recently reported on fundamental flaws in DOD’s financial Defense’s (DOD) financial management systems, processes, and overall internal control environment management has been on GAO’s that resulted in list of high-risk areas vulnerable to waste, fraud, abuse, and • government travel card delinquency rates for the Army and Navy that mismanagement. Taken together, DOD’s financial management were nearly double those of federal civilian agencies; deficiencies represent the single • numerous instances of potential fraud and abuse, including purchases of largest obstacle to achieving an a wide range of goods and services unrelated to official business; unqualified opinion on the U. S. • $146 million in illegal adjustments to amounts appropriated by the government’s consolidated Congress; financial statements. DOD • an inability to ensure the Congress that the $1.1 billion in funds it continues to face financial received for spare parts were used for that purpose; management problems that are • managing and reporting on the funding associated with the Air Force’s pervasive, complex, long-standing, contracted depot maintenance that resulted in understating the dollar and deeply rooted in virtually all its value of year-end carryover work by tens of millions of dollars; and business operations. DOD's • excessing and selling critical inventory items such as unused sets of financial management deficiencies adversely affect the department's chemical and biological protective garments for about $3 each, while at ability to control costs, ensure the same time procuring hundreds of thousands of other such garments basic accountability, anticipate for over $200 per set. future costs and claims on the budget, measure performance, Previous administrations over the past 12 years have attempted to address maintain funds control, prevent these problems in various ways, but have largely been unsuccessful despite fraud, and address pressing good intentions and significant effort. The results of DOD’s past stove-piped management issues. approaches to financial management reform are perhaps most evident in its business systems environment—recently estimated to include over 1,700 systems and system development projects—many of which evolved in piecemeal fashion to accommodate different organizations, each with its own policies and procedures. Keys to effective reform are • an integrated approach, • sustained leadership, Overhauling DOD’s financial management operations represents a major • accountability for reform tied management challenge that goes far beyond financial accounting to the very to the Secretary, fiber of the department’s range of business operations and management • results-oriented performance culture. To his credit, on September 10, 2001, the Secretary of Defense measures, recognized the far-reaching nature of DOD’s existing financial management • appropriate incentives and problems and announced a broad initiative intended to “transform the way consequences, the department works and what it works on.” DOD’s current initiative to • enterprisewide system overhaul its business systems is more far-reaching and comprehensive than architecture and investment in the past. DOD’s goals for reforming this high-risk area have long-term control, and application and are not just patchwork fixes. However, the challenges • effective oversight and monitoring. remaining are daunting. DOD’s well-intentioned transformation initiative will succeed only with the right incentives, transparency, and accountability. www.gao.gov/cgi-bin/getrpt?GAO-03-98. Most importantly, it will require a number of years of sustained leadership, spanning successive administrations, to be successful. For additional information about this high-risk area, click on the link above or contact Gregory D. Kutz at (202) 512-9505 or email@example.com. January 2003 HIGH-RISK SERIES Forest Service Financial Management Highlights of a high-risk area discussed in GAO’s Performance and Accountability Series report on the Department of Agriculture (GAO-03-96) Although the Forest Service In 1999, we designated financial management of the U.S. Department of received an unqualified opinion on Agriculture’s (USDA) Forest Service as “high risk” on the basis of serious its fiscal year 2002 financial financial and accounting weaknesses. Again in our January 2001 report, we statements, it took extraordinary reiterated our concerns. effort. The Forest Service has not proven it can sustain this outcome and continues to have serious In December 2002, the Forest Service received an unqualified opinion on its material internal control fiscal year 2002 financial statements. While the Forest Service has reached weaknesses. an important milestone, it has not yet proved it can sustain this outcome, and it has not reached the end goal of routinely having timely, accurate, and useful financial information. As described in the following table, the Forest Service still has long-standing material control weaknesses in, among other things, its two major assets—fund balance with the Department of the As recommended by its financial Treasury (Treasury) and property, plant, and equipment. statement auditor, the Forest Service should • continue to improve its internal controls over Forest Service Material Internal Control Weaknesses reconciliations of its records Financial management area Condition reported by auditor Fund balance with the Treasury The Forest Service had a large backlog of with the Treasury’s records, unreconciled items that needed to be researched and corrected. To bring the fund balance with the Treasury • improve internal controls over account into balance with Treasury records as of the general computer control September 30, 2002, the Forest Service made a $107 environment and specific million adjustment. software applications, General and software application Inadequate internal controls existed in the general controls computer control environment and in specific software applications. • develop a new methodology Accrued liabilities The proposed methodology for estimating certain for estimating certain liabilities liabilities, such as grants, was inaccurate and would and maintain supporting have understated both accrued liabilities and related documentation, expenses. Sampling methodologies were used to project the year-end balance. Payroll process Users were allowed to submit their time sheets for • improve automated and approval to an employee who was not the designated manual controls over payroll supervisor. In addition, time sheets lacked adequate processes, and evidence of supervisory review. Property, plant, and equipment Property cost and related information (e.g., useful life) • continue to improve its were not accurately recorded. internal controls over initial Source: GAO analysis. recording of its property, plant, and equipment. www.gao.gov/cgi-bin/getrpt?GAO-03-96. For additional information about this high-risk area, click on the link above or contact McCoy Williams at (202) 512-6906. January 2003 HIGH-RISK SERIES Federal Aviation Administration Financial Highlights of a high-risk area discussed in Management GAO’s Performance and Accountability Series report on the Department of Transportation (GAO-03-108) The Federal Aviation Since FAA financial management was designated high risk in 1999, FAA has Administration (FAA) lacked made significant progress in addressing its financial accountability accountability for billions of dollars weaknesses. Three major systems initiatives in process are designed to in assets and expenditures due to address specific identified needs. However, these systems must be fully weaknesses in its financial installed and effectively integrated with one another and with other FAA reporting, property, and cost accounting systems. Substantial systems and tested in actual use. problems with the general accounting system required 850 By the end of 2003, FAA expects to implement a new DOT departmentwide adjustments totaling $41 billion in general accounting system called Delphi. This new system is designed to 2001. Weaknesses in property eliminate overall financial management deficiencies that limit FAA’s ability accounting meant the agency could to report on and manage its assets and operations. not accurately and routinely account for property totaling $11.7 In addition, as a component of its Delphi system, FAA expects to implement billion. Finally, FAA lacked the a new property accounting system module and complete the installation of a cost information necessary to make cost accounting system in 2003. The property system is needed to accurately effective decisions about resource and routinely account for FAA’s property, while the cost accounting system needs and adequately account for its activities and major projects, is required to assign basic financial costs to its program activities and such as the air traffic control projects. modernization program. Subsequent to implementation, FAA’s financial statement audit will provide an assessment of the effectiveness of FAA’s new general accounting system, the reliability of its property amounts and related internal controls, and its FAA has made significant progress ability to account for costs of its program activities and major projects. in improving the accuracy and Until these systems are fully tested and assessed in actual integrated reliability of its financial operations, the reliability of FAA’s financial information will remain information. uncertain. To continue this progress, it must a implement and successfully Diagram Showing Way in Which FAA’s New Systems Must Exchange Data integrate and test its new accounting systems in actual operational use, including • The new general accounting system module, • The new property accounting system module, • Its new cost accounting system. These changes are expected to be implemented by the end of 2003. www.gao.gov/cgi-bin/getrpt?GAO-03-108. For additional information about this high-risk Note: GAO diagram based on FAA information. a area, click on the link above or contact Linda Planned completion—2003. Calbom at (202) 512-9508 or firstname.lastname@example.org. January 2003 HIGH-RISK SERIES Internal Revenue Service Financial Highlights of a high-risk area discussed in Management GAO’s Performance and Accountability Series report on the Department of the Treasury (GAO-03-109) The Internal Revenue Service (IRS) In fiscal year 2002, for the third consecutive year, IRS was able to produce is responsible for collecting about annual financial statements that were reliable, in GAO’s opinion, and was $2 trillion annually, or about 95 able to produce the fiscal year 2002 financial statements 6 weeks after the percent of the government’s end of the fiscal year. To achieve this, IRS made fundamental changes in revenue. However, IRS lacks the how it processed transactions, maintained its records, and reported its information it needs to measure the full cost of administering the results. However, this also required IRS to continue to rely on costly, Internal Revenue Code and to resource-intensive processes to compensate for serious internal control and report meaningful, cost based systems deficiencies. IRS has continued to act on and has shown strong performance information. commitment to resolving the financial management issues GAO has Congress and IRS therefore lack identified, and has made notable progress on several. In particular, IRS has the information to determine worked aggressively to address issues not solely dependent on systems whether IRS has appropriate levels modernization for their resolution, and has made important progress in of funding and staff and is using its addressing deficiencies in controls over budgetary activity, accountability resources effectively. These issues over property and equipment, taxpayer receipts and data, and computer concerning IRS’s financial security. At the same time, IRS recognizes that resolving a number of its management—a high-risk area financial management issues depends on the success of its systems since 1995—adversely affect the agency’s ability to effectively fulfill modernization efforts. The challenge will be for IRS to continue the its responsibilities as the nation’s improvements made in recent years and, more importantly, to develop long- tax collector. term solutions to address the internal control and systems deficiencies GAO has identified. IRS’s primary remaining internal control weaknesses are in the following areas: GAO has provided IRS with • Accountability over property and equipment. IRS continues to lack management and operational an integrated property management system that records property recommendations that address (1) acquisitions and disposals as they occur and links costs on accounting IRS’s systems modernization plans records to property records. to resolve weaknesses in financial management systems and (2) • Management of tax receipts and taxpayer data. IRS’s internal needed improvements in controls over how IRS records transactions, controls do not adequately protect against loss of tax receipts from theft maintains records, and reports and inappropriate disclosure of taxpayer information. financial results. We will continue to make recommendations as • Management of unpaid tax assessments. IRS continues to lack a necessary. IRS’s management has subsidiary ledger for unpaid assessments that would allow it to produce worked actively to address these timely and useful information. IRS employs a time-consuming, resource issues. However, resolving many of intensive process to produce an annual balance of taxes receivable and IRS’s most serious challenges will other unpaid assessments for its financial statements, but this balance is require a sustained, long-term only reliable as of the last day of the fiscal year. Additionally, IRS commitment of resources, continues to record erroneous and untimely information in taxpayer continued involvement of senior management, and sustained accounts, increasing the risk of unnecessary taxpayer burden. progress in systems modernization. • Computer security. IRS continues to have serious weaknesses in its www.gao.gov/cgi-bin/getrpt?GAO-03-109. computer security controls designed to protect its computing resources from unauthorized use, modification, loss, and disclosure. IRS has also For additional information about this high-risk area, click on the link above or contact not taken sufficient steps to ensure that computer security deficiencies Steven J. Sebastian at (202) 512-3406 or identified at one facility are addressed at other facilities. SebastianS@gao.gov. January 2003 HIGH-RISK SERIES Medicare Program Highlights of a high-risk area discussed in GAO’s Performance and Accountability Series report on the Department of Health and Human Services (GAO-03-101) Since 1990, GAO has designated CMS has made improvements in assessing the level of improper payments, Medicare a high-risk program, collecting overpayments and conducting other financial activities, and vulnerable to waste, fraud, abuse, building the foundation for modernizing its information technology. and mismanagement, in part Nevertheless, much work remains to be done. because of the program’s vast size and complex administrative structure. Medicare covered about • Reducing improper payments. Since 1996, annual audits by the 40 million elderly and disabled Department of Health and Human Services Office of the Inspector Americans and cost about $241 General have found that Medicare contractors have improperly paid billion in fiscal year 2001; program claims worth billions of dollars. CMS has been working to better hold spending as a share of the economy individual contractors accountable for claims payment performance and is projected to double by 2035. help them target remedial actions, but it does not expect to fully Medicare’s steward, the Centers for implement an initiative to measure performance before June 2003. Medicare & Medicaid Services (CMS), oversees claims • Monitoring managed care plans. In 2001, auditors found that 59 of 80 administration contractors that health plans had misreported key financial data or had accounting operate the program’s fee-for- records too unreliable to support their data, but CMS did not have a plan service component and health plans that enroll beneficiaries in in place to resolve these issues. the program’s managed care component, Medicare+Choice. • Improving financial management processes. Although CMS financial While CMS has improved oversight statements are achieving unqualified, or “clean,” opinions, the agency’s of contractors and health plans in financial systems and processes do not routinely generate information recent years, considerable that is timely or reliable and do not ensure that the confidentiality of management challenges remain. sensitive information is adequately protected from unauthorized access or service disruption. • Modernizing the agency’s information technology (IT). CMS’s Because Medicare will play such a processes for planning and managing systems development and significant role in the nation’s fiscal future, prudence calls for taking implementation have certain shortcomings that put its IT modernization steps to ensure that Medicare is efforts at risk. We reported in September 2001 that CMS’s blueprint for professionally and efficiently modernization lacked sufficient detail and its process for managing IT managed. Achieving this goal will investments was missing key review, approval, and evaluation steps. require CMS to improve oversight The agency has made progress in its planning, review, and approval of Medicare’s claims administration procedures and has strengthened IT security requirements, but much contractors, management of the more remains to be done to reduce significant risks. agency’s information technology initiatives, and the implementation • Preparing for a new contracting environment. CMS’s claims of financial management processes administration contracting authority and practices (1) do not generally across multiple contractors and allow for full and open competition, (2) limit the contractor pool to agency units. health insurers, and (3) limit CMS’s ability to terminate contracts. If proposed competitive contracting legislation were enacted, managing the transition and adapting to new requirements would be a major www.gao.gov/cgi-bin/getrpt?GAO-03-101. challenge for CMS in the coming years. For additional information about this high-risk area, click on the link above or contact Leslie G. Aronovitz at (312) 220-7600 or email@example.com. January 2003 HIGH-RISK SERIES Medicaid Program Highlights of a high-risk area discussed in GAO’s Performance and Accountability Series report on the Department of Health and Human Services (GAO-03-101) Medicaid, which pays for both Inadequate fiscal oversight has led to increased and unnecessary federal acute health care and long-term spending in the following ways: care services for over 44 million low-income Americans, has been Schemes that leverage federal funds inappropriately. Using statutory subject to exploitation. Financed and regulatory loopholes over the last decade, some states have created the jointly by the federal government and the states, Medicaid consists of illusion that they have made large Medicaid payments to certain providers, more than 50 distinct “state” such as county health facilities, in order to generate excessive federal programs that together cost matching payments. In reality, the states have only momentarily made $228 billion in fiscal year 2001, payments to these providers—generally through electronic funds transfers— accounts for more than and then required that the payments be returned. Some of these schemes 20 percent of states’ total have cost the federal government several billions of dollars each year. expenditures, and is projected to Although the Congress and CMS have repeatedly acted to curtail abusive double in spending in a decade. financing schemes when they have come to light, schemes continue to The federal government pays from emerge and require ongoing oversight. half to more than three-fourths of a state’s total Medicaid expenditures. Waiver programs that inappropriately increase the federal Growing concern about the program’s size, growth, and fiscal government’s financial liability. The Secretary of HHS has authority to oversight has led GAO to add waive certain statutory provisions and allow states to test new ideas for Medicaid to its 2003 list of high-risk delivering services and expanding coverage. Waiver programs must be programs. The Centers for “budget neutral,” in that they do not increase federal financial liability Medicare & Medicaid Services beyond what it would have been without these programs. Since the mid- (CMS) in the Department of Health 1990s, HHS has permitted states to use questionable methods to demonstrate and Human Services (HHS) is budget neutrality for changes estimated to increase federal costs. For responsible for administering the example, two states’ waivers approved in 2002 are estimated to cost the program at the federal level, while federal government an extra $330 million or more. HHS is currently the states administer their considering approval of similar waivers by additional states. respective programs’ day-to-day operations. Inappropriate billing by providers serving program beneficiaries. Medicaid, like other health care payers, is vulnerable to waste, fraud, and abuse by providers who submit inappropriate claims. While CMS has CMS should (1) ensure that the initiated steps to improve financial reviews of Medicaid, its efforts are in the federal government pays only its planning and early implementation stages and will require continued correct share of valid program oversight. Efforts on the part of states to identify billing errors and abuses expenditures, (2) develop better have been generally limited and only modestly funded. The hundreds of methods to assess the costs of millions of dollars in improper payments that a few states have identified state-proposed program suggests that these and other states have the potential to save hundreds of alternatives, and (3) strengthen millions more through increased efforts to safeguard program payments. federal and state fiscal oversight. www.gao.gov/cgi-bin/getrpt?GAO-03-101. For additional information about this high-risk area, click on the link above or contact Kathryn G. Allen at (202) 512-7118. January 2003 HIGH-RISK SERIES Earned Income Credit Noncompliance Highlights of a high-risk area discussed in GAO’s Performance and Accountability Series report on the Department of the Treasury (GAO-03-109) The Internal Revenue Service (IRS) IRS estimates that of the $31.3 billion in earned income credits claimed by administers the earned income taxpayers in tax year 1999, about $8.5 to $9.9 billion should not have been credit, a refundable federal income paid. Furthermore, efforts to reduce earned income credit noncompliance tax credit for low-income working over the past 5 years have produced little change. individuals and families. The credit reduces the amount of federal tax owed and can result in a refund Certain features of the credit represent a trade-off between compliance and check. There are significant other desired goals. Unlike other income transfer programs, such as Food compliance problems associated Stamps, the earned income credit was designed to be administered through with the credit. IRS estimates that the tax system. Accordingly, while other income transfer programs have billions of dollars in credits staff that independently certify the eligibility of applicants, administration of claimed by taxpayers should not the credit relies more directly on the self-reported qualifications of have been paid. Because IRS has individuals. This approach generally should result in lower administrative struggled to reduce overclaims and costs and possibly higher participation rates but may also contribute to because of the magnitude of the overclaims. financial risk, earned income credit noncompliance—a high-risk area The IRS Commissioner and the Treasury Assistant Secretary for Tax since 1995—continues to be high- risk. Policy have convened a high-level Treasury/IRS task force to develop recommendations to better administer the credit and make it easier for taxpayers to comply with the rules. IRS needs to: Earned Income Credit Claims and Estimated Potential Overclaims for Tax Year 1999 • in conjunction with Treasury, ensure that the earned income credit task force completes work on recommendations to better administer the credit, and • implement task force recommendations to deal with noncompliance and resulting erroneous refunds. www.gao.gov/cgi-bin/getrpt?GAO-03-109. For additional information about this high-risk area, click on the link above or contact Norm Rabkin at (202) 512-9110 or firstname.lastname@example.org. January 2003 HIGH-RISK SERIES Collection of Unpaid Taxes Highlights of a high-risk area discussed in GAO’s Performance and Accountability Series report on the Department of the Treasury (GAO-03-109) Taxpayers’ willingness to In testimonies and reports, GAO has highlighted large and pervasive declines voluntarily comply with the tax in IRS’s compliance and collections programs. These programs include laws depends in part on their computerized checks for nonfiling and underreported income, audits, and confidence that their friends, telephone and field collections. Between 1996 and 2001 the programs neighbors, and business generally experienced growing workloads, decreased staffing, and decreases competitors are paying their fair share of taxes. Many view the in the number of cases closed per employee. By the end of fiscal year 2001, Internal Revenue Service’s (IRS) IRS was deferring collection action on about one out of every three tax compliance and collection delinquencies assigned to the collections programs. By the end of fiscal year programs as critical to providing 2002, IRS had an inventory of unpaid taxes with a collection potential of that confidence. For the last about $100 billion. In May 2002 congressional hearings, the IRS several years, Congress and others Commissioner said that IRS was not providing taxpayers with adequate have been concerned that the assurance that their neighbors or competitors were complying with the tax declines in IRS’s compliance and laws and paying what they owed. collections programs are eroding taxpayers’ confidence in the To reverse these trends, IRS is in various stages of planning and fairness of our tax system. Because implementing a management improvement strategy, including efforts to of the potential revenue losses and the threat to voluntary compliance, improve the productivity of IRS’s existing compliance and collections staff collection of unpaid taxes—a high- and better target noncompliance. To improve productivity, IRS has begun risk area since 1990—continues to work to reengineer its compliance and collections processes, modernize its be high-risk. technology, and develop better information on the costs and benefits of its compliance activities using a centralized cost accounting system that is planned for implementation in late 2003. Better targeting of noncompliance requires better information. IRS’s new effort to review compliance, the National Research Program, should, if implemented as planned, provide IRS with the first up-to-date information on compliance rates and sources of • Reengineer compliance and noncompliance since it last measured the compliance rate using 1988 tax collections programs. returns. • Acquire and analyze data on noncompliance by continuing Audit Rates Have Declined to implement the National Research Program as planned. • Ensure that the planned centralized cost accounting system is effectively implemented and that its data is used to analyze the costs and benefits of compliance activities. www.gao.gov/cgi-bin/getrpt?GAO-03-109. For additional information about this high-risk area, click on the link above or contact Norm Rabkin at (202) 512-9110 or email@example.com. January 2003 HIGH-RISK SERIES Department of Defense Support Highlights of a high-risk area discussed in Infrastructure Management GAO’s Performance and Accountability Series report on the Department of Defense (GAO-03-98) Since 1997, GAO has identified the Infrastructure management, which GAO first identified as a high-risk area in Department of Defense’s (DOD) 1997, continues to present major challenges to DOD. The department management of infrastructure as a defines infrastructure as those activities that provide support services to high-risk area because DOD’s mission programs, such as combat units. DOD’s infrastructure categories infrastructure costs continue to include installations, communications and information infrastructure, consume a larger than necessary portion of DOD’s budget. DOD has science and technology programs, acquisition infrastructure, central been concerned for a number of logistics, the Defense Health Program, central personnel administration and years over the amount of funding benefits programs, central training, departmental management, and other devoted to its support selected infrastructure programs such as support of DOD intelligence and air infrastructure and the impact on its traffic control activities. GAO’s past and current work in this area indicates ability to devote more funding to that DOD weapon system modernization and other critical needs. • continues to spend a larger portion of its budget than desired on infrastructure—nearly 46 and 44 percent, respectively, in fiscal years 2001 and 2002; • lacks an overarching strategy to improve its business practices; and Organizations throughout DOD • faces a challenge in adequately maintaining and revitalizing the facilities need to continue reengineering their business processes and it expects to retain for future use. striving for greater operational effectiveness and efficiency. DOD For example, GAO’s recent review of the physical condition of recruit needs to develop a plan to better barracks confirmed DOD’s assertion that its facilities have been long integrate, guide, and sustain the neglected and underfunded. Additionally, GAO’s analysis of DOD data implementation of its diverse contained in its fiscal year 2002 annual report and fiscal year 2003 future business transformation initiatives years defense program showed that approximately $151 billion (44 percent) in an integrated fashion. DOD also of DOD’s $345 billion allocated to mission and support activities was spent needs to develop a comprehensive on infrastructure in fiscal year 2002. long-range plan for its facilities infrastructure that addresses DOD plans an additional base closure round in 2005; this could enable it to facility requirements, recapitalization, and maintenance devote its facility resources on fewer, more enduring facilities. With or and repair needs. without future base closures, DOD faces the challenge of adequately maintaining and revitalizing the facilities it expects to retain for future use. Available information indicates that DOD’s facilities continue to deteriorate because of insufficient funding for their sustainment, restoration, and modernization. To its credit, DOD has highly emphasized the reform of its support infrastructure to include an emphasis on the transformation of its associated business processes in recent years. These reforms include acquisition and financial management reform, logistics reengineering, public-private competitions under the Office of Management and Budget’s Circular A-76 process, and elimination of unneeded facilities infrastructure. However, www.gao.gov/cgi-bin/getrpt?GAO-03-98. many key reforms that may have the greatest impact on managing the support infrastructure and reducing costs are long term in nature and will For additional information about this high-risk area, click on the link above or contact Henry require many years to be fully implemented. L. Hinton, Jr. at (202) 512-4300 or firstname.lastname@example.org. January 2003 HIGH-RISK SERIES Department of Defense Inventory Highlights of a high-risk area discussed in Management GAO’s Performance and Accountability Series report on the Department of Defense (GAO-03-98) Since 1990, GAO has identified the Inefficient inventory management practices represent one of the most Department of Defense’s (DOD) serious weaknesses in DOD’s logistics operations. While DOD’s inventory management of secondary value for the last 10 years has been declining, GAO’s past and current work inventories (spare and repair parts, in this area indicates that DOD clothing, medical supplies, and other items to support the operating forces) as high risk • continues to store unnecessarily large amounts of material; because inventory levels were too • purchases material for which there is no valid requirement; high and management systems and • experiences equipment readiness problems because of a lack of key procedures were ineffective and spare parts; and wasteful. Many of these same • maintains inadequate visibility over material being shipped to and from weaknesses regarding excess military activities. About half of DOD’s $63 billion secondary inventory inventories and the lack of exceeds war reserve or current operating requirements. economy, efficiency, and effectiveness in DOD’s inventory One of the more serious and long-standing inventory management management practices still exist weaknesses that GAO has been reporting on for over a decade is the today. department’s inability to maintain adequate control over material being shipped between contractor facilities and DOD activities or between DOD activities. For example, in July 2002, GAO reported that the Air Force had The long-term solution to this high- not properly controlled or maintained effective accountability over material risk area necessitates that the DOD reportedly valued at about $567 million that had been shipped to contractors reengineer its entire logistics for repair or use in the repair process. operations to include the development of a long-range While almost half of DOD’s inventory is excess to its current war reserve and strategic vision and a operating requirements, GAO has consistently reported that the department departmentwide, coordinated has experienced equipment readiness problems because of shortages of key approach for logistics management. spare parts. In an attempt to alleviate these shortages, the Congress In the short term, however, GAO allocated $1.1 billion in supplemental appropriations to DOD in fiscal year recommends that the department 1999. GAO reported, however, that DOD’s financial reporting systems do not (1) reduce excess inventories, (2) eliminate material purchases for provide reasonable assurance that these funds are being used to purchase which no valid requirement exists, spare parts. Each of the services has a planned number of initiatives to (3) establish better controls and address these shortages. Additionally, DOD has initiatives planned or visibility over material shipped to underway to modernize its supply support management information systems and from military activities, (4) and has submitted financial reports in response to prior recommendations. take actions to address key spare parts shortages, (5) better track Rates at Which Selected Aircraft Were Reported as Not Mission Capable due to Supply how it spends its funds for spare Problems (in percent) parts, (6) correct information Reported Not Mission Capable Rates due to Supply Problems systems weaknesses, and (7) adopt Fiscal year Air Force C-5 aircraft Navy F-14D aircraft All Navy aircraft specific industry-proven best 1996 15.6 10.0 12.5 practices for improving inventory 1997 15.2 11.7 12.4 management. 1998 16.8 12.4 12.9 www.gao.gov/cgi-bin/getrpt?GAO-03-98. 1999 17.3 11.1 12.1 2000 18.1 7.6 12.9 For additional information about this high-risk area, click on the link above or contact Henry Source: GAO. L. Hinton, Jr. at (202) 512-4300 or email@example.com. Note: Analysis of Navy and Air Force data based on work completed in July 2001. January 2003 HIGH-RISK SERIES HUD Single-Family Mortgage Insurance Highlights of a high-risk area discussed in and Rental Housing Assistance Programs GAO’s Performance and Accountability Series report on the Department of Housing and Urban Development (HUD) (GAO-03-103) HUD manages about $550 billion in GAO originally designated HUD’s programs as high risk in 1994 due to insurance and $19 billion per year serious, long-standing, departmentwide management problems. Following in rental assistance. To do this, several years of effort by HUD to address these problems, in January 2001, HUD relies on the performance and GAO redefined and reduced the number of HUD programs deemed to be integrity of thousands of third high risk. HUD has continued to make progress in addressing identified parties, including about 7,500 lenders that process mortgage weaknesses in the high-risk program areas. HUD’s progress includes insurance; about 4,500 public implementation of new processes to allow the review of lenders and housing agencies that administer appraisers and new incentives to improve the performance of property rental assistance programs; and disposition contractors in its single-family programs. about 22,000 property owners who provide rental housing. HUD’s However, many of HUD’s strategies for resolving problems in its high-risk single-family mortgage insurance program areas represent new initiatives in the early stages of and rental housing assistance implementation, and evidence shows that significant problems remain. In its program areas are high risk rental housing assistance programs, implementation of a new assessment because of weaknesses that include system for public housing agencies has been delayed; correcting housing HUD’s oversight and monitoring of quality violations remains problematic; and HUD estimates that rental lenders, appraisers, and contractors, and ensuring assistance overpayments—some $2 billion out of $19 billion in assistance in compliance with HUD’s housing fiscal year 2000—are greater than previously estimated. Additionally, HUD’s quality standards. Because of these three major management challenges—human capital management, weaknesses, evidence of fraud, and acquisitions management, and programmatic and financial management the variety of challenges HUD faces information systems—cut across both program areas and contribute to the in implementing corrective actions, high-risk designations. HUD is in the early stages of developing measures to the program areas remain at high resolve these deficiencies. For example, HUD has not yet developed a risk. comprehensive strategy to resolve serious, long-standing programmatic and financial management information system deficiencies. HUD needs to Because significant challenges remain, GAO is maintaining the department’s • improve management and single-family mortgage insurance and rental housing assistance program oversight of its single-family areas as high risk at this time. mortgage insurance programs to reduce risk of losses from HUD’s High-Risk Program Areas and Management Challenges loan defaults or fraud; and • ensure that its rental housing assistance programs operate effectively and efficiently, specifically that assistance payments are accurate, recipients are eligible, assisted housing meets quality standards, and contractors perform as expected. www.gao.gov/cgi-bin/getrpt?GAO-03-103. For additional information about this high-risk area, click on the link above or contact Thomas J. McCool at (202) 512-8678 or firstname.lastname@example.org. . January 2003 HIGH-RISK SERIES Student Financial Aid Programs Highlights of a high-risk area discussed in GAO’s Performance and Accountability Series report on the Department of Education (GAO-03-99) Federal grant and loan programs Since being designated high risk in 1990, Congress and Education have made provide over $50 billion annually to considerable changes to address ongoing management challenges. students to finance their Congress established Education’s Office of Federal Student Aid (FSA) as a postsecondary education. Millions performance-based organization and Education created a team of senior of dollars in loans and grants have managers to address key financial and management problems throughout been disbursed to ineligible students because of internal the agency. Progress is occurring, but the following problems remain. control weaknesses. Further, while default rates have fallen, the • Information to assess systems integration progress is not yet amount of defaulted student loan readily available. FSA has selected a viable, industry-accepted means dollars has remained high. Finally, for integrating its systems. FSA, however, will need to develop clear with the exception of 1997, goals and measures in its performance plan and better demonstrate its Education has not received an progress in achieving systems integration. unqualified—or “clean”—opinion on its financial statements since its • Weaknesses in financial management and internal controls first agencywide audit in 1995. remain. Education has made progress improving its financial management; however it needs to implement corrective actions to ensure that relevant, reliable, and timely, financial information is available. Education also needs to address its internal control GAO believes the Department weaknesses to prevent improper and erroneous payments. should: • Plans and reports are unclear about how default management • continue with systems goals will be achieved. FSA has developed several goals to prevent integration and improve its and collect defaulted student loans, but its plans and reports provided plans and reports to better limited information about the actions it will take to achieve them. demonstrate its progress, • Continued focus on human capital management is needed. • make comprehensive improvements to address Education has developed a comprehensive human capital plan that financial management and incorporates FSA. This plan outlines specific steps and time frames for internal control weaknesses, improving its human capital management, but Education will need to continuously focus on implementation of the plan to achieve results. • improve plans and reports to clearly explain strategies for Amount of Student Loan Dollars in Default Remains High achieving default management goals, and • continue implementation of strategic human capital measures, including succession planning and staff development. www.gao.gov/cgi-bin/getrpt?GAO-03-99. For additional information about this high-risk area, click on the link above or contact Cynthia M. Fagnoni at (202) 512-7215 or email@example.com. Note: Balances include principal, interest, late fees, and administrative charges for defaulted loans under both the Federal Family Education Loan and Federal Direct Loan Programs. January 2003 HIGH-RISK SERIES Department of Defense Weapon Systems Highlights of a high-risk area discussed in Acquisition GAO’s Performance and Accountability Series report on the Department of Defense (GAO-03-98) Acquiring high performance DOD continues to experience problems in developing and acquiring weapon weapons is central to the systems. GAO has consistently found that acquisitions take a much longer Department of Defense’s (DOD) time and cost much more than originally anticipated, causing disruptions to ability to fight and win wars. Also, DOD’s overall investment strategy and significantly reducing its buying DOD’s investment in weapons is power. Programs are also at risk because they are moving forward with growing rapidly—from $110 billion in fiscal year 2002 to about $157 immature technologies and/or they are using late stage tests as a vehicle for billion by fiscal year 2007—as DOD discovering problems that should have been identified and addressed much pushes to transform itself to meet a earlier. Such problems were evident, for example, in GAO’s reviews of new range of threats. DOD’s Joint Strike Fighter, V-22 aircraft, F-22, and other programs. In Nevertheless, while DOD’s addition, DOD and the military services often do not consider options to acquisition process has produced acquire systems jointly to avoid costly duplication and interoperability the best weapons in the world, it problems. This was particularly apparent in efforts to acquire new sensor- also routinely yields undesirable to-shooter systems, antiarmor munitions, and combat identification systems. outcomes—cost increases, schedule delays, and performance Many of the problems GAO has uncovered are rooted in DOD’s environment shortfalls. Consequently, GAO has and its culture. The acquisition process tends to assert pressures on designated this as a high-risk area since 1990. programs to promise more than they can deliver and to push programs forward without sufficient knowledge about a weapon’s technology, design, and production. The intense competition to get programs approved and funded encourages setting requirements that will make the proposed GAO has recommended that DOD weapon system stand out from others. In addition, DOD officials who take additional steps to achieve establish requirements often aim for the most capability possible, since it outcomes on par with leading may be many years before they get another opportunity to acquire a new organizations. These include weapon system of the same type. This has led to overpromising capabilities • planning product development and underestimating costs. so that design and manufacturing decisions are DOD is changing its policies to achieve better outcomes. It has focused based on better data, primarily on (1) ensuring technologies are demonstrated to a high level of • ensuring testing does not get deferred until late in the maturity before beginning a weapon system program, (2) taking an development cycle, and evolutionary, or phased, approach to developing a system, and (3) making • considering joint mission more realistic cost estimates in programs. These are positive steps that needs in establishing weapon should help curb incentives to overpromise the capabilities of new weapon requirements. systems and lead to more realistic cost estimates when pricing programs. These steps should be taken in Implementation on individual programs will be the measure of the policies’ tandem with providing a better success, but early experience has been mixed, underscoring the challenge environment for starting and DOD managers face in translating the policies into better program outcomes. managing weapons programs—one Various Weapon Systems that more closely resembles the knowledge-based process followed by leading organizations. www.gao.gov/cgi-bin/getrpt?GAO-03-98. For additional information about this high-risk area, click on the link above or contact Jack L. Brock, Jr. at (202) 512-4841 or firstname.lastname@example.org. January 2003 HIGH-RISK SERIES Department of Defense Contract Highlights of a high-risk area discussed in Management GAO’s Performance and Accountability Series report on the Department of Defense (GAO-03-98) The Department of Defense (DOD), Since being designated high risk in 1992, DOD has worked to improve and the government’s largest purchaser, streamline its acquisition practices as it adjusts to a changing acquisition spent nearly $163 billion in fiscal environment. DOD’s senior leadership is committed to improving its year 2001 for goods and services to acquisition of services; and DOD has achieved some positive results in equip, maintain and support improving its payment processes for goods and services, is attempting to military forces, but it is unable to ensure that it is acquiring goods address health care contracting problems, and has made progress in laying a and services as efficiently as foundation for reshaping its acquisition workforce. The following problems possible. Further, between fiscal remain. years 1994 and 2001, DOD • Improving DOD’s acquisition of services. Too often requirements are contractors have refunded not clearly defined or alternatives fully considered. DOD does not have $6.7 billion in overpayments. Also, a strategic plan that integrates or coordinates ongoing initiatives or that DOD’s health care contracting, provides a road map for future efforts. involving about $5 billion annually, • Assuring the appropriate use of contracting techniques and is overly complicated and approaches. While efforts to streamline acquisition processes have prescriptive and is unstable. been made, DOD missed out on opportunities to generate savings, Contributing to DOD’s contract reduce administrative burdens, and enhance outcomes for its management problems, DOD’s acquisition workforce has been cut acquisitions due to unclear guidance, poor internal controls, and in half over the past 10 years. improperly trained personnel. As a result, DOD (1) had mixed results in incorporating performance-based attributes into contracts, (2) is vulnerable to fraud in its purchase and travel card programs, and (3) negotiated prices for goods and services using approaches that did not GAO’s reports on DOD’s contract always promote competition and ensure fair and reasonable prices. management have recommended • Overcoming long-standing contract payment issues. DOD that DOD take the following steps. continues to be challenged in ensuring prompt, proper, and accurate • Use a strategic approach to payments for goods and services. Payment errors are attributable to improve its acquisition of problems such as not adjusting payments for changed contract services. requirements and paying the same invoice twice. • Give priority management attention at all DOD levels to • Managing DOD’s contracts for health care. DOD’s contracting improve and use appropriate approach for TRICARE and numerous adjustments to the contracts had contracting techniques and created an unstable program. DOD also faces challenges in jointly approaches. contracting with the Veterans Administration for medical and surgical • Develop fundamental controls supplies due to different approaches in standardization and the lack of over contractor debt and accurate and reliable procurement data. overpayments. • Improving the acquisition workforce. DOD faces serious imbalances • Ensure a seamless transition in the skills and experience of its current workforce and the potential under new health care loss of highly specialized knowledge if many of its acquisition specialists contracts. retire. • Take a strategic view of human capital and build on initial efforts to reshape DOD’s Strategic Approach Leading Companies Take in Acquiring Services acquisition workforce. • Secure up-front commitment from top leaders • Create supporting structure processes and roles www.gao.gov/cgi-bin/getrpt?GAO-03-98. • Obtain improved knowledge of service spending For additional information about this high-risk • Enable success through leadership, communication and metrics area, click on the link above or contact Jack Source: GAO. L. Brock, Jr. at (202) 512-4841 or email@example.com. January 2003 HIGH-RISK SERIES Department of Energy Contract Highlights of a high-risk area discussed in Management GAO’s Performance and Accountability Series report on the Department of Energy (GAO-03-100) The Department of Energy, the DOE’s contract management, broadly defined to include contract largest non-Defense contracting administration and project management, continues to be a significant agency in the federal government, challenge for the department and remains at high risk for fraud, waste, relies primarily on contractors to abuse, and mismanagement. In a January 2001 report on DOE’s major carry out its diverse missions and management challenges, GAO reported ongoing problems with DOE’s operate its laboratories and other facilities. About 90 percent of approach to selecting an appropriate contract type, using competition to DOE’s annual budget is spent on award contracts, incorporating performance-based measures into contracts, contracts. DOE’s history of both and minimizing cost and schedule overruns on major projects. DOE has inadequate management and made progress in addressing these problems. However, contractor oversight and failure to hold its performance problems continue to occur at DOE's laboratories and contractors accountable has facilities. Objective performance information is scarce; DOE primarily resulted in the high-risk measured progress in implementation of contract reform initiatives rather designation for contract than measuring performance results. management since 1990. Nevertheless, there are indications that the performance of DOE’s contractors may not have improved. For ongoing major DOE projects, GAO found there was no significant improvement in cost or schedule To better ensure the effectiveness of its management improvement performance from 1996 to 2001. In both 1996 and 2001, more than half of the initiatives, such as contract reform, projects reviewed showed both cost increases and schedule delays. GAO recommended that DOE Furthermore, as shown below, the proportion of projects experiencing cost incorporate the management growth of more than double the initial cost estimates or schedule delays of 5 practices common in high- years or more has increased. performing organizations. This approach would include the key In an effort to improve cost and schedule performance on major projects, elements of (1) clearly defined DOE issued new policy and guidance on managing and controlling projects goals, (2) an implementation in 2000, and in 2001 established a project tracking system that required strategy that sets milestones and monthly status reporting on all projects with total project costs over $5 establishes responsibility, (3) million. DOE also has efforts under way to address skill gaps in its results-oriented outcome measures, and (4) a mechanism procurement and project management organizations and to develop the that uses results-oriented data to necessary technical and managerial expertise for adequate oversight of its evaluate the effectiveness of the contractors through training and certification programs. Over the long term, department’s initiatives and to take DOE may resolve the challenges in its contract management. However, the corrective action as needed. benefits of its improvement initiatives may take years to fully realize. Until then, these ongoing challenges can increase the government’s costs and expose the government to billions of dollars of financial risks. Comparison of Significant Cost Overruns and Schedule Delays for Ongoing Projects in 2001 with Ongoing Projects in 1996 Number of projects 1996 2001 Number of projects reviewed 25 16 www.gao.gov/cgi-bin/getrpt?GAO-03-100. Projects with a cost growth of more than double the initial cost estimate 7 (28%) 6 (38%) For additional information about this high-risk Projects with schedule delays of 5 years or area, click on the link above or contact Robert more A. Robinson at (202) 512-3841 or 8 (32%) 6 (38%) firstname.lastname@example.org. Source: GAO analysis of DOE data. January 2003 HIGH-RISK SERIES National Aeronautics and Space Highlights of a high-risk area discussed in Administration Contract Management GAO’s Performance and Accountability Series report on the National Aeronautics and Space Administration (GAO-03-114) Much of NASA’s success depends Our reports and testimonies have demonstrated just how debilitating on the work of its contractors—on weaknesses in contract management and oversight can be to important which it spends over $12 billion a space programs. Our July 2002 report on the International Space Station, for year. Since 1990, we have example, found that the National Aeronautics and Space Administration identified NASA's contract (NASA) did not effectively control costs or technical and scheduling risks, management function as an area at high risk, principally because it has provide adequate oversight review, or effectively coordinate efforts with its lacked accurate and reliable partners. As a result, NASA has had to make drastic cutbacks in the space financial and management station’s capabilities. information on contract spending, and it has not placed enough In recent years, NASA has addressed many acquisition-related weaknesses. emphasis on end results, product For example, it has developed systems to provide oversight and information performance, and cost control. needed to improve contract management. It has made progress in evaluating Since financial and contract procurement functions in its field centers. And it is reducing its use of problems threaten the success of unnegotiated (i.e., uncosted) contract changes. NASA's major programs, we believe contract management Moreover, NASA is now beginning to tackle one of its most formidable continues to be high risk. barriers to sound contract management—the lack of a modern, integrated financial management system. NASA’s financial management environment is currently comprised of decentralized, nonintegrated systems with policies, To further improve contract procedures, and practices that are unique to its field centers. Because its management, NASA needs to systems cannot easily exchange data, it is difficult to ensure that contracts successfully complete its design are being efficiently and effectively implemented and that budgets are and implementation of a new executed as planned. According to NASA, the planned new system will be financial management system. fully integrated, and it will provide complete cost information to agency Moreover, it will need to transform management for more fully informed decision-making. its operations to better support its core mission. This entails NASA faces considerable challenges in adequately implementing contract • ensuring that NASA has the management improvements. It is only in the early stages of implementing its right data to oversee its programs and contracts— new financial management system, for example, and NASA reported it is specifically data that will allow already facing challenges in terms of cost, security, and interoperability. comparisons of actual costs to Moreover, NASA has not yet ensured that contractors uniformly provide cost estimates; data at a level that will give managers the information they need to make • finding ways to shift trade-off decisions, although they have begun taking actions to improve the management attention away data available for some large programs. Furthermore, NASA has not yet from yearly budgets to total effectively shifted management attention away from yearly budgets to total costs; and costs. • strengthening NASA’s financial organization to better support Ultimately, to improve contract management and oversight, NASA will need the agency’s mission and goals. to transform its financial management organization so that it better supports its core mission. Right now, finance is not viewed as intrinsic to NASA’s program management decision process, nor does it focus on what “could” www.gao.gov/cgi-bin/getrpt?GAO-03-114. and “should” take place from an analytical cost-planning standpoint. Making this kind of transformation will be difficult because it will require NASA to For additional information about this high-risk area, click on the link above or contact Allen change its culture and long-standing ways of doing business. But the need Li at 202-512-4841 or email@example.com. for deeper reform is paramount since financial and contract management problems threaten the success of virtually every major program. Performance and Accountability and High- Risk Series Major Management Challenges and Program Risks: A Governmentwide Perspective. GAO-03-95. Major Management Challenges and Program Risks: Department of Agriculture. GAO-03-96. Major Management Challenges and Program Risks: Department of Commerce. GAO-03-97. Major Management Challenges and Program Risks: Department of Defense. GAO-03-98. Major Management Challenges and Program Risks: Department of Education. GAO-03-99. Major Management Challenges and Program Risks: Department of Energy. GAO-03-100. Major Management Challenges and Program Risks: Department of Health and Human Services. GAO-03-101. Major Management Challenges and Program Risks: Department of Homeland Security. GAO-03-102. Major Management Challenges and Program Risks: Department of Housing and Urban Development. GAO-03-103. Major Management Challenges and Program Risks: Department of the Interior. GAO-03-104. Major Management Challenges and Program Risks: Department of Justice. GAO-03-105. Major Management Challenges and Program Risks: Department of Labor. GAO-03-106. Major Management Challenges and Program Risks: Department of State. GAO-03-107. Major Management Challenges and Program Risks: Department of Transportation. GAO-03-108. Page 54 GAO-03-119 High-Risk Update Performance and Accountability and High- Risk Series Major Management Challenges and Program Risks: Department of the Treasury. GAO-03-109. Major Management Challenges and Program Risks: Department of Veterans Affairs. GAO-03-110. Major Management Challenges and Program Risks: U.S. Agency for International Development. GAO-03-111. Major Management Challenges and Program Risks: Environmental Protection Agency. GAO-03-112. Major Management Challenges and Program Risks: Federal Emergency Management Agency. GAO-03-113. Major Management Challenges and Program Risks: National Aeronautics and Space Administration. GAO-03-114. Major Management Challenges and Program Risks: Office of Personnel Management. GAO-03-115. Major Management Challenges and Program Risks: Small Business Administration. GAO-03-116. Major Management Challenges and Program Risks: Social Security Administration. GAO-03-117. Major Management Challenges and Program Risks: U.S. Postal Service. GAO-03-118. High-Risk Series: An Update. GAO-03-119. High-Risk Series: Strategic Human Capital Management. GAO-03-120. High-Risk Series: Protecting Information Systems Supporting the Federal Government and the Nation’s Critical Infrastructures. GAO-03-121. High-Risk Series: Federal Real Property. GAO-03-122. 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High-Risk Series: An Update
Published by the Government Accountability Office on 2003-01-01.
Below is a raw (and likely hideous) rendition of the original report. (PDF)