U . S . G E N E R A L A C C O U N T I N G O F F I C E S E R V I N G T H E C O N G R E S S A N D T H E N A T I O N Performance and Accountability R E P O R T Fiscal 2002 a ActualInsideFront.fm Page 1 Tuesday, January 21, 2003 3:54 PM SERVING THE CONGRESS GAO’S MISSION GAO exists to support the Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the benefit of the American people. SCOPE OF WORK GAO performs a range of oversight-, insight-, and foresight-related engagements, a vast majority of which are conducted in response to congressional mandates or requests. GAO’s engagements include evaluations of federal programs and performance, financial and management audits, policy analyses, legal opinions, bid protest adjudications, and investigations. CORE VALUES ACCOUNTABILITY INTEGRITY RELIABILITY We help the Congress oversee federal We set high standards for ourselves We at GAO want our work to be programs and operations to ensure in the conduct of GAO’s work. Our viewed by the Congress and the accountability to the American agency takes a professional, objective, American public as reliable. We people. GAO’s analysts, auditors, fact-based, nonpartisan, produce high-quality reports, lawyers, economists, information nonideological, fair, and balanced testimony, briefings, legal opinions, technology specialists, investigators, approach to all activities. Integrity is and other products and services that and other multidisciplinary the foundation of reputation, and are timely, accurate, useful, clear, and professionals seek to enhance the the GAO approach to work ensures candid. economy, efficiency, effectiveness, both. and credibility of the federal government both in fact and in the eyes of the American people. Source: NARA and GAO. From the Comptroller General January 31, 2003 It is indeed a pleasure to present GAO’s performance and accountability report for fiscal 2002. In the spirit of the Government Performance and Results Act, this annual report informs the Congress and the American people about what we have achieved on their behalf. Importantly, we received a clean opinion from inde- pendent auditors on our financial statements for the 16th consecutive year. I am confident that the finan- cial information and the data measuring GAO’s per- formance contained in this report are complete and reliable. The year 2002 was marked by certain new and unprecedented challenges for the federal govern- ment. In the aftermath of the September 11, 2001, ter- rorist attacks and the delivery of anthrax spores through the mail, securing the safety of Americans at home and abroad became the foremost national pri- ority. It was also a year of economic challenges: not just falling stock prices, but diminished public confidence in certain corporate institutions and in the ability of government to effectively oversee financial markets. The troubles experienced at Enron and other corporations and the related conduct of auditors and various other parties had far reaching effects. The threat of terrorism and the damage done to Americans’ economic well-being in 2002 were but two challenges among many—some of them long-standing challenges with which the Congress continues to grapple. The nation’s changing demographics, the educational needs of its children, the long-term viability of Social Security and Medicare, the rising cost of health care and the millions of Americans who are unin- sured, the vulnerability of the government’s computer systems to sabotage, the requirements of the armed forces in the face of new threats to national security— these and other challenges continued to engage the attention of the Congress and therefore helped define the year’s priorities at GAO. GAO PERFORMANCE AND ACCOUNTABILITY REPOR T 2002 i As a key source of objective information and analysis, GAO played a crucial role in supporting congressional decision making. For example, GAO’s work informed the debate over national preparedness strategy, helping the Congress answer questions about the associated costs and program trade-offs and providing perspectives on how best to organize and manage the new Transportation Security Administration and the new Department of Homeland Security. GAO’s input was a major factor in helping to shape the Sarbanes-Oxley Act, which created the Public Company Accounting Over- sight Board as well as new rules to strengthen corporate governance and ensure auditor independence. Further, GAO’s work helped the Congress develop and enact election reform legislation in the form of the Help America Vote Act of 2002. The Congress and the executive agencies took a wide range of actions based on GAO analyses and recommendations. These included reducing improper payments under the Medicare program, reducing the risks associated with agriculture loan programs, and improving the oversight of contingency appropriations for defense. In total, GAO’s efforts helped the Congress and government leaders achieve $37.7 billion in financial benefits—an $88 return on every dollar invested in GAO. That return on the public’s investment in GAO extends beyond dollar savings to improvements in how the government serves its citizens. Whether by spurring efforts to coordinate emergency preparedness by federal, state, and local agencies; by informing the Congress and the public about the risks involved in private pension plans; or by helping federal agencies improve their oversight of the nation’s food safety system, GAO is contributing directly to bettering Americans’ daily lives. Another way we do this is by raising congressional and public awareness of emerging national problems. For example, we underscored for the Congress the prevalence of security weaknesses at American seaports, the nature and growing cost of identity theft, weaknesses in export controls over sophisticated weapons technologies, inade- quacies in nursing home care, and shortages of children’s vaccines. The more the nation’s leaders in the public, nonprofit, and private sectors know about these grow- ing challenges, the sooner they will be able to craft effective responses. Access to the information the Congress wishes to have became a special issue for GAO during the year when, for the first time in our history, we used our statutory authority to file suit in order to obtain certain government records from an executive branch official. The action came about after we received congressional requests from four Senate Committee Chairs and Subcommittee Chairs and two House Members for information on meetings between private-sector individuals and a White House energy task force chaired by the Vice President on the development of the President’s proposed National Energy Policy. Starting in May 2001, we sought limited factual information from the Vice President in his capacity as chairman of the National Energy Policy Development Group. He refused to disclose a range of information, ii GAO PERFORMANCE AND ACCOUNTABILITY REPOR T 2002 such as the dates, locations, subjects, and attendees involved in the group’s meetings with external parties. We repeatedly explained our explicit statutory audit and access authority, streamlined our requests, and offered the White House flexibility in how the information might be provided. Furthermore, the administration did not take advantage of the statutory provision that could have prevented a suit and did not claim executive privilege. We reluctantly filed suit in federal district court in February 2002 under the provisions of GAO’s statutory authorities, asking the court to direct that the requested records be produced. In December 2002, the district court dismissed our suit for lack of standing. In doing so, the court did not address the merits of the case—including GAO’s fundamental audit or access rights—but instead ruled that as Comptroller General, I lacked stand- ing to enforce this agency’s access rights in court. In his ruling, the judge stated that the issues involved and the nature of the congressional interest in the records were not sufficient to have the court decide the dispute. We strongly disagree with the court’s ruling, but as this report goes to press, we are reviewing the court’s decision and analyzing its basis and potential implications. Once this review is completed and we have consulted with the Congress’s leadership on a bipartisan basis, I will decide whether to appeal the decision to the circuit court. The value of information in serving our clients is driven home to us every day at GAO. It is not just a matter of obtaining facts from the executive branch but also of observing best practices in and out of government and how they are or can be applied. For instance, how well the government delivers on its promises frequently depends on how well it applies fundamental modern management principles. Strate- gic planning, organizational alignment, performance management, financial manage- ment, information technology, human capital strategy, knowledge management, and change management are key elements in maximizing performance and ensuring accountability. We have significantly increased the amount of our work focused on these areas to enhance the implementation of these principles throughout the federal gov- ernment. We don’t just preach modern management principles at GAO. We practice what we preach, and we aim to lead by example. We continued this year to make signifi- GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 iii cant progress in improving our human capital programs, our information technology capabilities, and our change management practices. All of these are key areas in which we seek to be a model for other federal agencies. Visitors to GAO headquarters may have felt, as I do, that the building itself somehow conveys a sense of solidity and purpose. There is a new plaque in the lobby of GAO headquarters that commemorates another quality of the organization and its people: a readiness to contribute in whatever way may be needed to support our country, the Congress, and the continuity of representative government. On October 23, 2001, with only 3 days’ notice, we opened our doors to the 435 members of the House of Representatives and selected members of their staffs. As they set up quarters at GAO, their Capitol Hill offices were checked for traces of anthrax. It was the first time since the War of 1812, when the Capitol and the White House were burned, that the House of Representatives sought alternative housing. Working with congressional and contractor staff, we were able to provide the tele- communications, computer, and other services needed to conduct the business of the House as 1,200 members of our staff shifted to alternative locations. Through it all, our work went on, and we continued to issue reports and to testify on issues impor- tant to the Congress and the public. I am very proud of how, in a time of uncertainty, the people of GAO responded with a positive attitude in doing whatever their coun- try required and an unwavering resolve to continue their work. Knowing this organi- zation as I do, I was not surprised. In summary, fiscal 2002 was truly an exceptional year. I believe that those who read this report will agree with me that taxpayers receive an excellent return on their investment in GAO. David M. Walker Comptroller General of the United States iv GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 The Comptroller General’s Integrity Act Assurance Statement for Fiscal 2002 On the basis of GAO’s comprehensive management control program, I am pleased to certify the following with reasonable assurance: ■ GAO’s financial reporting is reliable—Transactions are properly recorded, processed, and summarized to permit the preparation of financial statements in accordance with generally accepted accounting principles, and assets are safeguarded against loss from unauthorized acquisition, use, or disposition. ■ GAO is in compliance with all applicable laws and regulations—Transactions are executed in accordance with (a) laws governing the use of budget authority and other laws and regulations that could have a direct and material effect on the financial statements and (b) any other laws, regulations, and governmentwide policies applicable to GAO. ■ GAO’s performance reporting is reliable—Transactions and other data that support reported performance measures are properly recorded, processed, and summarized to permit the preparation of performance information in accordance with the criteria stated by GAO’s management. I also believe these same systems of accounting and internal controls provide reason- able assurance that GAO is in compliance with the spirit of 31 U.S.C. 3512, formerly the Federal Managers’ Financial Integrity Act (the Integrity Act). David M. Walker Comptroller General of the United States GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 v In fiscal 2002, GAO served the Congress ■ Create a national preparedness strategy at the federal, state, and local levels that will make Americans safer from terrorism ■ Devise election reforms to restore voter confidence ■ Protect investors through better oversight of the securities industry and the accounting profession ■ Ensure a safer national food supply ■ Expose the inadequacy of nursing home care ■ Make income tax collection fair, effective, and less painful to taxpayers ■ Strengthen public schools’ accountability for educating children ■ Keep sensitive American technologies out of the wrong hands ■ Protect American armed forces confronting chemical or biological weapons ■ Identify the risks to employees in private pension programs ■ Identify factors causing the shortage of children’s vaccines ■ Assist the postal system in addressing anthrax and various management challenges and the American people by helping to — ■ Identify security risks at ports, airports, and within transit systems ■ Save billions by bringing sound business practices to the Department of Defense ■ Foster human capital strategic management to create a capable, effective, well- managed federal workforce ■ Ensure that the armed forces are trained and equipped to meet the nation’s defense commitments ■ Enhance the safety of Americans and foreign nationals at U.S. installations worldwide ■ Assess ways of improving border security through biometric technologies and other means ■ Reduce the international debt problems faced by poor countries ■ Reform the way federal agencies manage their finances ■ Protect government computer systems from security threats ■ Enhance the transition to e-government—the new “electronic connection” between government and the public viii GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 Contents From the Comptroller General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i GAO at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Performance at a Glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 How to Use this Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Part I: Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . 9 Serving the Congress and the Nation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Goal 1: Addressing Challenges to the Well-Being and Financial Security of the American People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Goal 2: Responding to Changing Security Threats and the Challenges of Global Interdependence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Goal 3: Transforming the Government’s Role to Meet 21st Century Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Goal 4: Maximizing the Value of GAO . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Managing Our Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Strategies and Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Strategies for Achieving Our Goals and Coordinating with Others . . . . . . . . . . . 33 Addressing Management Challenges That Could Affect Our Performance. . . . . . 36 Mitigating External Factors That Could Affect Our Performance . . . . . . . . . . . . . 38 Part II: Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 How We Assess Our Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Agencywide Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Goal 1 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Goal 2 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Goal 3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Goal 4 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Data Quality and Program Evaluation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Part III: Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 From the Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Overview of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 ix Statement of Net Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Statement of Changes in Net Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Statement of Budgetary Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Statement of Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 Audit Advisory Committee’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Part IV: Appendixes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 1. Accomplishments and Other Contributions . . . . . . . . . . . . . . . . . . . . . 108 2. Inspector General’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 3. Report on the Implementation of Public Law 106-303 . . . . . . . . . . . . . 152 4. Government Information Security Reform . . . . . . . . . . . . . . . . . . . . . . 154 5. Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 Image Sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 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 materi- als. Permission from the copyright holder may be necessary should you wish to reproduce copyrighted materials separately from GAO’s product. x GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 GAO at a Glance The U.S. General Accounting Office is an indepen- GAO’s Locations dent, nonpartisan, professional services agency in the legislative branch that is commonly regarded as the audit, evaluation, and investigative arm of the Congress. Created in 1921 as a result of the Budget and Accounting Act, GAO’s “watchdog” role has Seattle evolved over the decades as the Congress Boston expanded our statutory authority and called on us San Chicago Dayton with increasing frequency for support in carrying Francisco Washington, D.C. Denver out its legislative and oversight responsibilities. Norfolk Los Huntsville Atlanta Today, we examine the full breadth and scope of Angeles Dallas federal activities and programs, publish thousands of reports and other documents annually, and pro- Source: GAO. vide a number of related services intended to aid decision makers and the general public alike. We Senate and House leaders and must be confirmed also study national and global trends to anticipate by the Senate. The current Comptroller General is their implications for public policy. By making rec- David M. Walker, who began his term in November ommendations to improve the accountability, oper- 1998. He is assisted by an executive committee ations, and services of government agencies, GAO consisting of Chief Operating Officer Gene L. contributes not only to the increased effectiveness Dodaro, Chief Financial Officer/Chief Mission Sup- of federal spending, but also to the enhancement of port Officer Sallyanne Harper, and General Counsel the taxpayers’ trust and confidence in their Anthony Gamboa. Mem- government. bers of the Senior Execu- tive Service lead the To accomplish our mission, we rely on a workforce agency’s research, of highly trained professionals who hold degrees in audit, and evalua- many academic disciplines, including accounting, tion teams and law, engineering, public and business administra- the staff and tion, economics, computer science, and the social mission sup- and physical sciences. They are arrayed in 13 port offices. research, audit, and evaluation teams and one tem- porary or “virtual” team on national preparedness. These teams are backed by staff offices and mission support units. About three-quarters of our approxi- mately 3,200 employees are based at our headquar- ters in Washington, D.C.; the rest are deployed in 11 field offices. The agency’s chief executive officer is the Comp- troller General of the United States, who is appointed to a 15-year term. The Comptroller Gen- eral is nominated by the President from a list of candidates submitted by a bipartisan commission of GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 1 GAO AT A GLANCE GAO’s Structure for Fiscal 2002 Public External Congressional Comptroller General Opportunity and Inspector Affairs Liaison Relations Chief Operating Officer Inclusiveness General Chief Mission Support Field Quality and Product and General Officer Operations Risk Process Counsel Management Improvement Human Controller Special Capital Investigations Information Knowledge Technology Services Teams Acquisition Defense Financial Health International Natural Strategic and Sourcing Capabilities and Management Care Affairs Resources and Issues Management Management and Assurance and Trade Environment Applied Education, Financial Markets Information National Physical Tax Research Workforce, and and Community Technology Preparedness Infrastructure Administration and Methods Income Security Investment and Justice Source: GAO. Note: National Preparedness is a temporary or “virtual” team. To ensure that GAO is well positioned to meet the ments were initiated by the Congress. The remain- Congress’s future needs, those executives and the ing 11 percent of the engagements were initiated staff they direct update the agency’s 6-year strategic independently by GAO as authorized by the plan every 2 years, consulting extensively during agency’s enabling legislation. the update with GAO’s clients on Capitol Hill and with other experts. Using the plan as a blueprint, As a legislative branch agency, GAO differs in some we lay out the areas in which we expect to conduct ways from executive branch agencies. We are, for research, audits, analyses, and evaluations to meet instance, exempt from many laws designed to our clients’ needs, and we allocate the resources we improve the performance and accountability of the receive from the Congress accordingly. Given the executive branch. But because one of our strategic increasingly fast pace with which crucial issues goals is to maximize our value by serving as a emerge and evolve, we design flexibility into our model agency for the federal government, we hold plans and our staffing structure so that we can ourselves to the spirit of many of these laws, includ- respond readily to the Congress’s changing priori- ing 31 U.S.C. 3512 (formerly the Federal Managers’ ties. When we revise our plans or our allocation of Financial Integrity Act), the Federal Financial Man- resources, we disclose those changes in annual per- agement Improvement Act of 1996, the Government formance plans and revised performance plans, all Performance and Results Act of 1993, and the of which are—like our strategic plan updates— Reports Consolidation Act of 2000. Accordingly, posted on the Web for public inspection this consolidated performance and accountability (www.gao.gov/sp.html). Each year, we hold our- report for fiscal 2002 supplies what we consider to selves accountable to the Congress and to the be information that is the equivalent of that sup- American people for our performance, primarily plied by executive branch agencies in their perfor- through the report you are reading. mance and accountability reports. The Congress directs GAO to conduct specific On the pages that follow, we assess our perfor- engagements through requests from committee mance for fiscal 2002 against our performance goals Chairmen, Ranking Minority Members, and other and our past performance. We also present our Members of Congress and through mandates writ- financial statements and the independent auditor’s ten into legislation, resolutions, and committee opinion. We will issue our performance plan for reports. In fiscal 2002, 89 percent of GAO’s engage- fiscal 2004 as soon as the budget process permits, 2 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 GAO AT A GLANCE but we have included some tentative information about future plans in this report to provide as cohe- sive a view as possible of what we have done, what we are doing, and what we expect to do to support the Congress and to serve the nation. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 3 Performance at a Glance We use seven annual measures to help assess improvements are made. In fiscal 2002, GAO GAO’s performance in meeting our strategic goals exceeded the performance targets for six of these and objectives for serving the Congress. They show seven annual measures. We also use an eighth, the degree to which our work is benefiting the Con- biennial, indicator that tracks our progress on work gress and the American people and whether GAO is we laid out under performance goals in our strate- laying a foundation for future benefits by providing gic plan. This indicator shows we are on track for the Congress with the most imminent and high-pro- meeting 95 percent of our performance goals by the file information it requests, developing ways to end of fiscal 2003. improve government, and tracking whether those Financial benefits: $37.7 billion Financial Benefits The financial benefits GAO reports are generated Dollars in billions when agencies act on GAO’s findings and recom- 40 37.7 mendations to make government services more effi- cient, to improve budgeting and spending of tax 30.0 30 26.4 dollars, or to strengthen the management of federal 23.2 resources. GAO’s work to curb Medicare fraud and 20.1 abuse, to improve budgeting practices for public 20 housing programs, and to reduce losses from farm 10 loans yielded more than $17.8 billion—or nearly half of the year’s total. About 11 percent of the increase between fiscal 2001 and 2002 is attributable 0 1999 2000 2001 2002 2002 to a change in our methodology for calculating Actual Target Actual financial benefits. Source: GAO. Other benefits: 906 actions taken Other Benefits Many of the benefits that flow to the American peo- Number of actions ple from GAO’s work cannot be measured in dollar 1000 906 terms. During fiscal 2002, GAO documented 65 900 instances in which information we provided to the 788 799 770 800 Congress resulted in statutory or regulatory 700 607 changes, 391 instances in which federal agencies 600 500 improved services to the public, and 450 instances 400 in which core business processes were improved at 300 agencies or governmentwide reforms were 200 advanced. These actions spanned the full spectrum 100 of national issues from combating terrorism to bet- 0 1999 2000 2001 2002 2002 ter targeting funds to high-poverty school districts. Actual Target Actual Source: GAO. 4 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PERFORMANCE AT A GLANCE Past recommendations implemented: Past Recommendations Implemented 79 percent 4-year implementation rate One way we measure our impact in improving the 90 government’s accountability, operations, and ser- 78% 79% 79% 80 75% vices is by tracking the percentage of recommenda- 70% 70 tions that we made 4 years ago that have since been 60 implemented. At the end of fiscal 2002, 79 percent 50 of the recommendations we made in fiscal 1998 had 40 been implemented, primarily by executive branch 30 agencies. It is putting those recommendations into 20 practice that will generate tangible benefits for the 10 American people in the years ahead. 0 1999 2000 2001 2002 2002 Actual Target Actual Source: GAO. New recommendations made: 1,950 New Recommendations Made Because developing implementable recommenda- Number made tions is an important part of GAO’s work for the 2500 Congress and helps to improve how the govern- 1950 ment functions, we track the number made each 2000 year. For example, the 1,950 made in fiscal 2002 1563 include recommendations to the Secretary of State 1500 1224 1200 calling for the development of a governmentwide 1000 940 plan to help other countries combat nuclear smug- gling and those to the Chairman of the Federal 500 Energy Regulatory Commission calling for the agency to develop an action plan for overseeing 0 1999 2000 2001 2002 2002 competitive energy markets. Actual Target Actual Source: GAO. New products containing recommendations: New Products with Recommendations 53 percent Percentage This measure recognizes that a report containing a 60 single broad recommendation may have more 53% 50 impact than a report containing a dozen specific 44% 45% 39% ones. We also understand that GAO’s congressional 40 clients often want products that are purely informa- 33% 30 tional and contain no recommendations. Hence, the target provides ample leeway for responding to 20 requests for informational products. 10 0 1999 2000 2001 2002 2002 Actual Target Actual Source: GAO. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 5 PERFORMANCE AT A GLANCE Testimonies: 216 Testimonies During fiscal 2002, experts from GAO’s staff testified Hearings at which GAO testified at 216 congressional hearings covering a wide range 350 of complex issues. On national preparedness 300 alone, we testified on border security, bioterrorism, 263 250 229 nuclear smuggling, seaport and aviation security, 216 and the formation of the Department of Homeland 200 200 151 Security. Among the other topics addressed were 150 protecting against foodborne illnesses, reducing the 100 threat of wildfires, and safeguarding nursing home 50 residents from abuse. 0 1999 2000 2001 2002 2002 Actual Target Actual Source: GAO. Timeliness: 96 percent Timeliness We chart the percentage of our products that are Products on time delivered on the day we agreed to with our con- 100 96% 96% 95% 98% 96% gressional clients because for our work to be used it must be timely. While a vast majority of our prod- 80 ucts were on time in fiscal 2002, we missed our tar- 60 get of providing 98 percent of them on the promised day and are taking steps to improve our 40 performance in the future. 20 0 1999 2000 2001 2002 2002 Actual Target Actual Source: GAO. Two-year performance goals: 93 of 98 on track Two-Year Performance Goals In addition to our seven annual measures, we track 98 two-year performance goals GAO’s progress on 2-year performance goals that Not on track describe the work we planned to do to achieve our 5% strategic goals and objectives. At the end of fiscal 2002—the halfway point in the assessment cycle— GAO’s senior managers reported that enough work had been completed or was under way for the agency to meet 95 percent of GAO’s performance On track goals by the end of fiscal 2003. 95% Source: GAO. 6 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 How to Use this Report This report consolidates GAO’s performance and accountability reports for fiscal 2002 as called for by the Reports Consolidation Act of 2000. In assessing our performance, we are comparing actual results against targets and goals set in our annual perfor- mance plan, which we developed to help us carry out our strategic plan. Our com- plete set of strategic planning and performance and accountability reports is available from our Web site at www.gao.gov/sp.html. This report has four major parts: ■ Management’s Discussion and Analysis Look here for high-level summaries of our performance and use of resources in fiscal 2002. Look here also for information on the strategies we use to achieve our goals and the management challenges and external factors that affect our performance. ■ Performance Information Look here for details on our performance in fiscal 2002, the targets we are aiming for in fiscal 2003, and for explanations of how we assess GAO’s performance and how we ensure the completeness and reliability of the performance data used in this report. ■ Financial Information Look here for details on our finances in fiscal 2002, including a letter from GAO’s Chief Financial Officer, our audited financial statements and notes, and the reports from our external auditor and our audit advisory committee. Look here also for information on our internal controls and for an explanation of what kind of information each of our financial statements conveys. ■ Appendixes Look here for detailed write-ups about our accomplishments and contributions recorded in fiscal 2002, for our Inspector General’s assessment of our agency’s management challenges, for our reports on our implementation of P.L. 106-303 (an act giving GAO certain human capital management flexibilities) and on information security reform measures. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 7 8 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 Part I: Management’s Discussion and Analysis PART I Serving the Congress and the Nation Fiscal 2002 was a year of challenges, not just for GAO but also for the Congress and the nation GAO serves. The nation’s vulnerabilities were exposed in a series of crises—America’s vulnerability to sophis- ticated terrorist networks, America’s vulnerability to bioterrorism waged through mechanisms as mun- dane as the daily mail, and America’s vulnerability to corporate misconduct capable of wiping out jobs, pensions, and investments virtually overnight. As the Congress’s priorities evolved to meet these cri- ses, GAO’s challenge was to respond quickly and effectively to our congressional clients’ changing work on the outbreak of West Nile virus and our needs. Under our original strategic plan, published examination of state and local efforts to meet the in spring 2000, we had already streamlined and challenges all epidemics pose—those of detection realigned GAO’s structure and resources to better and treatment—we aided the Congress’s decision serve the Congress in its legislative, oversight, and making about how to equip and organize the investigative roles. The new human capital initia- Department of Homeland Security to prepare for tives we had begun, including recruiting, hiring, and respond to bioterrorism. We were also deeply and professional development, equipped us to involved in congressional efforts to address terror- operate in a constantly changing knowledge envi- ism insurance issues—presenting alternative strate- ronment. The steps that we took to enhance our gies and suggesting guiding principles based on information technology capabilities served to past efforts to assist industries and firms in times of increase our productivity, consistency, and respon- crisis, such as the savings and loan industry and, siveness. And with work already under way across more recently, the aviation industry. a spectrum of critical policy and performance issues, we had a head start toward meeting the Con- As we gathered information and conducted analy- gress’s needs in a year of unexpected and often ses for the Congress, developed recommendations tumultuous events. for improvements, and detailed the potential ramifi- cations of homeland security issues, we continued We were, for instance, asked to assist with the work on the issues that the Congress had been deliberations over the Department of Homeland addressing before homeland security gripped the Security’s formation by looking into questions nation’s attention. Among those continuing issues involving flexibilities for managing human capital, were many that directly affected the lives of information sharing, management, acquisition, bud- Americans: get and program transfer authorities; and lessons available from other reorganizations in the public ■ We, for instance, helped policymakers probe the and private sectors. Teams with different specialties issues behind the shortages in the supplies of from across GAO collaborated on that effort and vaccines for childhood illnesses, such as measles, also pursued specific aspects of national prepared- mumps, rubella, and tetanus, clarifying the ness. For example, building on an extensive body variety of contributing factors and exploring the of completed work, we provided important infor- key questions, such as how more manufacturing mation to the Congress as it drafted the Aviation and competition can be encouraged, how and Transportation Security Act, while providing adequate oversight can be provided, and how continuing assistance with information on aviation, stockpiles can be amassed. port, and transit security. Building on our previous 10 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I ■ Our work also helped policymakers—and the Commission calling for his agency to develop an public—understand private pension issues in the action plan for overseeing competitive energy mar- wake of the Enron bankruptcy and other kets. We also had continued to track the recom- corporate failures, including the questions they mendations we had made in past years, checking to raised for workers nationwide. For instance, in see that they had been implemented and, if not, early 2002, the Comptroller General convened a deciding whether we needed to do follow-up work forum on corporate governance, transparency, on problem areas. We found, in fact, that 79 per- and accountability that highlighted a number of cent of the recommendations we had made in fiscal systemic issues, including concerns related to 1998 had been implemented, a significant step employee pension and savings plans. And we when the work we have done for the Congress alerted the Congress to weaknesses that may exist becomes a catalyst for creating tangible benefits for in the legal protections for employee pensions. the American people. We highlighted the ways in which employers’ stock investment decisions can increase the risks In fiscal 2002, we recorded 906 instances in which to which employees’ pension plans are exposed our work led to improvements in government oper- and recommended improvements to the ations or programs. For example, by acting on information employees must receive. We also GAO’s findings or recommendations, the federal issued a guide for Members of Congress, their government has taken important steps toward staffs, and the public called Answers to Key enhancing aviation safety, improving pediatric drug Questions about Private Pension Plans labeling based on research, better targeting of funds (www.gao.gov/cgi-bin/getrpt?rptno=GAO-02- to high-poverty school districts, greater accountabil- 745sp), which explains in easy-to-understand ity in the federal acquisition process, and more terms the concepts and rules that last year effective delivery of disaster recovery assistance to became sharply relevant to the future economic other nations, among other achievements. In security of millions of Americans. another 115 instances, federal action on GAO’s find- ings or recommendations produced financial bene- ■ Our work on the elections process contributed to fits for the American people: a total of $37.7 billion reform legislation drafted in response to the was achieved by making government services more voting problems that gained national prominence efficient, improving the budgeting and spending of in the November 2000 presidential election. A tax dollars, and strengthening the management of series of our reports disclosed major challenges federal resources. Increased funding for improved involving the people, processes, and technology safeguards against fraud and abuse helped the used at each stage of the election process— Medicare program to better control improper pay- registering voters, absentee and early voting, ments of $8.1 billion over 2 years, for instance, and preparing for and conducting election day better policies and controls reduced losses from activities, and tabulating votes in the 10,000 local farm loan programs by about $4.8 billion across 5 election jurisdictions nationwide. The legislation years. Altogether, GAO’s fiscal 2002 financial bene- passed by the Congress addresses federal fits translate into a financial return on investment of subsidies for voting machinery, standards for the $88 for every dollar budgeted for GAO. equipment, improved voter registration rolls, and improved access for voters with disabilities. Of our seven agencywide annual performance tar- By year’s end, we had testified 216 times before the gets (see the table), only one was not met: timeli- Congress, sometimes on as little as 24 hours’ notice, ness. While we provided 96 percent of our on a range of issues, including those listed on the products to their congressional requesters by the next page. We had filled hundreds of urgent date promised, we have yet to hit this measure’s tar- requests for information. We had developed 1,950 get of 98 percent on-time delivery. The year’s tur- recommendations for improving the government’s bulent events played a part in our missing the operations, including, for example, those we made target, causing us to delay work in progress when to the Secretary of State calling for the development higher-priority requests came in from the Con- of a governmentwide plan to help other countries gress. We know we will continue to face factors combat nuclear smuggling and those we made to beyond our control as we strive to improve our per- the Chairman of the Federal Energy Regulatory formance in this area. But we believe the agency GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 11 PART I Selected Public Laws to Which GAO Contributed During Fiscal 2002 Included— ■ Prescription Drug User Fee Amendments of 2002, P.L. 107-188 ■ Best Pharmaceuticals for Children Act, P.L. 107-1092 ■ No Child Left Behind Act of 2001, P.L. 107-110 ■ Food Stamp Reauthorization Act of 2002, P.L. 107-171 ■ Help America Vote Act of 2002, P.L. 107-252 ■ Homeland Security Act of 2002, P.L. 107-296 ■ Public Health Security and Bioterrorism Preparedness and Response Act of 2002, P.L. 107-188 ■ Aviation and Transportation Security Act, P.L. 107-71 ■ Department of Defense Appropriation Act, 2003, P.L. 107-248 ■ Department of Defense and Emergency Supplemental Appropriations for Recovery From and Response to Terrorist Attacks on the United States Act, 2002, P.L. 107-117 ■ Bob Stump National Defense Authorization Act for Fiscal Year 2003, P.L. 107-314 ■ Foreign Relations Authorization Act, Fiscal Year 2003, P.L. 107-228 ■ Small Business Paperwork Relief Act of 2002, P.L. 107-198 ■ Federal Information Security Management Act of 2002, P.L. 107-347 ■ Sarbanes-Oxley Act of 2002, P.L. 107-204 ■ National Defense Authorization Act for Fiscal Year 2002, P.L. 107-107 ■ Legislative Branch Appropriations, Fiscal Year 2002, P.L. 107-68 ■ Improper Payments Information Act of 2002, P.L. 107-300 ■ Trade Act of 2002, P.L. 107-210 ■ Terrorism Risk Insurance Act of 2002, P.L. 107-297 ■ E-Government Act of 2002, P.L. 107-347 protocols we are piloting will help clarify aspects of human capital and information technology will our interactions with the agencies we evaluate and improve our timeliness while allowing us to main- audit and ultimately expedite our work in ways that tain our high level of productivity and performance could improve the timeliness of our final products. overall. These initiatives are among those discussed We also believe that our continuing investments in later in this report. 12 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I Types of Benefits Recorded in Fiscal 2002 from GAO’s Work Financial Benefits Other Benefits Total $37.7 billion Total 906 $3.6 billion (9.7%) 65 (7.2%) $11.2 billion 450 (49.7%) (29.7%) $22.9 billion 391 (43.2%) (60.6%) Categories Information GAO provided to the Congress resulted in statutory or regulatory changes Agencies acted on GAO information to improve services to the public Core business processes improved at agencies and governmentwide management reforms advanced by GAO’s work Source: GAO. Note: Percentages may not total 100 because of rounding. Agencywide Summary side its borders. The economic outlook had become difficult to predict. And the federal govern- Measure Actual Target Met? ment faced the return of serious, long-range budget Financial benefits $37.7 billion $30 billion Yes deficits and the burden they impose on the nation’s Other benefits 906 770 Yes future prosperity. Past recs implemented 79% 75% Yes New recs made 1,950 1,200 Yes The updated plan carried forward the four strategic New products with recs* 53% 45% Yes goals we had already established as the organizing Testimonies 216 200 Yes principles for a body of work that is as wide-rang- ing as the interests and concerns of the Congress Timeliness* 96% 98% No itself: *Measure is used at the agencywide level but not at the goal level. ■ Provide timely, quality service to the Congress At the beginning of fiscal 2002, as we prepared an and the federal government to address current updated draft of our strategic plan for congressional and emerging challenges to the well-being and comment—extending the plan to fiscal 2007 and financial security of the American people. factoring in developments that had occurred since ■ Provide timely, quality service to the Congress we first issued it in fiscal 2000—it was clear that the and the federal government to respond to world had changed considerably. When the origi- changing security threats and the challenges of nal plan was issued, the nation had been enjoying a global interdependence. period of peace and prosperity, with large budget surpluses projected into the future. When the ■ Help transform the federal government’s role and updated plan went onto the Web in 2002, the nation how it does business to meet 21st century was at war against terrorism, both within and out- challenges. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 13 PART I ■ Maximize the value of GAO by being a model effective is to be flexible and capable of responding federal agency and a world-class professional quickly to change. As a result, we have sought services organization. more cooperative, partnerial approaches that maxi- mize the skills and expertise of people working While these strategic goals help us plan our work together toward the same ends. and assess our progress in fulfilling our mission to serve the Congress and the nation, they are not sep- Later sections of this report highlight our perfor- arate endeavors. We developed them with the mance under each of our strategic goals, how we intention of moving away from “siloed”—or com- used our resources in fiscal 2002, the management partmentalized—approaches to doing business on a challenges we face, and other matters. But first, we matrixed basis. As the challenges facing policymak- look briefly at how the high-risk program GAO ers grow more complex and interdependent, the established in 1990 has influenced the performance only way a knowledge-based, multidisciplinary pro- of federal agencies. fessional services organization such as GAO can be 14 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 ISSUES ON WHICH GAO TESTFIED DURING FISCAL 2002 GOAL 1 GOAL 2 GOAL 3 Well-Being and Financial Changing Security Threats and Transforming the Federal Security of the American People Challenges of Globalization Government’s Role Aviation security A-76 competitive sourcing Contract management Bioterrorism Anthrax vaccine Contracting for services Blood supplies Ballistic missile defense Corporate governance and Child welfare Chemical and biological accountability Childhood vaccines preparedness Debt collection Coast Guard’s security missions Combating terrorism DOD financial management Customs’ cargo inspections Compact with Micronesia Electronic Government Act of 2002 Disability programs Conflict diamonds Electronic-government security EPA cabinet status Debt relief for poor countries Enterprise architecture FBI reorganization Encroachment on training Federal budget issues ranges Federal building security Federal property management reform Export controls Federal financial management Food safety Food aid reform Highway trust fund Foreign language needs Federal rulemaking requirements Housing Gulf War illnesses Freedom to Manage Act HUD management reform Information security aspects Human capital strategy of homeland security Illegal tax schemes and scams Identity theft International trade Intergovernmental aspects of Immigration enforcement Nuclear smuggling homeland security Indian tribal recognition Organizational aspects of IRS modernization Intercity passenger rail homeland security Medicaid financial management Long-term care SEC’s human capital NASA’s management challenges Medicare payments challenges President’s Management Agenda Nuclear waste storage Strategic seaport protection Purchase card controls Nursing homes Terrorism insurance Securing America’s borders Postal Service challenges U.S. overseas presence U.S. government’s financial Public health aspects of Weapons of mass destruction statements homeland security Retiree health insurance SBA’s human capital challenges Social Security reform Transit safety and security VA health care Welfare reform Wildfire threats Workforce development Source: GAO. PART I GAO’s High-Risk Program Helping to Improve the Performance and Accountability of the Federal Government Every 2 years, with the start of each new Congress, we issue an update of our high-risk series, identify- ing and reporting on federal programs and opera- tions that have greater vulnerabilities to waste, fraud, abuse, and mismanagement or that have major challenges associated with their economy, efficiency, or effectiveness. Lasting solutions to high-risk problems offer the potential to save bil- Service transformation plan has been produced and lions of dollars, dramatically improve service to the the President has formed a commission to focus on American public, strengthen public confidence and Postal Service transformation. trust in the performance and accountability of the national government, and ensure the ability of gov- With these positive results in mind, for 2003, GAO ernment to deliver on its promises. has designated four additional high-risk areas. Three are based on challenges involving broad- Since 1990, the Congress’s and federal agencies’ based transformation or the need for legislative commitment to resolving serious, long-standing solutions. The first is implementing and transform- high-risk problems has paid off—the root causes of ing the Department of Homeland Security, which is half the 14 high-risk areas on our original list have a high-risk area because of the sheer size of the been addressed. This sustained commitment con- undertaking, the fact that the department’s pro- tinues to produce results. In 2001, GAO identified posed components already face a wide array of 23 high-risk areas. Since then, demonstrable existing challenges, and the prospect of serious progress has been made in virtually all of them. In consequences for the nation should the department two of those areas, the Supplemental Security fail to adequately address its management chal- Income program and the asset forfeiture programs lenges and program risks. A related homeland managed by the Departments of the Treasury and security challenge will be to protect information Justice, GAO has determined that sufficient progress systems supporting the federal government and the has been made to remove the high-risk designation. nation’s critical infrastructures; information security has been a high-risk area since 1997 and has been GAO has increasingly used the high-risk designa- expanded this year to include both of these con- tion to draw attention to the challenges faced by cerns. government programs and operations in need of broad-based transformation. For example, in 2001, The second new high-risk area involves disability GAO designated as high risk strategic human capital programs, primarily those at the Social Security management across government and the U.S. Postal Administration and the Department of Veterans Service’s transformation and fiscal outlook. Since Affairs. Already growing, disability programs are then, the President has made human capital a top poised to surge as baby boomers age, yet the pro- initiative of his Management Agenda, while the grams remain mired in outdated economic, work- Congress has enacted key governmentwide human force, and medical concepts and are poorly capital reforms as it created the Department of positioned to provide meaningful and timely sup- Homeland Security. In addition, a promising Postal port to disabled Americans. 16 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I The third new high-risk area involves federal real program, in part because of growing concerns property, based on long-standing problems such as about inadequate fiscal oversight to prevent inap- excess and underutilized property and deteriorating propriate state spending, which increases federal facilities, as well as increased security challenges spending unnecessarily. from the threat of terrorism. To learn more about these new high-risk areas or to This year’s fourth new area is high risk under our download the update in full, go to more traditional criteria involving fraud, waste, www.gao.gov/pas/2003/. abuse, or mismanagement. It involves the Medicaid 2003 High-Risk List Year designated High-risk area high risk Addressing challenges in broad-based transformations Strategic human capital management* 2001 U.S. Postal Service transformation efforts and long-term outlook * 2001 Protecting information systems supporting the federal government and the nation’s critical 1997 infrastructures Implementing and transforming the new Department of Homeland Security 2003 Modernizing federal disability programs * 2003 Federal real property * 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 program * 1990 Medicaid program * 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 programs 1994 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 * Additional authorizing legislation is likely to be required as one element of addressing this high-risk area. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 17 PART I SERVING THE CONGRESS GAO’S STRATEGIC PLAN FRAMEWORK MISSION GAO exists to support the Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the benefit of the American people. THEMES GOALS & OBJECTIVES Provide Timely, Quality Service to the Congress and the Security Federal Government to . . . and Preparedness Address Current and Emerging Challenges to the Well-Being and Financial Security of the American People related to . . . Health care needs and financing Effective system of justice Globalization Education and protection of children Viable communities Work opportunities and worker Natural resources use and protection environmental protection Retirement income security Physical infrastructure Changing Economy Respond to Changing Security Threats and the Challenges of Global Interdependence involving . . . Demographics Diffuse security threats Advancement of U.S. interests Military capabilities and readiness Global market forces Science Help Transform the Federal Government Government’ss Role and How It and Does Business to Meet 21st Century Challenges by assessing . . . Technology Roles in achieving federal Progress toward results-oriented, objectives accountable, and relevant government Human capital and other capacity for Fiscal position and financing of the Quality serving the public government of Life Maximize the Value of GAO by Being a Model Federal Agency and a World-Class Professional Services Organization in the areas of . . . Governance Client and customer service Process improvement Leadership and management focus Employer of choice Institutional knowledge and experience CORE VALUES Accountability Integrity Reliability Fiscal 2002-2007 Source: GAO. 18 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I Goal 1 Addressing Challenges to the Well-Being and Financial Security of the American People The Congress’s legislative and oversight responsibil- ities lead it to examine issues that weave through the lives of many American communities and virtu- ally every American. Consequently, the congres- sional requests that drive most of GAO’s work take our people through the doors of every federal agency and many other organizations, seeking information and ways to improve how the govern- of domestic and imported foods. Recently, the ment serves the public. Our work under our first threat of deliberate contamination of the nation’s strategic goal spans the cradle-to-grave issues of food supply by terrorists has elevated these American life from the health and education of the concerns significantly. Our assessments of nation’s children, to their employability and work- federal efforts to ensure the safety of the food ing conditions as adults, to their financial security as supply have helped the Congress and agencies retirees. Our work under this goal also looks at the strengthen oversight and enforcement. For viability of the communities Americans live in, their example, the Congress included several food ability to move safely and efficiently around those safety provisions in the Public Health Security communities and around the world, the natural and Bioterrorism Preparedness and Response Act resources that literally fuel their every endeavor, of 2002. and the justice system that keeps wrongs from tram- ■ Alerting the public to the inadequacy of care in pling their individual liberties. certain nursing homes—Our groundbreaking work over the past 5 years has helped raise It was under goal 1, for example, that we conducted public awareness of the terrible conditions a number of the engagements highlighted in the prevalent in some 15 percent of America’s previous section, helping the Congress to make nursing homes, where serious and recurring informed decisions on the shortages of vaccines for problems have caused physical and emotional childhood illnesses, on the necessary safeguards harm to patients. In response to our against improper Medicare payments to health care recommendations, the Centers for Medicare and providers, on preparing the nation to confront biot- Medicaid Services, which oversees nursing errorism, on curbing losses from farm loan pro- facilities, has increased the rigor of its inspections, grams, on crafting election reforms to end the its responsiveness to complaints, and its voting problems that have marred two national application of sanctions to offending facilities. elections, and on understanding private pension Our work has spurred a growing understanding issues. But our work during fiscal 2002 accom- of the dimensions of the problem and increased plished much more as well: the likelihood that effective federal actions will be taken. ■ Helping to make the food supply safer for the American people—Although the U.S. food supply ■ Helping ensure accountability for educating is regarded as one of the safest in the world, children in the public schools—In 1994, foodborne illnesses continue to be an extensive concerned that federal funding was not and costly problem that raises concerns about the significantly improving the educational progress federal government’s ability to ensure the safety of at-risk students, the Congress began requiring GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 19 PART I states to ensure accountability in their public administration’s first performance plan for the school systems. One key requirement was department, which said that GAO’s reports would student testing. The No Child Left Behind Act, be a “roadmap” for making management passed in 2001, built on those requirements, improvements. The Deputy Secretary reiterated raising the stakes for schools that fail to make the department’s position before the Senate adequate progress. A year after the new act’s Banking Committee in July 2002, and, in passage, GAO, collaborating with other particular, endorsed our characterization of the accountability organizations, studied the states’ department’s three major management implementation of the 1994 requirements and challenges. found widespread shortcomings, raising the ■ Aiding congressional deliberations on surface question of how well the states can fulfill the transportation legislation—As the Congress began additional requirements of the 2001 law. The drafting the reauthorization of the Transportation lesson learned from this work is that setting Equity Act for the 21st Century, we assisted by accountability requirements, such as student identifying the major challenges that face all testing, is only part of the job. Effective modes of surface transportation, including the implementation, including such basics as Interstate Highway System and new transit ensuring that tests are scored accurately, is no systems. We also reviewed the continued less important. purchasing power of the Highway Trust Fund ■ Helping to enhance the oversight of restructured over the next authorization period, identified energy markets to better protect consumers—The alternative approaches to funding investments in electricity and natural gas industries are changing surface transportation, and pointed out from being regulated monopolies to players in a opportunities to improve federal research competitive market environment. During the programs on surface transportation. transition, GAO has made important contributions ■ Alerting the Congress to the prevalence and cost in clarifying key issues for the Congress, issues of identity theft—Identity theft is the fastest such as the implications for the energy markets of growing type of crime in the United States. It Enron’s collapse, how market power has been involves using another person’s personal exercised in California, the reasons for price identifying information—such as Social Security spikes in the natural gas markets, and the Federal number, date of birth, and mother’s maiden Energy Regulatory Commission’s capacity to name—for fraudulent purposes. GAO’s reporting oversee energy markets. Our work has also helped the Congress devise the Identity Theft and influenced federal decisions affecting market Assumption Deterrence Act of 1998; since then, concentration in the ethanol market. most states have enacted laws that make identity ■ Providing a roadmap for management reform at theft a crime. Still, the growth of identity theft the Department of Housing and Urban and the frequently multi- or cross-jurisdictional Development (HUD)—GAO has designated nature of this type of crime underscore the programs in the department as high risk since importance of cooperation among federal, state, 1994, and today, two of its three major program and local law enforcement authorities. This year, areas (representing about 70 percent of its GAO reported further on the prevalence and cost budget) remain high risk. Our recent reports and of identity theft and worked to promote testimonies have focused on the department’s awareness and the use of intergovernmental progress with management reform and with three mechanisms for improving cooperation and major management challenges: human capital enforcement. policies, programmatic and information We exceeded four of the goal’s five targets for the management systems, and contracting practices. year, recording $24.1 billion in financial benefits The department has been responsive to our and 226 other benefits, making 524 new recommen- findings and is taking action. During his dations for improvements to government programs confirmation hearings in early 2001, HUD’s new and operations, and presenting 111 congressional Secretary, citing GAO’s work, placed improving testimonies. Although the implementation rate for management atop the department’s highest recommendations we made 4 years ago rose 1 priorities. This was followed by the Bush 20 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I point over last year’s figure for this goal, to 72 per- lations and our work under goal 1 on the retirement cent, we did not meet our target of implementing 75 and health programs show that absent substantive percent of the recommendations made in fiscal 1998 reform of these programs, they will overwhelm the by the end of fiscal 2002. For details please see the federal budget. Three factors that will shape life in second part of this report, Performance Information. the 21st century are converging: First, as the baby- boom generation retires, labor force growth is pro- Strategic Goal 1 Summary jected to continue to fall and, by 2025, is expected to be less than a third of what it is today. Absent a Measure Actual Target Met? growth in productivity, this decline in labor force Financial benefits $24.1 billion $17.0 billion Yes growth will lead to slower growth in the econ- Other benefits 226 218 Yes omy—and in federal revenues. Second, these retir- Recs implemented 72% 75% No ees are destined to live longer than the generations Recs made 524 359 Yes that preceded them, collecting Social Security and Testimonies 111 93 Yes Medicare benefits for longer periods. And, third, rising health care costs will make providing Medi- At the close of fiscal 2002, GAO was halfway care and Medicaid benefits much more expensive. through the 2-year assessment cycle for the perfor- Our budget simulations indicate that, absent major mance goals that provide the strategies we will use reforms in underlying entitlements or taxes, deficits to achieve our broader strategic goals and objec- will grow to unsustainable levels as spending for tives. Under strategic goal 1, we have 37 perfor- Social Security and health care absorb all available mance goals, which call for GAO to undertake work revenues in the budget. ranging from assessing the effectiveness of federal initiatives assisting small and minority-owned busi- Early action to reform federal retirement and health nesses to assessing the nation’s ability to ensure reli- care programs is essential. In our efforts under our able and environmentally sound energy for current third strategic goal, we have work under way that and future generations. At the midpoint mark, will clarify the various long-term claims that will GAO’s managers reported that enough work was encumber the nation’s resources in the future. This under way or completed to allow the agency to work can contribute to a reassessment of the vari- meet all 37 performance goals by the end of fiscal ous tools and approaches used to achieve broad 2003. national purposes and outcomes—a reassessment that needs to test existing claims and operations for Work now in progress includes assessing the impli- their relevance and fit. Such a process needs to be cations of various Social Security reform proposals; national, not just federal in scope, involving the par- evaluating Medicare reform, financing, and opera- ticipation of key state, local, private, and nonprofit tions; assessing states’ experiences in providing stakeholders. Ultimately, the Congress and the health insurance coverage for low-income popula- executive branch will need to work together to tions; and evaluating federal and state program reposition government so that it can better address strategies for financing and overseeing chronic and the challenges facing the nation in the 21st century. long-term health care. Our long-term budget simu- GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 21 PART I Goal 2 Responding to Changing Security Threats and the Challenges of Global Interdependence The September 11 terrorist attacks on the United States have led to a fundamental shift in the focus of national security planning and spending priorities. To help the Congress respond to these changes, GAO has undertaken a broad body of work that has shown the need for new approaches and sustained leadership to enhance the nation’s security. Our crosscutting work on homeland security issues quate transparency and accountability safeguards; enabled us to play a critical role in the national and develop a comprehensive transition plan. We debate on how to transform the federal govern- underscored the need to also clearly identify the ment’s organizational structure to better serve the significant start-up costs the creation of a new nation. department will entail. This work, which has been carried out under GAO’s GAO also assisted the Congress and federal agen- second strategic goal since its adoption in fiscal cies in assessing vulnerabilities to terrorism and in 2000, prompted GAO to recommend—prior to the identifying actions to mitigate risks. Among other attacks in 2001—that the United States establish a things, GAO’s analyses identified the need for a single focal point and a national strategy for home- national critical infrastructure protection strategy, land security issues and complete a comprehensive improved analytical and warning capabilities, threat and risk assessment. In fiscal 2002, through improved information sharing, and continued fieldwork and analyses that yielded reports, testimo- actions to resolve pervasive weaknesses in federal nies, and discussions on Capitol Hill and with agen- information security. GAO contributed to U.S. cies, multidisciplinary teams from across GAO efforts to combat the smuggling of nuclear materials continued to pursue solutions to the fragmented by providing reports and testimony showing the U.S. approach to countering security threats. We need for more effective planning among the six fed- were, for instance, intensively involved in support- eral agencies that play a role in controlling the ing congressional deliberations on proposals for a spread of nuclear materials. As a result, the admin- Department of Homeland Security. In testimony, we istration is drafting a governmentwide strategic plan framed the key factors to be considered when to coordinate these agencies’ efforts, and the agen- weighing the options for creating an agency that cies are upgrading radiation detection equipment in would merge parts of 22 agencies and programs many countries. GAO’s reviews of U.S. export con- and pull together some 170,000 federal employ- trol laws helped the Congress better understand ees—one of the largest federal government reorga- how proposed changes to the Export Administra- nizations ever undertaken. GAO’s work showed tion Act will affect the delicate balance between that the Congress and the administration will need protecting our national security and promoting U.S. to work together to articulate a clear, overarching export markets. In addition, GAO identified spe- mission for the new department; establish a short cific actions needed to improve the Defense Depart- list of initial critical priorities; ensure effective com- ment’s protection of U.S. forces and facilities and its munication and information systems; balance preparations for chemical and biological defense. human capital and budgeting flexibilities with ade- 22 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I In attempting to adjust its plans, programs, and pro- ations and the impact of existing agreements, such cesses to better focus on the most important threats as China’s participation in the World Trade Organi- to national security, while also improving its econ- zation. We also played a key role in the debate on omy and efficiency, the Defense Department is fac- approaches for providing debt relief to impover- ing many challenges. GAO provided the Congress ished nations. Our recent findings on World Bank and the department with many analyses and recom- and International Monetary Fund debt relief to poor mendations on how to better manage defense pro- countries became the basis for U.S. negotiations grams and achieve efficiencies. For example, our with the World Bank and European countries and work uncovered the planned disposal of military resulted in a ground-breaking shift in World Bank property that could readily be reused. That work policies. ultimately led to over $500 million in financial bene- fits being recorded in fiscal 2002. Also in fiscal 2002, our work was instrumental in helping the executive branch make progress with Moreover, in response to our body of work on the the right-sizing of its overseas presence at U.S. best commercial practices for acquiring new sys- embassies and consulates—one of nine program tems, the department is changing its weapons initiatives in the President’s Management Agenda. acquisition practices to elevate the importance of GAO developed an analytical framework for con- critical design reviews and to make sure that tech- sidering security, mission, and cost factors in assess- nologies have demonstrated a high level of maturity ing staff levels at U.S. embassies and consulates and before being moved forward. Implementing such demonstrated how embassy security could be changes should help the department avoid costly improved by adopting alternative staffing mistakes and delays in designing and procuring approaches, crucial given the increased risks U.S. new systems. In addition, GAO has helped the personnel now face overseas. The Office of Man- department and other agencies to better manage agement and Budget and the State Department’s programs for determining whether commercial Office of the Inspector General adopted the frame- activities should be performed by the government work as a means of assessing staff levels worldwide or the private sector and to assess options for and considering changes. They are also encourag- changing the sourcing process. In anticipation of ing regional approaches in Europe, as suggested by another round of military base closures, GAO pro- GAO’s work, as a means of reducing the number of vided the Congress and the Defense Department U.S. personnel stationed at embassies with security with lessons learned from earlier base closures to limitations and are developing cost data, as we sug- help ensure that future processes lead to sound gested, to permit cost-based decision making on the decisions. We also made numerous recommenda- overseas presence. In addition, our work has high- tions to help the department enhance the readiness lighted the State Department’s weak performance in of existing U.S. forces, correct weaknesses in its staffing embassies in hardship locations and has led logistics support, improve its human capital man- the department to commit itself to ensuring that for- agement, privatize military housing, and better man- eign service officers are assigned where they are age the transition to a military force that is lighter, most needed. more agile, and better integrated across the services. Our analysis of U.S. air operations in Kosovo, for We exceeded four of the goal’s five targets for the example, identified many issues that can help to year, recording $8.4 billion in financial benefits and improve future operations. 218 other benefits, achieving an 83 percent imple- mentation rate for the recommendations we made 4 Recognizing that national security and economic years ago, and making 618 new recommendations prosperity rest increasingly on global interdepen- for improvements to government programs and dence, GAO also played a significant role in provid- operations. Although GAO witnesses testified at 38 ing the Congress with fact-based analyses to guide congressional hearings related to this strategic goal, decision making on trade negotiations and debt that number fell short of our target of 49 testimonies relief. Growing public and congressional interest in during the year. For details please see the second the effects of globalization has increased the part of this report, Performance Information. demand for GAO analyses of ongoing trade negoti- GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 23 PART I Strategic Goal 2 Summary chemical weapons to analyzing how trade agree- ments and programs serve U.S. interests. Halfway Measure Actual Target Met? through our 2-year assessment cycle, GAO’s manag- Financial benefits $8.4 billion $7.8 billion Yes ers reported that enough work was under way or Other benefits 218 178 Yes completed to allow the agency to meet all 21 of the Recs implemented 83% 75% Yes performance goals by the end of fiscal 2003. The Recs made 618 460 Yes work now in progress includes an examination of Testimonies 38 49 No the organizational changes intended to enhance the ability of federal agencies to deter and respond to Under strategic goal 2 we have 21 performance terrorism in conjunction with state and local govern- goals, which call for GAO to undertake work rang- ments and other nations. GAO is, for example, ing from assessing the effectiveness of efforts to examining the roles and responsibilities of the prevent the proliferation of nuclear, biological, and Defense Department in ensuring homeland security. 24 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I Goal 3 Transforming the Government’s Role to Meet 21st Century Challenges Last year, the financial collapse of major corpora- tions like Enron and the serious lapses in ethical behavior associated with those failures sparked wide public interest and calls to strengthen account- ability, ensure the adequacy of financial reporting and auditing, and comprehensively reassess the government’s role and how it does business. The huge losses suffered by shareholders and employ- As part of our efforts, GAO convened a forum on ees led to severe criticism of virtually all areas of the various governance, transparency, and accountabil- nation’s financial reporting and auditing systems, ity issues that was attended by high-level experts in which are fundamental to maintaining investor con- each of these areas. fidence in America’s capital markets. The Congress adopted a number of GAO’s reform Through GAO’s reports, testimonies, and work with proposals in formulating the Sarbanes-Oxley Act of congressional staff under our third strategic goal, 2002, which established the Public Accounting we aided the Congress in reforming the govern- Oversight Board and dealt with critical auditor inde- ment’s role in financial oversight by helping to pendence, corporate responsibility, and financial define the issues and explore various options. The disclosure matters. As we go forward, GAO will Comptroller General, for example, testified before continue to stress accountancy and accountability the Congress that the Enron situation raised a num- through major studies, which the act requires, of the ber of systemic issues for congressional consider- relative pros and cons of mandatory audit firm rota- ation, focusing on four overarching areas— tion, the impact of the consolidation of public corporate governance, the independent audit of accounting firms, and the role of investment banks financial statements, oversight of the accounting in recent public company failures. profession, and various accounting and financial reporting issues. These areas are the keystones to So that auditors of federal programs and funds protecting the public interest—a breakdown in one could lead by example, GAO issued significant or more of the components can have serious conse- changes to the independence requirements in the quences and usher in reforms such as those to pro- Government Auditing Standards to prohibit these tect deposit insurance that followed the savings and auditors from (1) performing management functions loan crisis in the 1980s. In considering changes to or making management decisions and (2) auditing the system that gave rise to the Enron collapse and their own work. Working in consultation with the other areas of concern, GAO advocated reform Comptroller General’s Advisory Council on Govern- based on the fundamental principles of having ment Auditing Standards (which comprises 20 experts in financial and performance auditing and ■ the right incentives for the key parties to do the reporting), GAO developed a new independence right thing, standard that makes it clear that in some circum- stances it is not appropriate for auditors to perform ■ adequate transparency to provide reasonable both audit and certain nonaudit services for the assurance that the right thing will be done, and same client. For example, an auditor should not ■ full accountability if the right thing is not done. conduct a recruiting program or make hiring or fir- GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 25 PART I ing decisions for the client. To do so would be to mendations we made 4 years ago, making 808 new sacrifice the independence the auditor needs to recommendations for improvements to government assess the client’s operations objectively. If provid- programs and operations, and presenting 65 con- ing both audit and nonaudit services could impair gressional testimonies. We also recorded $5.2 bil- the auditor’s independence, the auditor or the client lion in financial benefits for work done under this must choose which type of service will be provided. goal, narrowly missing the target of $5.3 billion. For GAO believes that the new standard will reinforce details please see the second part of this report, Per- the public’s confidence in the independence of formance Information. auditors of government financial statements, pro- grams, and operations. To further strengthen the Strategic Goal 3 Summary way these auditors conduct their work, we will Measure Actual Target Met? issue a major update next year of the Government Financial benefits $5.2 billion $5.3 billion No Auditing Standards, commonly referred to as the Yellow Book. Other benefits 462 374 Yes Recs implemented 82% 75% Yes GAO also took steps to strengthen the government’s Recs made 808 381 Yes own accountancy and accountability by revitalizing Testimonies 65 58 Yes the federal financial management reforms called for by the statutory foundation the Congress laid down Under strategic goal 3, we have 21 performance in the 1990s. One step is particularly notable: over goals, which call for GAO to undertake work rang- the past year, the Comptroller General, the Secretary ing from analyzing the long-term fiscal position of of the Treasury, the Director of the Office of Man- the federal government to identifying and facilitat- agement and Budget, and the Director of the Office ing the implementation of human capital practices of Personnel Management—who comprise the prin- that will improve federal economy, efficiency, and cipals of the Joint Financial Management Improve- effectiveness. At the halfway mark in our 2-year ment Program—have joined together to advance assessment cycle, GAO’s managers reported that financial management reforms governmentwide. enough work was under way or completed to allow The principals have the agency to meet all 21 of the performance goals by the end of fiscal 2003. Work in progress includes ■ redefined the success measures for financial an effort—as part of our strategic planning dialogue management, with the Congress—to explore whether and how to establish a portfolio of national performance indica- ■ required accelerated financial reporting, tors for the United States. America’s duly elected ■ enhanced the capability and independence of the leaders make the choices to frame issues and bal- Federal Accounting Standards Advisory Board, ance priorities. GAO has always played an impor- tant role in bringing vital facts and information to ■ established an audit committee for the federal bear in support of those decisions. In that role, we government as a whole and required its major are observing substantial and growing activity, agencies to do so as well, and throughout the United States and around the world, ■ addressed difficult accounting policy issues. on measuring national performance. Understand- Their continuing leadership is necessary to improve ing these efforts is vital to the process of setting the government’s financial performance—a long- direction and measuring progress as a context for standing GAO objective and also a key objective of our work with the Congress. the President’s Management Agenda—and to ensure current, reliable, and useful financial infor- Defining key national indicators goes beyond any mation is routinely available for making decisions one sector, beyond corporate governance, beyond about government programs and operations. nonprofit outcomes, and beyond government per- formance. Only with this level of information can We exceeded four of the goal’s five targets for the leaders and the public decide the respective roles of year, recording 462 nonfinancial benefits, achieving the private, nonprofit, and public sectors in solving an 82 percent implementation rate for the recom- the challenges of the 21st century. This includes the looming long-range fiscal challenge of how a 26 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I shrinking workforce can sustain a rapidly growing national leaders and experts on key national perfor- population of benefit recipients and also meet the mance indicators for the United States. A summary other demands for federal funds. In February 2003, of the issues discussed and ideas raised will be pub- the Comptroller General—in cooperation with the lished to further the public dialogue. National Academies—will convene a forum of GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 27 PART I Goal 4 Maximizing the Value of GAO At GAO, our people are our most valuable asset. It is only through their combined efforts that we can effectively serve the Congress and our country. After nearly a decade of downsizing, curtailed investments in human capital, and a significantly increased potential for retirements among our senior staff, GAO recognized a need for new human capital strategies. We are striving to be in vided in the flexibility legislation. We conducted the vanguard of the federal government’s efforts to our first voluntary early retirement offer, through modernize its human capital strategies. We have which we granted early retirement to 52 employees. begun to use the flexibilities given to us in Public The voluntary early retirements helped us to realign Law 106-303 (sometimes referred to as the GAO rather than downsize GAO and to strengthen our Personnel Flexibility Act of 2000) and other actions efforts to have the right staff with the right skills in to realign our workforce; correct skill imbalances; the right locations to better meet the needs of the recruit and retain talented employees; and modern- Congress. We also established and filled seven new ize our human capital policies, procedures, and senior-level positions and drafted our reduction-in- practices. Our commitment to “lead by example” in force regulations, which were posted for comment transforming the way that government does busi- and are now being revised and readied for issu- ness is leading to many improvements at GAO, as ance, although no such reduction is planned at this detailed in the goal 4 section of appendix 1. time. We have not begun drafting regulations to authorize voluntary buyouts because of the high Our work in improving GAO’s human capital strate- cost of the required retirement fund contributions, gies has been a major focus of goal 4 since the and, at this time, we do not plan to use this author- goal’s adoption in the strategic plan issued in fiscal ity. Together, the tools provided by P.L. 106-303 2000. To help us achieve the goal, we sought legis- have given us much-needed flexibility to deliver on lation that gave us additional tools to realign our our mission in an efficient, effective, and economi- workforce with mission needs and overall budget- cal manner, while incorporating adequate safe- ary constraints; correct skill imbalances; and reduce guards for our employees. high-grade, managerial, or supervisory positions without reducing the overall number of GAO In addition to implementing the special legislative employees. Public Law 106-303 gave us the author- authorities, we have taken a number of other ity to (1) make targeted voluntary early retirement actions to align our workforce to meet our overall and buyout offers to certain groups of employees; mission needs. During fiscal 2002, we improved (2) create senior-level positions at compensation the linkage between our strategic plan and our bud- levels and benefits consistent with Senior Executive get by implementing a workforce planning process Service positions so that we can address our ongo- that establishes a more participatory and systematic ing need for scientific, technical, and professional approach for managers to identify the resources career expertise; and (3) give much greater consid- needed to meet our goals and objectives. The pro- eration to employees’ performance, skills, and cess addresses not only the appropriate size and knowledge in any reduction-in-force actions. In fis- deployment of our workforce, but also its profile— cal 2002, we initiated actions to use the tools pro- focusing on ensuring that the workforce has the 28 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I knowledge, skills, and abilities needed to pursue with additional flexibility to assign and use staff in a our strategic goals, both now and in the future. To manner that is more suitable to multitasking and the ensure that that workforce is also diverse, we took full utilization of available staff. During the year, we several actions to expand and support our recruit- also increased our focus on training by expanding ing efforts. Overall, in fiscal 2002, we hired more training opportunities for our senior executives and new staff than in any recent year—nearly 430 per- managers, developing a plan to revitalize training manent staff and 140 interns. Most of those hired for all staff in GAO’s core competencies, and pro- were entry-level professionals with advanced viding access to more than 100 commercially devel- degrees who will help to support our strategic initi- oped classes that support GAO’s mission. We also atives and meet our succession-planning needs as have implemented several employee empowerment more senior staff members retire. In addition, we and benefit programs, including employee surveys, recruited and hired individuals with expertise in the transportation subsidies, career transition services, specialties needed to achieve our strategic goals. and a student loan repayment program. We also increased our emphasis on diversity in col- lege recruiting and developed and implemented a At the halfway point in our 2-year assessment cycle strategy for recruiting a broad spectrum of candi- for our performance goals, we were on track to dates for professional positions. This strategy is meet 14 of the 19 performance goals under strategic designed to ensure that we (1) recruit candidates at goal 4 by the end of fiscal 2003. As the Perfor- schools that matriculate significant numbers of racial mance Information section explains, work on the minorities, (2) train our recruiters in best practices other five goals is behind schedule, raising the pos- for recruiting a broad spectrum of candidates, (3) sibility that they may not be met by the deadline, reflect GAO’s existing diversity through our recruit- typically because resources were diverted to efforts ers and recruiting materials, and (4) collect and ana- focused on better serving our congressional clients. lyze data on the effectiveness of our recruiting efforts, including the extent to which best practices The transformation of GAO’s human capital man- are used. This year, we enlisted key minority exec- agement is a work in progress. Implementing these utives as recruiters and added outreach efforts at 23 changes has been and will continue to be challeng- target schools. As a result, we attracted and hired a ing for us. To assist our Human Capital Office, talented and diverse pool of applicants. which is at the forefront of the transformation efforts, we established a team composed of staff We also took steps to modernize our human capital from across GAO to review the office’s role and policies, procedures, and practices during fiscal responsibilities, develop a vision for the future, 2002. We redesigned and implemented a new per- design initiatives for the office to achieve this vision, formance appraisal system for our analysts, special- and identify the key priorities for change or ists, and attorneys to create stronger links with our improvement. In fiscal 2003 and 2004, we plan to strategic plan, core values, and desired outcomes. continue the evolution of agencywide human capi- This new system is also linked to a revised pay, pro- tal strategies, implement the new broad-banded motion, and rewards system that is “state of the art” pay-for-performance system and competency-based for a professional services organization. We are performance appraisal system for the APSS segment working on implementing a broad-banded pay-for- of our workforce, and develop and implement a performance system for GAO’s Administrative Pro- core training curriculum focusing on the competen- fessional and Support Staff (APSS) similar to the sys- cies critical to performing GAO’s work. In addition, tem we have in place for analysts, specialists, and to help attract new recruits and better describe the attorneys. A primary goal of our broad-banded modern audit and evaluation entity GAO has pay-for-performance system is to reward staff on become, we will work with the Congress to explore the basis of knowledge, skills, and performance as the possibility of changing the agency’s name while opposed to longevity. It also provides managers retaining our well-known acronym of GAO. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 29 PART I Managing Our Resources Resources Used to Achieve Our Fiscal 2002 Performance Goals GAO’s financial statements for fiscal 2002 received an unqualified opinion from an independent audi- tor. No material weaknesses in internal control were identified, and the auditor reported substantial compliance with the requirements in the Federal Financial Management Improvement Act of 1996 (the Improvement Act) for financial systems. The auditor found no instances of noncompliance with Compared with the statements of large and com- the laws or regulations in the areas tested. The plex agencies in the executive branch, GAO’s state- statements and their accompanying notes, along ments present a relatively simple picture of a small with the auditor’s report, appear later in this report. agency in the legislative branch that focuses most of The table below summarizes key data. its financial activity on the execution of its congres- sionally approved budget and most of its resources GAO’s Financial Highlights: Resource devoted to the human capital needed for its mission Information of supporting the Congress with information and Dollars in millions analysis. Fiscal Fiscal 2001 2002 GAO’s budget consists of an annual appropriation Total budgetary resources $392.9 $442.6 covering salaries and expenses and revenue from Total outlays $387.2 $427.8 reimbursable audit work and rental income. For fis- Net cost of operations cal 2002, GAO’s total budgetary resources increased by $49.7 million from fiscal 2001. This increase Goal 1: Well-being and $161.1 $178.3 financial security of the consists primarily of additional current year appro- American people priations to meet continuing program requirements Goal 2: Changing security 93.4 110.5 and $7.6 million in transfers of budget authority to threats and challenges of conduct safety and security efforts to respond to the globalization events of September 11. These transfers included Goal 3: Transforming the 139.5 141.0 about $4.4 million for one-time security upgrades federal government’s role and $3.2 million for recurring safety programs. Goal 4: Maximizing the value 20.7 25.3 GAO’s total assets were $126.8 million, consisting of GAO mostly of property and equipment (including the Less reimbursable services (1.6) (2.1) headquarters building, land, and improvements and not attributable to goals computer equipment and software) and funds with Total net cost of operations $413.1 $453.0 the Treasury. The major change in our assets was Actual full-time equivalents 3,110 3,210 in funds with the Treasury, which increased in fiscal 2002 because of differences from the prior year-end Note: The net cost of operations figures include in the timing of payments. The total liabilities of nonbudgetary items, such as imputed pension and $91.7 million were composed largely of employees’ depreciation costs, which are not included in the figures for accrued annual leave, amounts owed to other gov- total budgetary resources or total outlays. ernment agencies, accounts payable, and workers’ compensation liability. The greatest changes in the 30 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I liabilities were made up of salaries and benefits ■ Alan B. Levenson, a practicing attorney in payable and workers’ compensation. The decrease Washington, D.C., and a former senior official at in salaries and benefits payable occurred because the Securities and Exchange Commission; and standard pay periods caused a salary payment to be ■ Katherine D. Ortega, a certified public made closer to the end of fiscal 2002 than in fiscal accountant, former Treasurer of the United States, 2001; consequently, the liability incurred was former Commissioner of the Copyright Royalty smaller in fiscal 2002. Workers’ compensation liabil- Tribunal, and a former member of the President’s ity increased because of a change in the actuarial Advisory Committee on Small and Minority assumptions used for the liability calculation. Business. GAO reports net costs by strategic goal to align our At the start of fiscal 2003, two members informed us net costs with our strategic plan. As the figure indi- they were no longer able to serve on the board. cates, our first goal, under which we organize our New members will be appointed to the committee work on challenges to the well-being and financial early in the year. security of the American people, accounted for the largest share of the costs. As the next section on Limitation on Financial Statements our budget request for fiscal 2003 will show, we Responsibility for the integrity and objectivity of the expect this goal to continue to represent the largest financial information presented in the financial share of our costs. statements in this report rests with GAO’s managers. The statements were prepared to report GAO’s financial position and results of operations, consis- Net Cost of Operations tent with the requirements of the Chief Financial FY 2002 total $453 million Officers Act as amended (31 U.S.C. 3515). The statements were prepared from GAO’s financial records in accordance with the formats prescribed Goal 4 6% in the Office of Management and Budget’s Bulletin 01-09, Form and Content of Agency Financial State- Goal 1 ments. These financial statements differ from the 39% Goal 3 financial reports used to monitor and control GAO’s 31% budgetary resources; however, both were prepared from the same financial records. Goal 2 24% GAO’s financial statements should be read with the understanding that, as an agency of a sovereign Source: GAO. entity, the U.S. government, GAO cannot liquidate its liabilities (that is, pay its bills) without legislation Audit Advisory Committee that provides resources to do so. Although future Assisting the Comptroller General in overseeing the appropriations to fund these liabilities are likely and effectiveness of GAO’s financial operations is a anticipated, they are not certain. three-member external Audit Advisory Committee. The committee’s report for fiscal 2002 appears after our financial statements and accompanying notes. Resources Needed to Achieve During fiscal 2002, the members were Our Fiscal 2003 Performance ■ Sheldon S. Cohen (Chairman), a certified public Goals accountant and practicing attorney in Washington, D.C., a former Commissioner and GAO has requested a budget of $457.8 million for Chief Counsel of the Internal Revenue Service, fiscal 2003 to maintain current operations to support and a Senior Fellow of the National Academy of the Congress as outlined in our strategic plan. This Public Administration; funding level—which is 6 percent above our 2002 funding level—would allow us to support our authorized level of 3,269 full-time-equivalent per- GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 31 PART I sonnel and includes $4 million to meet nonrecur- During fiscal 2003, we plan to increase our invest- ring requirements to enhance the safety and ments in maximizing the productivity of our work- security of GAO’s staff. force by continuing to address two of the management challenges we discussed in our perfor- The following table provides an overview of how mance and accountability report for fiscal 2001: our budgetary and human capital resources will be human capital and information technology. On the allocated among GAO’s four strategic goals. human capital front, to ensure our ability to attract, retain, and reward high-quality staff, we plan to GAO’s Revised Fiscal 2003 Budget devote additional resources to our employee bene- fits and training programs. For example, we will Dollars Full-time in equivalent target increased resources to continue initiatives Strategic goal millions staff begun in fiscal 2000 to address skill gaps, maximize Goal 1: Well-being and staff productivity, and increase staff effectiveness; to financial security of the update our training curriculum to address organiza- American people $177.6 1,275 tional and technical needs; and to train new staff. Goal 2: Changing security In fiscal 2003, we will continue to focus our hiring threats and the challenges of efforts primarily on recruiting talented entry-level globalization 119.5 854 staff. Goal 3: Transforming the federal government’s role 141.0 985 On the information technology front, we plan to Goal 4: Maximizing the value continue initiatives designed to increase our of GAO 19.7 155 employees’ productivity, facilitate knowledge-shar- Total $457.8 3,269 ing, maximize the use of technology, and enhance the tools available at the desktop. We will also Almost 80 percent of GAO’s fiscal 2003 budget will devote resources to reengineering the information provide for employee compensation and benefits. technology systems that support job management The next largest portion of our budget—about $55 processes, such as our engagement tracking system, million—is for contract services supporting both and continue implementing tools that will ensure a GAO’s mission work and administrative operations, secure network operating environment. Through including information technology, training, security, these initiatives, we expect to complete the estab- and building maintenance and operations services. lishment of a stable and reliable computer network About $13 million will be spent on travel and trans- with standard, routine updates of operating systems portation, critical components to accomplishing and equipment. With the completion of that work, GAO’s mission and ensuring the quality of our the focus of our management challenge will evolve work. The remaining funds will be used for office from information technology to maintaining infor- equipment and space rentals; telephone, videocon- mation security, as will be discussed in the section ference, and data communications services; and on management challenges later in this report. other operating expenses, including supplies and materials, printing and reproduction, and furniture Finally, we will also make the investments neces- and equipment. sary to address our third management challenge— enhancing the safety and security of GAO’s people, facilities, and other assets. 32 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I Strategies and Challenges The Government Performance and Results Act directs agencies to articulate not just goals, but also strategies for achieving those goals. As detailed below, GAO’s strategies primarily emphasize con- ducting audits, evaluations, analyses, research, and investigations and providing the information from that work to the Congress and the public in a vari- ety of forms. Our strategies also emphasize the importance of two overarching approaches: (1) working with organizations on crosscutting issues and (2) effectively addressing the challenges to achieving our agency’s goals—that is, those internal ■ overseeing government operations through and external factors that could impair GAO’s financial and other management audits to performance. determine whether public funds are spent efficiently, effectively, and in accordance with applicable laws; Strategies for Achieving Our ■ investigating whether illegal or improper Goals and Coordinating with activities are occurring; Others ■ analyzing the financing for government activities; As the audit, evaluation, and investigative arm of ■ conducting constructive engagements in which the Congress, GAO has a unique role to play. we work proactively with agencies, when Within the legislative branch, we are the only appropriate, to provide advice that may assist agency with staff in the field, conducting perfor- their efforts toward positive results; mance analyses and financial accounting among ■ providing legal opinions that determine whether other congressionally requested activities, and agencies are in compliance with applicable laws reporting our findings not only to our congressional and regulations; clients but also to the American public. While we work with the Inspectors General at every federal ■ conducting policy analyses to assess needed agency, our engagements differ from theirs in that actions and the implications of proposed actions; ours are often more strategic and longer-range in and nature, governmentwide in scope, and initiated by ■ providing additional assistance to the Congress in requests from the Congress. support of its oversight and decision-making responsibilities. Achieving our goals and objectives rests, for the most part, on providing professional, fact-based, The performance goals listed in Part II of this report balanced, nonpartisan information. We develop and lay out the work we plan to complete by the end of present this information in a number of ways to fiscal 2003 using the strategies above. In our support the Congress in carrying out its constitu- annual performance plan for fiscal 2004, we will tional responsibilities, including the following: issue our performance goals covering the work we plan to do in fiscal 2004 and 2005. ■ evaluating federal policies and the performance of agencies; GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 33 PART I Because achieving our strategic goals and objectives by the Comptroller General, and 10 regional inter- also requires strategies for coordinating with other governmental audit forums, GAO consults regularly organizations with similar or complementary mis- with federal Inspectors General and state and local sions, we auditors. In addition, through the Domestic Work- ing Group, the Comptroller General and the heads ■ use advisory panels and other bodies to inform of 18 federal, state, and local audit organizations GAO’s strategic and annual work planning, and exchange information and seek opportunities to collaborate. ■ initiate and support collaborative national and international audit, technical assistance, and other We also work with a number of issue-specific and knowledge-sharing efforts. technical panels to improve our strategic and work Those two types of strategic working relationships planning, including the following: allow us to extend our institutional knowledge and experience, and, in turn, to improve our service to ■ The Advisory Council on Government Auditing the Congress and the American people. Our Exter- Standards, which provides guidance to GAO on nal Liaison office takes the lead and provides strate- promulgating auditing standards. The council gic focus for the work with crosscutting played a significant role in the deliberations over organizations, while our research, audit, and evalua- a new independence standard for auditors that tion teams lead the work with most of the issue- GAO issued in January 2002 as an amendment to specific organizations. the Government Auditing Standards (www.gao.gov/govaud/ybk01.htm), commonly Strategic and Annual Work Planning referred to as the Yellow Book, which articulates Through newly established forums and a number of auditors’ responsibilities when examining ongoing advisory boards and panels, we gather government organizations, programs, activities, or information and perspectives for GAO’s strategic functions and government assistance received by and annual performance planning efforts. In early contractors, nonprofits, and other 2002, the Comptroller General began to convene nongovernment organizations. The council’s various experts from the public and private sectors work ensured that the new standard would be in a series of forums intended to enhance GAO’s generally accepted and feasible. understanding of emerging issues and to identify opportunities for action. The first of the forums, ■ The Accountability Advisory Council, made up of held in February, focused on corporate governance, experts in the financial management community, transparency, and accountability issues. The results which provides advice on GAO’s audit of the U.S. of this forum, along with other analyses, testimo- government’s consolidated financial statements nies, and reports GAO developed, helped inform and emerging issues involving financial the Congress as it drafted legislation to strengthen management and accountability reporting. The government oversight of the nation’s financial mar- council also provided insights that were valuable kets and protect the public interest by reducing the in framing parts of a question-and-answer guide possibility of future Enron-like situations. on the new independence standard mentioned above. Ongoing advisory boards and panels also support ■ The Executive Council on Information our strategic and annual work planning by alerting Management and Technology, whose 21 us to issues, trends, and lessons learned across the members are experts from the public and private national and international audit community that we sectors and representatives of related professional should factor into our own work. These groups organizations, met in March 2002 to discuss include the Comptroller General’s Advisory Board, information management issues in the context of whose 40 members from the public and private sec- homeland security. As a result of these tors have broad expertise in areas related to our discussions and subsequent discussions with strategic objectives. The board meets with our lead- individual members, GAO improved its planning ership annually to share its views on GAO’s strate- and audit methodologies for several engagements gic direction and specific initiatives. Through the in that area. National Intergovernmental Audit Forum, chaired 34 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I ■ The Comptroller General’s Educators’ Advisory To build capacity in national audit offices around Panel, composed of deans, professors, and other the world, we conduct an international fellows academics from prominent universities across the training program each year for mid- to senior-level United States, advises GAO on recruiting, staff from other countries. In 2002, 14 fellows from retaining, and developing staff. Africa, Asia, Latin America, and Eastern Europe spent about 4 months at GAO learning how we are Internationally, GAO participates in the Interna- organized to do our work, how we plan work, and tional Organization of Supreme Audit Institutions what methodologies we use, particularly for perfor- (INTOSAI)—the professional organization of the mance audits. In addition, GAO provided technical national audit offices of 184 countries. During fiscal training on designing, planning, and conducting 2002, GAO led a 10-nation task force in developing performance audits to over 150 auditors from 10 a strategic planning framework for INTOSAI, which European countries. We have also begun to imple- the Governing Board approved in October 2002. In ment a memorandum of understanding signed fiscal year 2003, the task force will expand the jointly by the Inter-American Development Bank, framework into a comprehensive strategic plan to the INTOSAI Development Initiative, the Organiza- guide INTOSAI in the future. The Comptroller Gen- tion of Latin American and Caribbean Supreme eral also leads the Global Working Group, in which Audit Institutions, and GAO to help strengthen the the heads of GAO’s counterparts from 15 countries capacity of audit institutions in this region. meet annually to discuss mutual challenges, share experiences, and identify opportunities for collabo- Domestically, GAO helped the executive branch ration with each other. formulate principles to guide decisions about whether federal employees or the private sector Collaborating with Others By collaborating with numerous organizations and should perform activities for the government that individuals, we have strengthened professional can be purchased as commercially available ser- standards, provided technical assistance, leveraged vices. The Comptroller General, responding to a resources, and developed best practices. In our statutory mandate, convened a commercial activities work with INTOSAI, GAO chairs the accounting panel that included senior officials from govern- standards committee and is an active member of ment agencies, federal labor unions, contractor INTOSAI’s auditing standards, internal control stan- groups, and academia. The panel reviewed govern- dards, and public debt committees. As a member of ment policies and procedures, unanimously that latter committee, GAO identified and devel- adopted a set of principles to guide government oped partnerships with the World Bank and the sourcing policies, and used those principles to craft United Nations Conference on Trade and Develop- a package of specific recommendations designed to ment to design and deliver regionally based training improve the way federal agencies make sourcing programs for auditors and managers of public debt. decisions (www.gao.gov/a76panel/index.html). We also publish INTOSAI’s quarterly International The Office of Management and Budget is revising Journal of Government Auditing its guidance on competitive sourcing to address the (www.intosai.org/2_IJGA_.html) in five languages panel’s recommendations. to further the global understanding of standards, best practices, and technical issues. GAO also chairs Among the other collaborative activities undertaken the public sector committee of the International by GAO’s people during fiscal 2002 were the fol- Federation of Accountants to help ensure that pub- lowing: lic sector perspectives are reflected in that commit- tee’s accounting standards. Toward the same end, ■ We collaborated with the Joint Financial we are collaborating closely with the International Management Improvement Program principals in Auditing and Assurance Standards Board and the fostering financial management reform World Bank to develop international auditing stan- governmentwide, with the Federal Accounting dards through an effort led by the National Audit Standards Advisory Board in establishing Office of Sweden. generally accepted accounting principles for the federal government, and with the President’s Council on Integrity and Efficiency (PCIE, a group primarily composed of presidentially GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 35 PART I appointed Inspectors General) in publishing and of the maturity of biometric technologies for use updating a joint GAO/PCIE Financial Audit in U.S. border control and the policy implications Manual (www.gao.gov/special.pubs/FAM/ of using such technologies. index.html). ■ GAO’s Office of Special Investigations completed ■ We worked with the Inspector General of the U.S. a joint investigation with the Social Security Department of Education, the State Auditors of Inspector General on potential fraudulent use of Pennsylvania and Texas, and the Office of the deceased individuals’ Social Security numbers in Comptroller in Philadelphia to develop a series of selected entitlement benefit and health care recommendations on improving the quality of programs. We are continuing to work together on data used to measure student achievement, a other investigations of the possible misuse of critical element of accountability under a new Social Security numbers. federal law, the No Child Left Behind Act. The joint effort earned an award for excellence from PCIE as an achievement “so unusual as to be at Addressing Management the forefront of the [audit] community.” Challenges That Could Affect ■ Several GAO teams are conferring with the Private Sector Council, a nonprofit, nonpartisan, Our Performance public service organization committed to helping GAO has three management challenges that may the federal government improve its efficiency, affect our performance. Two of these challenges— management, and productivity through the human capital and physical security—were identi- cooperative sharing of knowledge. Council fied in our previous performance and accountability members have assisted us in developing best report. We have made progress in addressing each practices in information technology training. of these challenges, but we still have work to do. They have also assisted us in the development of The third challenge, information security, will a guide for government agencies on innovative replace our previous challenge of information tech- practices for planning, delivering, and evaluating nology. With the establishment of a stable and reli- training. able computer network and institutionalized ■ We worked on multiple projects to help assess standard routine updates of network and desktop and enhance security in different aspects of operating systems and equipment, we will have American life. As part of a team led by the State completed our work on the original management Auditor of Louisiana, for instance, we assisted in challenge. However, independent reviews of our developing a guide for evaluating security efforts information security program indicate a need for within the nation’s transportation system. Other further improvement. team members included the Inspector General of the U.S. Department of Transportation and the Given GAO’s role as a key provider of information State Auditors of Arkansas, Connecticut, New and analyses to the Congress, maintaining the right York, and Rhode Island. We also collaborated mix of technical knowledge and expertise as well as with auditors in 11 states on a report that general analytical skills is vital to achieving our mis- examines federal and state efforts to enhance the sion. We spend about 80 percent of our resources security of the food supply and worked with 32 on our people, but without excellent human capital federal, state, and local audit organizations on management, we could still run the risk of being joint information security initiatives, which unable to meet the expectations of the Congress resulted in, among other things, a Management and the nation. In 1999, after an extended hiring Planning Guide for Information Security Auditing freeze, GAO’s workforce was sparse at the entry and a model-training curriculum. Finally, a new level, and we faced succession planning issues as a relationship we established with the National large number of our senior managers and analysts Academy of Sciences to bring the technical became eligible to retire. The development and expertise of Academy members to bear on a training of our senior executives had been curtailed range of GAO work was vital in our assessment for funding reasons. And at the same time, more of our staff needed enhanced technical skills if they were to assist the Congress effectively. In all those 36 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I respects, GAO was little different from the govern- as a challenge for our agency. Protecting our people ment as a whole. Since 1999, we have addressed and our assets is critical to our ability to carry out these issues in a variety of ways and are continuing our mission. We devoted additional resources to this to do so. For example, we area and implemented measures such as reinforcing vehicle and pedestrian entry points, installing an ■ developed a recruitment program that allowed us additional x-ray machine, adding more security to hire 430 permanent staff during fiscal 2002, guards, reinforcing windows, and relocating air sources. We are in the process of researching and ■ doubled the proportion of our workforce at the designing other projects to better control building entry level, access and security around the building. We plan to ■ revamped and modernized the performance implement these projects over the next several appraisal system for analysts and attorneys, years. ■ implemented a succession-planning program, Ensuring information systems security and disaster ■ conducted an agencywide assessment and recovery systems that allow for continuity of opera- inventory of our workforce’s knowledge and tions is a critical requirement for the agency, partic- skills, and ularly in light of the events of September 11 and the ■ completed an organizational realignment and anthrax incidents. The risk is that in an emergency resource reallocation. our information could be compromised and we would be unable to respond to the needs of the Over the next several years, we need to continue to Congress. In light of this risk, and in keeping with address skill gaps, maximize staff productivity and our goal of being a model federal agency, we are effectiveness, and reengineer our human capital implementing an information security program con- processes to make them more user-friendly. We sistent with the requirements in the Government plan to address skill gaps by further refining our Information Security Reform provisions (commonly recruitment and hiring strategies to target gaps iden- referred to as “GISRA”) enacted in the Floyd D. tified through our workforce planning efforts, while Spence National Defense Authorization Act for Fis- taking into account the significant percentage of our cal Year 2001. As discussed in appendix 4, we have workforce eligible for retirement. We will reengi- made progress through our efforts to neer our human capital systems and practices to increase their efficiency and to take full advantage ■ implement a risk-based, agencywide security of technology. We will also ensure that our staff program; have the needed skills and training to function in this reengineered environment. In addition, we are ■ develop essential policies and reporting developing a competency-based performance sys- mechanisms for implementing and maintaining tem for our mission support employees. During the security requirements; 108th Congress, we will work with our appropria- ■ provide security training and awareness; tions and oversight committees to achieve enact- ment of legislation to support our continuing efforts ■ enhance the agency’s ability to respond to to be a leader in federal human capital management computer security incidents; and a world-class organization. To build on the ■ integrate security into our capital investment human capital flexibilities provided by the Congress control process; in 2000, we will identify opportunities for additional ■ identify critical assets within our computer flexibilities that would, among other things, facilitate architecture; GAO’s continuing efforts to develop a more perfor- mance-based compensation system, realign our ■ ensure the security of services provided by workforce, and provide greater opportunities for others; and staff to phase into retirement. ■ develop and implement an enterprise disaster recovery solution. In the aftermath of the September 11 terrorist attacks and subsequent anthrax incidents, our abil- ity to provide a safe and secure workplace emerged GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 37 PART I However, we need to complete certain key actions to be better able to detect intruders in our systems, Mitigating External Factors identify our users, and recover in the event of a That Could Affect Our disaster. Our current efforts and plans for these Performance areas are as follows: Several external factors could affect the achieve- ■ We installed software to help us detect intruders ment of our performance goals, including national on our external servers, but need to complete and international developments and the resources applying this software to our internal servers. We we receive. Limitations imposed on our work by also plan to add more tools to facilitate the early other organizations or limitations on the ability of detection and response to any suspicious activity. other federal agencies to make the improvements we recommend are additional factors that could ■ We began to implement a two-factor secure user affect the achievement of our goals. authentication to eliminate the threat of penetration of our network resulting from As the Congress focuses on unpredictable events— passwords that are easily guessed by intruders. such as the global threat posed by sophisticated ter- Secure user authentication provides a high degree rorist networks, international financial crises, or nat- of certainty that each user who accesses GAO’s ural disasters—the mix of work we are asked to system is legitimate. We need to complete the undertake may change, diverting our resources implementation of this project and extend it to from some of our strategic objectives and perfor- our remote access and internal wireless links. mance goals. We can and do mitigate the impact of ■ We are refining the disaster recovery plan we these events on the achievement of our goals in var- developed last year and have begun limited ious ways: testing exercises to ensure the continued operation of GAO’s essential computer systems, ■ We are alert to possibilities that could shift the should a disaster occur. Congress’s and, therefore, our priorities. At GAO, management challenges are identified by ■ We continue to identify in our products and the Comptroller General and the agency’s senior meetings with the Congress conditions that could executives through the agency’s strategic planning, trigger new priorities. management, and budgeting processes. Our ■ We quickly redirect our resources, when progress in addressing the challenges is monitored appropriate, so that we can deal with major through our annual performance and accountability changes that do occur. process. Under strategic goal 4, we establish per- formance goals focused on each of our manage- ■ We maintain broad-based staff expertise so that ment challenges and track our progress in we can readily address emerging needs. completing the key efforts for those performance As this report goes to press, the uncertainty about goals quarterly. The performance goals are our fiscal 2003 funding levels was affecting when assessed and updated each year. we will complete—and, in some cases, begin—initi- atives to address our management challenges and GAO’s Inspector General reviews management’s other issues. Meeting the fiscal 2003 performance assessment of the challenges and the agency’s targets in this report and completing the work progress in addressing them. The memorandum on under way to meet our 2-year performance goals the Inspector General’s findings is reprinted in are contingent on receiving the resources we are appendix 2. requesting from the Congress. Once actual funding is known, we may adjust our targets and perfor- mance goals to ensure that key congressional prior- ities are met. A final external factor is the extent to which GAO can obtain access to certain types of information. Most notably, recent developments have raised con- 38 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART I cerns about whether records access challenges are on sensitive issues. Historically, our auditing and likely to increase in the future. First, in December information gathering has been limited whenever 2002, a district court dismissed a lawsuit GAO filed the intelligence community is involved. Nor have to obtain information about meetings held with pri- we had the authority to access or inspect records or vate-sector individuals by the Vice President, in his other materials held by other countries or, generally, capacity as chairman of the National Energy Policy by the multinational institutions that the United Development Group, and the group’s members and States works with to protect its interests. Conse- staff. The court did not address the merits of the quently, our ability to fully assess the progress case, but rather stated that the Comptroller General being made in addressing homeland security issues lacked standing in the matter. Second, the current may be hampered, and because some of our administration has shown a tendency to not readily reports may be subjected to greater classification share certain information with GAO and the Con- reviews than in the past, their public dissemination gress that both have received in the past. In addi- may be limited. We will work with the Congress to tion, with concerns about operational security being identify both legislative and nonlegislative opportu- unusually high at home and abroad, GAO may have nities for strengthening GAO’s access authority as more difficulty obtaining information and reporting necessary and appropriate. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 39 PART I 40 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 Part II: Performance Information PART II How We Assess Our Performance The hierarchy of elements in GAO’s strategic plan establishes the structure we use in discussing our performance. At the top of the hierarchy are GAO’s four broad strategic goals. Below them are 21 strate- gic objectives that are more specific and that are in turn, supported by 98 performance goals, which articulate the strategies we will use for achieving the higher-level objectives and goals. At the lowest level of the hierarchy are more than 400 key efforts that describe the work we must do to implement the strategies laid out in the performance goals. This section explains how we assess our agency’s present testimony before the Congress and are performance using this structure and how our responding to those requests, that they are making annual measures help us gauge whether we are a sufficient effort to recommend improvements to making progress toward our strategic goals. the conditions they have uncovered during their fieldwork, that their recommendations are being implemented by the agencies to which they are GAO’s Strategic Planning Elements and directed, and, ultimately, that implementation has Performance Measures led to benefits for the American people. Strategic GAO’s Strategic Management Goals (4) Structure Strategic Objectives (21) GAO’s work is aligned under four strategic goals that are designed to fulfill GAO’s mission to support the Congress in meeting its constitutional responsi- 1-Year 2-Year Performance bilities and to help improve the performance and Performance ensure the accountability of the federal government Measures Goals (98) (7 GAO-wide) for the benefit of the American people. The first three of the strategic goals focus outwardly on the Financial and Other Benefits; Past Recs nature of the information and recommendations Key Efforts (400+) Implemented; New Recs GAO must provide—at GAO, these are often Made; Products with Recs; Testimonies; Timeliness referred to as the external goals. The fourth strategic goal is GAO’s internal goal. It focuses inwardly on Source: GAO. improving GAO itself so that the agency can per- If, for instance, we are providing timely, quality ser- form better under the external goals and also serve vice to the Congress and the federal government to as a model for others. The four strategic goals are as address current and emerging challenges to the follows: well-being and financial security of the American people as our first strategic goal calls for us to do, ■ Provide timely, quality service to the Congress the indicators should show that our people are and the federal government to address current delivering almost all of their products when they and emerging challenges to the well-being and have promised to, that they are being invited to financial security of the American people. 42 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II ■ Provide timely, quality service to the Congress form of sets of performance goals that support each and the federal government to respond to strategic objective. For instance, the seven perfor- changing security threats and the challenges of mance goals supporting GAO’s objective on health global interdependence. care needs and financing call for GAO to, among other things, evaluate Medicare reform, financing, ■ Help transform the federal government’s role and and operations and to assess trends and issues in how it does business to meet 21st century private health insurance coverage. (To view GAO’s challenges. current strategic plan, go to www.gao.gov/sp/html/ ■ Maximize the value of GAO by being a model splan02.html.) federal agency and a world-class professional services organization. At the conclusion of each 2-year cycle, GAO Each of the four strategic goals is supported by a set assesses whether it has met those performance of strategic objectives. Under strategic goal 1, for goals and thereby advanced toward the strategic instance, are eight strategic objectives that call for objectives and the broader strategic goals. To make GAO to address issues that range from health care the assessment, GAO looks at whether the key needs and financing to a secure and effective efforts under each performance goal have been national physical infrastructure. (The framework accomplished. The performance goal calling for diagram on page 18 provides an at-a-glance sum- GAO to evaluate Medicare reform, financing, and mary of all the strategic goals and objectives.) All operations, for instance, has six key efforts, among together, GAO has 21 strategic objectives. Units them analyzing the potential consequences of Medi- within GAO typically contribute to the achievement care structural reforms and assessing the effects of of more than one strategic objective, with some expanding managed care in Medicare. The key working in more than one strategic goal as well. efforts, which currently number more than 400 for This matrixing allows GAO more flexibility in the agency as a whole, are published as supple- deploying the agency’s resources to meet congres- ments to the strategic plan (to view them, go to sional requests on complex issues. www.gao.gov/sp/spsupp.html). For a performance goal to have been met, 75 percent of its key efforts Every 2 years, as a new Congress convenes on Cap- must have been accomplished during the 2-year itol Hill, we revisit GAO’s goals and objectives assessment cycle. Unmet goals, unless they are through an update of the agency’s strategic plan. found to be no longer relevant to the Congress’s The update includes an “environmental scan” and the nation’s needs, are carried forward into the involving staff at headquarters in Washington and in next 2-year cycle so that the work under them will 11 field offices. During the scan, we gather and dis- be completed. The next 2-year assessment will till information about trends and issues likely to occur at the end of fiscal 2003. have a critical effect on the lives of Americans. The information from the scan is combined with infor- mation developed in every unit of GAO about the GAO’s Annual Performance Congress’s likely needs, the federal government’s Measures most pressing challenges, and the strategies GAO can use to address both in the near and long terms. To provide annual indicators of whether the work Key to the update process is active consultation GAO is doing under the 2-year performance goals is with Members of Congress and their staffs and an having a measurable effect toward the achievement open comment period during which the Congress; of our external strategic goals, GAO attempts to members of the accountability community at the measure the benefits the agency’s work creates for federal, state, and local levels; members of GAO’s the American people. We also track our staff’s own staff; and the public can suggest improvements efforts to provide the kind of information and rec- to the draft plan. ommendations that will lead to those benefits. In total, we use seven annual measures to track the When the final plan is issued, it contains not only progress of the agency as a whole. We also use five GAO’s strategic goals and objectives but also GAO’s of the seven measures to track specific progress on strategies for achieving them, strategies that take the each of our external strategic goals (that is, goals 1, GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 43 PART II 2, and 3). Together, this array of annual indicators Both of the benefits measures may come into play helps GAO’s senior executives and managers deter- years after our people have completed work and mine where we are succeeding in our mission and reported our findings and recommendations for where we need to do more. improvements to government accountability, opera- tions, or services. For benefits to accrue from our In discussing our performance, we usually present work, federal agencies or the Congress must act on the longer-term outcomes first by looking at finan- our findings and recommendations, which often cial and other benefits and then looking at the indi- takes time. We then must be able to observe and cators that show the flow of newer work as it document the results of those actions, which takes moves toward the stage at which it may provide additional time. Tabulating the benefits of GAO’s benefits. Hence, the measures toward the bottom work helps demonstrate the value we provide in of the table below provide data on work completed return for the appropriations we receive and it also in this fiscal year (the newly planted seeds, as it helps focus our people on the need to design were), while the measures at the top provide data engagements in ways that have the potential to pro- on the results yielded by work completed in past duce benefits in the future. years (the harvest). Measuring the rate at which past recommendations The financial and other benefits for the nation that have been implemented is an interim measure that GAO reports may take several forms. They may shows GAO what percentage of recommendations reflect, for instance, federal dollars freed up for made 4 years ago has been acted on by the agency other purposes because the Congress or federal to which they were directed. Assessing the status of agencies used GAO’s findings or recommendations “open” recommendations goes on throughout the to make government operations more efficient, less year and is the responsibility of the unit that devel- wasteful, or less subject to potential abuse. Or they oped the recommendations (to see what recom- may reflect instances in which GAO’s findings or mendations are currently open, go to recommendations led to higher revenues for the www.gao.gov/openrecs.html). The staff close rec- government through asset sales or changes in tax ommendations once implementation is documented laws or user fees. But they may also reflect federal or, if implementation is not likely, close them as programs that serve Americans better because unimplemented. This assessment process not only GAO’s findings and recommendations have helped paves the way for a later examination of any bene- to make them more accountable, responsive, and fits that implementation may have produced, it also efficient, a type of benefit that cannot be measured prompts GAO’s staff to discuss implementation with in monetary terms. the federal agencies involved, alerts GAO’s staff to GAO’s Annual Performance Measures Measure An indicator of… Financial benefits Has our work provided financial benefits for the American people in the form of reduced costs or higher revenues? Other benefits Has our work produced tangible benefits for the American people in the form of better government operations or services? Past recommendations implemented Are most of our recommendations being implemented? New recommendations made Do we develop ways of improving the conditions we uncover in our work? New products with recommendations Do about half of our products provide recommendations for improvements while we continue to meet our congressional clients’ requests for purely informational products? Testimonies Are we in touch with our congressional clients’ information needs and can we fill requests for what typically is high-profile, fast-turnaround, expertly distilled information? Timeliness Do we deliver most of our products to our requesters when agreed? 44 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II areas where they may need to do more work to get mony requests, which require fast preparation of intended results, and reinforces the need to make brief but information-rich presentations. The mea- recommendations that are likely to be implemented sure is also an indicator of how in touch our people because they are clearly stated, feasible, and cost- are with our congressional clients and how well effective. We measure the implementation rate for they have foreseen our clients’ information needs. recommendations made 4 years ago because prior In that requests to testify are often received on short experience has shown that recommendations often notice, responding to them requires GAO to have a take several years to be put in place. At the same body of relevant work completed or well on the time, if a recommendation has not been imple- way to completion before hearings are even sched- mented within 4 years, it is not likely to be uled. Of course, the Congress itself determines the implemented. number of hearings it will conduct in a year and thus controls the number of possible opportunities Because providing implementable recommenda- GAO’s people can have to earn places at the wit- tions is an important part of GAO’s work for the ness tables. Congress and helps to improve how the govern- ment functions, we encourage staff to design GAO’s final annual measure—timeliness—is, like engagements that will allow them not only to the testimonies measure, an indicator of the quality describe the conditions they find but also to recom- of service GAO provides to its congressional clients. mend improvements. GAO therefore counts the However good GAO’s information and recommen- number of recommendations made each year and, dations may be, if what we provide reaches those at the agencywide level, calculates the percentage who need it too late to be useful, we have failed in of products that contain recommendations. our mission to support the Congress. We assess timeliness by comparing the date on which a GAO One essential way we fulfill GAO’s mission of sup- product is actually delivered with the delivery date porting the Congress is to present information GAO’s managers agreed to with their congressional directly to the congressional committees that are clients. conducting oversight or deliberating legislation. We assess our ability to meet that challenge by tracking In the following sections, we discuss what GAO’s the number of hearings at which GAO’s experts fiscal 2002 results for these measures say about our present testimony. This measure serves as an indica- performance. tor of how responsive GAO’s people are to testi- GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 45 PART II Agencywide Results In our 81st year as the Congress’s “watchdog,” GAO recorded $37.7 billion in financial benefits for the American people, along with more than 900 actions taken to improve government agencies’ manage- ment or performance. Those numbers reflect not only the achievements of GAO’s people but also those of the Congress and of the many federal agencies that acted on our findings and recommen- dations to improve the government’s accountability, operations, and services. In this section, we present detailed performance information for GAO as a whole. Subsequent sections present detailed per- indicators to gauge progress in meeting societal formance information on our progress toward each needs and refocused work under another perfor- of GAO’s strategic goals. mance goal on improving the quality of evaluative information (see the goal 3 results section). As discussed in the previous section, we use a set of performance measures to assess the results of our After congressional action is complete on our bud- work each year. These results are compared with get request for fiscal 2003, we may revise our performance targets set 2 years in advance. We set annual targets for that year and our 2-year perfor- performance targets after assessing what we have mance goals. been able to achieve, on average, in the past and what congressional and executive branch actions are likely to occur in the future. Once we have ten- tative agencywide targets, we begin to look at tar- Financial Benefits gets for our strategic goals. In a series of meetings, the views of executives in charge of the work to be For fiscal 2002, we reported $37.7 billion in finan- done and the views of the agency’s top leadership cial benefits stemming from the implementation of are compared and discussed to refine the tentative GAO’s findings and recommendations. That total targets at all levels. Once approved by the Comp- exceeds the target for the year of $30 billion by troller General, the targets become final and are nearly 26 percent. Six of GAO’s 115 financial published in our performance plan. accomplishments for the year represented nearly $21.9 billion (or about 58 percent) of the total: Actual performance during fiscal 2002 has not affected our planned performance in fiscal 2003 in ■ safeguarding Medicare from fraud and abuse, appreciable ways. In some instances, we have $8.1 billion; adjusted performance targets for fiscal 2003, but we ■ improving the Department of Housing and Urban made those adjustments in response to changing Development’s budget practices, $4.9 billion; assessments of the external factors that influence our work. The measures and targets tables in this ■ reducing losses from farm loans, $4.8 billion; section show where targets have changed since the ■ improving the Defense Department’s budgeting publication of our fiscal 2003 performance plan. for contingencies, $1.5 billion; We have also updated our 2-year performance goals in two instances, again based on what we ■ reducing the cost of cleaning up hazardous waste want to achieve in the future: We added a new per- at the Energy Department’s Hanford facility, $1.5 formance goal on the use of national performance billion; and 46 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II Agencywide Results Annual Measures and Targets 2002 4-year 1999 2000 2001 avg. 2003 Performance measure Actual Actual Actual Target Actual Actual Target Financial benefits (billions) $20.1 $23.2 $26.4 $30.0 $37.7a $26.9 $32.5b Other benefits 607 788 799 770 906 775 800b Past recommendations implemented 70% 78% 79% 75% 79% N/A 77% New recommendations made 940 1,224 1,563 1,200 1,950 1,419 1,250b New products with recommendations 33% 39% 44% 45% 53% 42% 50% Testimonies 229 263 151 200 216 215 180b Timeliness 96% 96% 95% 98% 96% 96% 98% Note: Agencywide totals may differ from the sum of the amounts on the tables for strategic goals 1, 2, and 3 because when multiple units participate in an engagement, credit may be reflected under more than one of the goals. Also, the fiscal 2003 target for testimonies includes seven testimonies not assigned to goals. aChanges GAO made to its methodology for tabulating financial benefits caused the fiscal 2002 results to increase about 11 percent. See text under Financial Benefits on page 47 for details. bFour targets published in GAO’s performance plan for fiscal 2003 were subsequently revised based on more current informa- tion. Two were raised; two were lowered. The original targets were financial benefits, $35 billion; other benefits, 785; recom- mendations made, 1,200; and testimonies, 210. N/A = not applicable 4-Year Averages present value in calculating benefits. We had expected the changes in methodology to increase Performance measure 1999 2000 2001 2002 financial benefits by about 25 percent and raised Financial benefits (billions) $19.5 $21.0 $22.4 $26.9 our fiscal 2002 and 2003 targets to offset that Other benefits 451 581 683 775 increase. When we analyzed the actual results for New recommendations fiscal 2002, we found that the changes in methodol- made 898 997 1,179 1,419 ogy had instead caused about an 11 percent New products with increase. If the financial benefits reported in fiscal recommendations 33% 35% 37% 42% 2002 had been tabulated using GAO’s old method- Testimonies 212 233 225 215 ology, they would have totaled about $33.9 billion Timeliness 88% 94% 95% 96% (or $3.8 billion less than under the new methodol- ogy), up more than 28 percent over the $26.4 bil- Note: 4-year averages can be useful when examining lion in benefits reported in fiscal 2001. trends over time because they minimize the effect of an atypical result in any given year. To claim that financial benefits have been achieved, GAO’s people must document the connection ■ preserving an inability-to-work test as a between the benefits reported and work GAO did. qualification for Disability Insurance payments, They must also obtain estimates of the benefits’ $1.1 billion. value from independent third parties. In the past, GAO’s staff were limited to claiming no more than 2 When comparing the fiscal 2002 results to previous years’ worth of an accomplishment’s benefits. They years’ results, it is important to note that we could, however, request waivers of the 2-year limit changed our methodology for tabulating financial if they could demonstrate that a particular accom- benefits between fiscal 2001 and 2002 to ensure that plishment had an effect over a much longer period. criteria were uniformly applied and to use net GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 47 PART II The number of waivers granted was small: 16 over enced by unusual highs or lows—shows growth the course of 4 years during which more than 380 over the longer term to have been more typically in accomplishments were documented as having pro- the range of $2 billion a year. Most of fiscal 2002’s duced financial benefits. But the issues raised by increase occurred under goal 1, as will be discussed the waivers prompted GAO’s executives to study later. Given the trends in the financial benefits data, whether the 2-year period was too short to show the smaller impact of the methodological changes, the real impact of certain types of accomplishments. and the status of new changes federal agencies have begun to make in response to GAO’s findings The study group found that the accomplishments in and recommendations, we have lowered our fiscal question were those that led to reductions in the 2003 target from $35 billion to $32.5 billion. costs of projects and entitlements over a multiyear period or that increased revenues from asset sales or changes in tax laws or user fees. They recom- Other Benefits mended that beginning in fiscal 2002, teams be per- mitted to claim 5 years of benefits accruing from Many of the benefits that flow to the American peo- those types of accomplishments and that the use of ple from GAO’s work cannot be measured in dol- waivers be eliminated, thus making the application lars. These benefits stem from instances in which of the criteria uniform. Their recommendations GAO’s findings or recommendations prompted were adopted and in fiscal 2002, 30 of GAO’s 115 actions that improved government operations and financial accomplishments (or roughly 26 percent) services. In fiscal 2002, GAO recorded 65 instances met the criteria for claiming financial benefits for in which information GAO provided to the Con- more than 2 years. gress resulted in statutory or regulatory changes, 391 instances in which federal agencies improved For certain types of accomplishments, however, services to the American public, and 450 instances GAO’s executives believed the 5-year period was in which core business processes were improved at too long because experience has shown that the agencies or in which governmentwide reforms were impact of some kinds of changes is less sustained advanced. This total of 906 other benefits exceeded than that of those placed under the 5-year limit. our target of 770 for the year by about 18 percent Consequently, staff can continue to claim no more and was also up about 16 percent over the fiscal than 2 years of benefits from accomplishments gen- 2001 total of 779. erated by changes made to federal agencies’ opera- tions. In fiscal 2002, 85 of GAO’s financial Among the key accomplishments were the first accomplishments (or nearly 74 percent) fell in this important steps toward unifying the homeland secu- category. rity efforts of all levels of government and the pri- vate sector, greater accountability in the federal In addition to the elimination of waivers and the acquisition process, and protecting the taxpayers establishment of a 5-year accrual period for some from faulty analyses of major public works pro- kinds of benefits, GAO began in fiscal 2002 to cal- grams. These and other accomplishments are culate financial benefits in net present value terms. reported in detail in appendix 1. Because $1 next year is worth less than $1 today, we utilize present value accounting to convert Looking ahead, our assessments of the executive future and past values into current values for accu- branch’s current efforts to implement GAO’s recom- rate comparison. All of the other requirements for mendations led us to set a target of 800 other bene- claiming financial benefits have remained the same fits for fiscal 2003. (see page 74 for more information). After taking the effects of the changes in methodol- Additional Measures ogy into account, it is clear that fiscal 2002 was still In addition to the benefits that accrued in fiscal 2002 an unusual year for GAO. The $7.5 billion increase from GAO’s past work, the following results were in financial benefits between fiscal 2002 and 2001 also achieved: was more than twice that of prior years. The trend in the 4-year averages data—which are less influ- 48 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II ■ Past recommendations implemented—We completes a series of compliance audits on documented that federal agencies had agencies’ information security systems and implemented 79 percent of the recommendations practices—work that has required specific, and we made in fiscal 1998, results that exceeded the therefore numerous, recommendations to each target of 75 percent and were the same as the agency. We therefore set a fiscal 2003 target of fiscal 2001 results. As the figure shows, agencies 1,250 new recommendations. need time to act on recommendations; hence, we ■ New products with recommendations—In assess implementation after 4 years, the point at fiscal 2002, 53 percent of GAO’s products which past experience has shown that if a contained recommendations for improved recommendation has not been implemented it is government accountability, operations, or not likely to be. The implementation of GAO’s services, exceeding the target of 45 percent by 8 recommendations paves the way toward more points and our fiscal 2001 results of 44 percent by benefits for the American people in future years. 9 points. Because we know that our Our target for fiscal 2003 is a 77 percent congressional clients often want purely implementation rate. informational products from us, we have leveled off the target for this measure at 50 percent, Implementation Rate for Recommendations letting our staff know they have the leeway to Made in Fiscal 1998 accommodate informational requests while still Percentage focusing on the need to provide 90 recommendations for improvements in about half 79% 80 of GAO’s products. 69% 70 62% ■ Testimonies—Our witnesses testified at 216 60 50 congressional hearings during fiscal 2002, 44% 40 exceeding our target of presenting testimony at 30 200 hearings by 8 percent and surpassing the 20 fiscal 2001 total of 151 hearings by 43 percent. 10 Meeting the target was challenging given the 0 disruptions anthrax attacks caused on Capitol Hill Year 1 Year 2 Year 3 Year 4 and the reordering of congressional priorities in Source: GAO. the wake of the September 11 attacks. The ■ New recommendations made—We issued opportunities to hold hearings were reduced by 1,950 new recommendations for additional the former and the topics that needed to be improvements to government accountability, addressed were altered by the latter. Especially operations, and services during fiscal 2002, quick responses were also necessary. GAO exceeding the target of 1,200 by 63 percent and received about 24 hours’ notice of a hearing also exceeding the previous year’s total of 1,563 before the panel drafting the House legislation to by 25 percent. Among the recommendations create the new Department of Homeland were those to the Administrator of the Centers for Security, for instance. The body of work GAO Medicare and Medicaid Services to help safeguard had already completed and the internal the well-being of nursing home residents, those coordination of ongoing engagements provided to the Secretary of State calling for the by GAO’s “virtual” National Preparedness Team development of a governmentwide plan to help allowed us to meet that request and a number of other countries combat nuclear smuggling, and others. Looking ahead, we anticipate the those to the Director of the Office of Management Congress will be holding fewer hearings during and Budget calling for agency auditors to pay fiscal 2003 than last year for three reasons. special attention to agencies’ ability to meet cost Historical data show that fewer hearings are accounting standards and to report on agencies’ conducted (1) in the first year of a congressional compliance with them. Looking ahead, we session as the new Congress organizes, (2) when expect the recent increase in the number of new the majority shifts in the House or the Senate and recommendations to begin tailing off as our staff committee staffs reorganize and reprioritize, and (3) when the House, Senate, and the White GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 49 PART II House are all controlled by one political party. protocols (www.gao.gov/cgi-bin/ All three of these factors will be present during getrpt?rptno=GAO-03-232sp) that define fiscal 2003. We have therefore lowered the year’s transparent policies and practices governing target for the number of hearings at which we GAO’s interactions with agencies when we audit expect our staff to testify to 180. or evaluate their operations or programs. We believe that the protocols will help us expedite ■ Timeliness—Although we were able to deliver some of the work with agencies by, for instance, almost all of our products—96 percent---on time helping them understand and meet deadlines for in fiscal 2002 and nudged GAO’s performance up commenting on drafts of GAO products before a point over fiscal 2001’s, we missed the target of they are issued. Greater compliance with the 98 percent. A number of factors contributed to comment period deadlines should allow us to the 2-point gap in GAO’s performance on this issue more of our products on time. The pilot measure, most notably the need to delay work in phase for the agency protocols concludes on progress to free up resources to meet new and June 30, 2003. The protocols will then be imperative congressional requests for modified as appropriate and formally adopted. information. GAO is keeping the target for this We may see some improvement in our timeliness measure at 98 percent for fiscal 2003, and we statistics in fiscal 2003 as a result of the pilot, but expect it to continue to be a difficult target to hit. the real effect of the protocols may not be seen While external factors beyond GAO’s control may until the end of fiscal 2004. We also believe that again defeat our attempts to hit the 98 percent our continuing investments in human capital and level, we believe we can still improve the information technology will improve our timeliness of our work in other ways. For timeliness. instance, we are piloting a set of agency 50 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II Goal 1 Results Provide Timely, Quality Service to the Congress and the Federal Government to Address Current and Emerging Challenges to the Well-Being and Financial Security of the American People In furthering GAO’s mission to support the Con- gress in carrying out its constitutional responsibili- ties, GAO’s first strategic goal focuses on several aspirations of the American people that were defined by the Founding Fathers: to “establish jus- tice, insure domestic tranquility,… promote the gen- eral welfare, and secure the blessings of liberty to ourselves and our posterity ….” The nation’s aging To do our work under these eight objectives during and more diverse population, rapid technological fiscal 2002, we conducted audits, analyses, and change, and the desire of Americans to improve the evaluations at every major federal agency and quality of their lives have major policy and budget- developed hundreds of reports and testimonies on ary implications for the federal government. In par- the efficacy and soundness of those programs in ticular, growing commitments to the elderly will response to congressional requests and mandates. soon exhaust the capacity of a smaller generation of As the table below shows, the results for the year workers to finance the competing needs and wants exceeded four of this strategic goal’s five perfor- brought to the federal doorstep. mance targets. This section analyzes those results, discusses the reason for the unmet target, and lays GAO’s first strategic goal, therefore, is to help out our targets for fiscal 2003. address the current and emerging challenges that affect the well-being and financial security of the American people by supporting congressional and federal efforts on Financial Benefits ■ the health needs of an aging and diverse The financial benefits reported for this goal in fiscal population, 2002 totaled $24.1 billion, exceeding the target of $17 billion by nearly 42 percent and topping fiscal ■ the education and protection of the nation’s 2001’s total of $8.9 billion by 171 percent. The tar- children, get was exceeded by such a wide margin primarily ■ the promotion of work opportunities and the because the agencies that implemented particular protection of workers, recommendations from GAO were able to achieve far greater financial benefits than we expected. ■ a secure retirement for older Americans, ■ an effective system of justice, Five of GAO’s six accomplishments valued at over $1 billion were achieved by this goal. Those five ■ the promotion of viable communities, big-dollar accomplishments, in fact, accounted for ■ responsible stewardship of natural resources and 85 percent of the goal’s total. Their unanticipated the environment, and size is responsible for the goal’s greatly exceeding its target for financial benefits. These accomplish- ■ a secure and effective national physical ments, listed on page 46 and reported in detail in infrastructure. the goal 1 section of appendix 1, stemmed from GAO engagements that helped safeguard and best GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 51 PART II Strategic Goal 1 Performance Data Annual Measures and Targets 2002 4-year 1999 2000 2001 avg. 2003 Performance measure Actual Actual Actual Target Actual Actual Target Financial benefits (billions) $13.8 $14.1 $8.9 $17.0 $24.1a $15.2 $21.2b Other benefits 140 182 210 218 226 190 208b Past recommendations implemented 72% 72% 71% 75% 72% N/A 77% New recommendations made 350 435 396 359 524 426 363b Testimonies 123 131 73 93 111 110 85b aChanges GAO made to its methodology for tabulating financial benefits caused the fiscal 2002 results to increase about 11 percent. See page 47 for details. bThis target was revised after GAO issued its performance plan for fiscal 2003. The original targets were financial benefits, $22.8 billion; other benefits, 218; recommendations made, 359; and testimonies, 93. N/A = not applicable 4-Year Averages Other Benefits Performance measure 1999 2000 2001 2002 The other tangible benefits reported for goal 1 in Financial benefits (billions) $9.8 $11.8 $11.9 $15.2 fiscal 2002 included 187 actions taken by federal Other benefits 129 154 177 190 agencies to improve their services and operations in New recommendations response to GAO’s work and another 39 in which made 278 336 367 426 information GAO provided to the Congress resulted Testimonies 110 121 114 110 in statutory or regulatory changes. This total of 226 other benefits exceeded our target of 218 for the Note: Four-year averages can be useful when examining trends over time because they minimize the effect of an year and was an increase of roughly 8 percent over atypical result in any given year. fiscal 2001’s results of 210 other benefits. Among the key accomplishments in this category use tax dollars. The largest of them, valued at $8.1 were better targeting education funds to high-pov- billion, arose from our work on curtailing improper erty school districts, making the Job Corps Program Medicare payments to providers. The others more effective, improving the management of stemmed from our work on farm loans, public nuclear waste cleanup projects, and protecting the housing, hazardous waste cleanup, and Social Secu- taxpayers from faulty analyses of major public rity Disability Insurance. works programs. These and other accomplish- ments are reported in detail in the goal 1 section of Looking ahead, our assessments of the progress appendix 1. agencies are achieving with the implementation of recommendations we made in the past have led us Looking ahead, our assessments of the executive to believe the financial benefits attributable to goal branch’s current efforts to implement GAO’s recom- 1 will not be nearly as high in the near future. We mendations made under this goal led us to set a tar- have therefore set a target of $21.2 billion for fiscal get of 208 other benefits for fiscal 2003. 2003, a figure that is still quite high when compared with goal 1’s past annual results or with the 4-year average results. Additional Measures In addition to the benefits that accrued in fiscal 2002 from past work done under this goal, GAO also recorded the following results: 52 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II ■ Past recommendations implemented—We strategy for expanding stockpiles of childhood documented that federal agencies had vaccines and those to the Chairman of the implemented 72 percent of the recommendations Federal Energy Regulatory Commission calling for we made in fiscal 1998, results that were up 1 his agency to develop an action plan for point from fiscal 2001’s but falling short of the 75 overseeing competitive energy markets. Our percent target for fiscal 2002. After GAO missed target for fiscal 2003 is 363 new goal 1’s target for this measure in fiscal 2001, we recommendations. examined the reasons and found that ■ Testimonies—Our witnesses testified at 111 recommendations developed by staff who congressional hearings related to this strategic subsequently retired or moved to another GAO goal, an increase of about 52 percent over fiscal unit were less likely to be monitored for 2001 and exceeding the fiscal 2002 target of 93 implementation than recommendations testimonies by 19 percent. Much of the increase developed by staff still available to monitor represents testimonies on homeland security implementation themselves. Hence, it was issues. In the months immediately after the possible that the implementation rate was higher September 11 terrorist attacks, we anticipated a than the information in GAO’s tracking system surge in requests for testimonies on topics related indicated. We held a session to allow staff from to our work under goal 2. As the year unfolded, teams with higher implementation rates to discuss however, we observed that congressional interest practices and solutions with staff from teams with was highest on goal 1 issues such as safeguarding lower implementation rates and stressed the need transportation and other vital infrastructure and to conduct thorough follow-up on past assessing the capabilities of first responders to recommendations. In revisiting the issue after the handle bioterrorism and other threats. We do not target again went unmet in fiscal 2002, we found believe the pace of hearings will be the same in more specific problems relating to fiscal 2003 for the three reasons discussed recommendations made to particular agencies. previously. We have therefore set a target of One agency’s reorganization had delayed presenting testimony at 85 hearings during fiscal implementation of some of GAO’s 2003. recommendations, and in a few other instances, agencies had decided not to implement ■ Two-year performance goals—At the close of recommendations they considered costly or fiscal 2002, GAO was halfway through the 2-year insignificant. In these latter instances, the senior assessment cycle for the performance goals that executive now in charge of our work in those provide the strategies we use to achieve our areas has directed staff to ensure that broader strategic goals and objectives. Strategic recommendations issued in the future are clearer goal 1 has 37 performance goals, which call for and doable and to develop a dialogue with the GAO to undertake work that includes evaluating agencies in question to foster implementation of the effectiveness of federal programs to promote our recommendations. GAO has asked the staff and protect the public health and assessing whose work contributes to the goal 1 results to efforts to improve safety and security in all renew their monitoring efforts to help meet a transportation modes. As the table at the start of higher target for fiscal 2003: a 77 percent rate of this section shows, at the halfway mark, GAO’s implementation. managers reported that enough work was under way or completed to allow us to meet all 37 of ■ New recommendations made—During fiscal the performance goals by the end of fiscal 2003. 2002, we issued 524 new recommendations The key efforts to be undertaken to meet each of under goal 1 for additional improvements to the goals are online in the supplements to GAO’s government accountability, operations, and strategic plan at www.gao.gov/sp/html/ services, exceeding the target of 359 by 46 goal_1.html. The performance goals GAO will percent and the fiscal 2001 total of 396 by 32 begin work on in fiscal 2004 will be published in percent. Among the recommendations were our annual performance plan after our those to the Secretary of Health and Human appropriations for the year are known. Services calling for the development of a sound GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 53 PART II 2-Year Performance Goals, Fiscal 2002–2003 ■ On track to meet ❏ Not on track to meet Strategic objective/performance goal The health care needs of an aging and diverse population ■ Evaluate Medicare reform, financing, and operations ■ Assess trends and issues in private health insurance coverage ■ Assess actions and options for improving the Department of Veterans Affairs’ and the Department of Defense’s health care services ■ Evaluate the effectiveness of federal programs to promote and protect the public health ■ Evaluate the effectiveness of federal programs to improve the nation’s preparedness for the public health and medical consequences of bioterrorism ■ Evaluate federal and state program strategies for financing and overseeing chronic and long-term health care ■ Assess states’ experiences in providing health insurance coverage for low-income populations The education and protection of the nation’s children ■ Analyze the effectiveness and efficiency of early childhood education and care programs in serving their target populations ■ Assess options for federal programs to effectively address the educational and nutritional needs of elementary and secondary students and their schools This performance goal has been revised to reflect the scope of the work we are doing; it now includes assessing the nutritional needs of students. ■ Determine the effectiveness and efficiency of child support enforcement and child welfare programs in serving their target populations ■ Identify opportunities to better manage postsecondary, vocational, and adult education programs and deliver more effective services The promotion of work opportunities and the protection of workers ■ Assess the effectiveness of federal efforts to help adults enter the workforce and to assist low- income workers ■ Analyze the impact of programs designed to maintain a skilled workforce and ensure employers have the workers they need ■ Assess the success of various enforcement strategies to protect workers while minimizing employers’ burden in the changing environment of work ■ Identify ways to improve federal support for people with disabilities A secure retirement for older Americans ■ Assess the implications of various Social Security reform proposals ■ Identify opportunities to foster greater pension coverage, increase personal saving, and ensure adequate and secure retirement income ■ Identify opportunities to improve the ability of federal agencies to administer and protect workers’ retirement benefits An effective system of justice ■ Identify ways to improve federal agencies’ ability to prevent and respond to terrorist acts and other major crimes ■ Assess the effectiveness of federal programs to control illegal drug use ■ Identify ways to administer the nation’s immigration laws to better secure the nation’s borders and promote appropriate treatment of legal residents ■ Assess the administrative efficiency and effectiveness of the federal court and prison systems 54 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II 2-Year Performance Goals, Fiscal 2002–2003 ■ On track to meet ❏ Not on track to meet Strategic objective/performance goal The promotion of viable communities ■ Assess federal economic development assistance and its impact on communities ■ Assess how the federal government can balance the promotion of home ownership with financial risk ■ Assess the effectiveness of federal initiatives to assist small and minority-owned businesses ■ Assess federal efforts to enhance national preparedness and capacity to respond to and recover from natural and man-made disasters The wording of this goal has been revised to reflect that the scope of the work we are doing under the goal is broader than assessing just disaster assistance. ■ Assess how well federally supported housing programs meet their objectives and affect the well- being of recipient households and communities Responsible stewardship of natural resources and the environment ■ Assess the nation’s ability to ensure reliable and environmentally sound energy for current and future generations ■ Assess federal strategies for managing land and water resources in a sustainable fashion for multiple uses ■ Assess federal programs’ ability to ensure a plentiful and safe food supply, provide economic security for farmers, and minimize agricultural environmental damage ■ Assess federal pollution prevention and control strategies ■ Assess efforts to reduce the threats posed by hazardous and nuclear wastes A secure and effective national physical infrastructure ■ Assess strategies for identifying, evaluating, prioritizing, financing, and implementing integrated solutions to the nation’s infrastructure needs ■ Assess the impact of transportation and telecommunications policies and practices on competition and consumers ■ Assess efforts to improve safety and security in all transportation modes ■ Assess the Postal Service’s transformation efforts to ensure its viability and accomplish its mission ■ Assess federal efforts to plan for, acquire, manage, maintain, secure, and dispose of the government’s real property assets Note: Each performance goal is supported by a set of key efforts. For a performance goal to be considered “met” after 2 years, at least 75 percent of its key efforts must have been accomplished. To view the key efforts for any of the performance goals above, go to www.gao.gov/sp/spsupp.html. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 55 Goal 1’s Cost: $178.3 Million Goal 1 39% of GAO’s Total Goal 1 Goal 2 Goal 3 Goal 4 Well-being and financial security of American people Results $24.1 billion in financial benefits -Safeguarding Medicare from fraud and abuse, $8.1 billion -Improving HUD’s budget practices, $4.9 billion -Reducing losses from farm loans, $4.8 billion -Reducing costs of hazardous waste cleanup at Hanford, $1.5 billion -Additional financial benefits, $4.8 billion 226 other benefits -Improving pediatric drug research and labeling -Simplifying requirements for food stamp eligibility and benefits -Better targeting education funds to high-poverty school districts -Protecting taxpayers from faulty analyses of major public works programs -222 additional benefits 524 new recommendations made -Develop strategy for expanding stockpiles of childhood vaccines -Develop an action plan for overseeing competitive energy markets -522 additional improvements recommended 111 testimonies -Aviation security -Bioterrorism -Food safety -Nursing homes -107 additional hearings on topics of national importance Source: GAO. PART II Goal 2 Results Provide Timely, Quality Service to the Congress and the Federal Government to Respond to Changing Security Threats and the Challenges of Global Interdependence As the world grows increasingly interconnected through more open markets and rapidly developing technology, globalization is creating new opportuni- ties for the United States as a whole and for U.S. producers and consumers. At the same time, the United States is facing threats to its security and economy from sources that span terrorism, regional conflicts, and instability sparked by economic con- ■ respond to diffuse threats to national and global ditions, corruption, ethnic hatreds, and national- security, ism. Consequently, the federal government is ■ ensure military capabilities and readiness, working to promote foreign policy goals, sound trade policies, and other strategies to advance the ■ advance and protect U.S. international interests, interests of the United States and its allies while also and seeking to anticipate and address the increasingly ■ respond to the impact of global market forces on diffuse threats to the nation’s security and economy. U.S. economic and security interests. Given the importance of those efforts to the nation To do our work under these four objectives during and the Congress’s expressed needs for objective fiscal 2002, we conducted field work in Europe, information, analyses, and recommendations on the Africa, Asia, Central America, South America, and, wide range of highly complex issues involved, the of course, North America, to collect the most rele- second goal in GAO’s strategic plan is focused on vant, direct evidence in response to congressional helping the Congress and the federal government requests. We then analyzed and distilled the infor- respond to changing security threats and the chal- mation we collected into hundreds of reports, testi- lenges of global interdependence. GAO’s specific monies, and other types of information services. As objectives are to support congressional and federal the table below shows, the results for the year efforts to exceeded four of the strategic goal’s five perfor- mance targets. This section analyzes those results, discusses the reason for the unmet target, and lays out our targets for fiscal 2003. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 57 PART II Strategic Goal 2 Performance Data Annual Measures and Targets 2002 4-year 1999 2000 2001 avg. 2003 Performance measure Actual Actual Actual Target Actual Actual Target Financial benefits (billions) $3.0 $5.5 $10.5 $7.8 $8.4a $6.9 $6.8b Other benefits 80 129 188 178 218 154 200b Past recommendations implemented 65% 84% 81% 75% 83% N/A 77% New recommendations made 255 376 618 460 618 467 521b Testimonies 37 56 34 49 38 41 36b aChanges GAO made to its methodology for tabulating financial benefits caused the fiscal 2002 results to increase about 11 percent. See page 47 for details. bThis target was revised after we issued GAO’s performance plan for fiscal 2003. The original targets were financial benefits, $7.6 billion; other benefits, 192; recommendations made, 485; and testimonies, 55. N/A = not applicable 4-Year Averages Performance measure 1999 2000 2001 2002 Financial benefits (billions) $6.3 $6.0 $6.2 $6.9 Other benefits 65 90 118 154 New recommendations made 266 279 373 467 Testimonies 40 46 43 41 Note: Four-year averages can be useful when examining trends over time because they minimize the effect of an atypical result in any given year. 58 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II 2-Year Performance Goals, Fiscal 2002–2003 ■ On track to meet ❏ Not on track to meet Strategic objective/performance goal Responding to diffuse threats to national and global security ■ Analyze the effectiveness of the federal government’s approach to providing for homeland security ■ Assess U.S. efforts to protect computer and telecommunications systems supporting critical infrastructures in business and government ■ Assess the effectiveness of U.S. programs and international agreements to prevent the proliferation of nuclear, biological, chemical, and conventional weapons and sensitive technologies Ensuring military capabilities and readiness ■ Assess the ability of DOD to maintain adequate readiness levels while addressing the force structure changes needed in the 21st century ■ Assess overall human capital management practices to ensure a high-quality total force ■ Identify ways to improve the economy, efficiency, and effectiveness of DOD’s support infrastructure and business systems and processes ■ Assess the National Nuclear Security Administration’s efforts to maintain a safe and reliable nuclear weapons stockpile ■ Analyze and support DOD’s efforts to improve budget analyses and performance management ■ Assess whether DOD and the services have developed integrated procedures and systems to operate effectively together on the battlefield ■ Assess the ability of weapon system acquisition programs and processes to achieve desired outcomes Advancing and protecting U.S. international interests ■ Analyze the plans, strategies, costs, and results of the U.S. role in conflict interventions ■ Analyze the effectiveness and management of foreign aid programs and the tools used to carry them out ■ Analyze the costs and implications of changing U.S. strategic interests ■ Evaluate the efficiency and accountability of multilateral organizations and the extent to which they are serving U.S. interests ■ Assess the strategies and management practices for U.S. foreign affairs functions and activities Responding to the impact of global market forces on U.S. economic and security interests ■ Analyze how trade agreements and programs serve U.S. interests ■ Improve understanding of the effects of defense industry globalization ■ Assess how the United States can influence improvements in the world financial system ■ Assess the ability of the financial services industry and its regulators to maintain a stable and efficient global financial system ■ Evaluate how prepared financial regulators are to respond to change and innovation ■ Assess the effectiveness of regulatory programs and policies in ensuring access to financial services and deterring fraud and abuse in financial markets Note: Each performance goal is supported by a set of key efforts. For a performance goal to be considered “met” after 2 years, at least 75 percent of its key efforts must have been accomplished. To view the key efforts for any of the performance goals above, go to www.gao.gov/sp/spsupp.html. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 59 PART II Financial Benefits Other Benefits The financial benefits reported for this goal in fiscal The other tangible benefits reported for goal 2 in 2002 totaled $8.4 billion, exceeding the target of fiscal 2002 included 204 actions taken by federal $7.8 billion by roughly 8 percent. agencies to improve their services and operations in response to GAO’s work and another 14 in which Most of the financial benefits were attributable to information GAO provided to the Congress resulted seven accomplishments valued at $500 million or in statutory or regulatory changes. This total of 218 more each. These accomplishments, reported in other benefits exceeded our target of 178 for the detail in the goal 2 section of appendix 1, typically year and was an increase of 16 percent over fiscal stemmed from GAO engagements that helped the 2001’s total of 188. Department of Defense free billions of dollars for defense priorities by eliminating waste or ineffi- Among the key accomplishments in this category ciency. The largest of them, valued at $1.5 billion, were the first important steps toward unifying the arose from the reduction of the department’s for- homeland security efforts of all levels of govern- eign currency exchange funding during a time ment and the private sector, stronger measures to when the dollar has been strong, a step Defense prevent the unapproved export of missile parts, and officials took in response to a GAO recommenda- the more effective delivery of disaster recovery tion that did not affect readiness but did free funds assistance to other nations. These and other accom- to meet other needs. plishments are reported in detail in the goal 2 sec- tion of appendix 1. Although we met the fiscal 2002 target, the year’s total was down about 20 percent from fiscal 2001’s Looking ahead, our assessments of the executive figure. The 2001 total was, in fact, unusually branch’s current efforts to implement GAO’s recom- large—$10.5 billion compared with the 4-year aver- mendations made under this goal led us to set a tar- age of $6.2 billion—because of the benefits docu- get of 200 other benefits for fiscal 2003. mented from one particular accomplishment: GAO’s support work for the Base Realignment and Closure Commission, which sought to reconfigure U.S. mili- Additional Measures tary facilities to meet 21st century needs. We esti- mated the value of our work at about $6 billion, In addition to the benefits that accrued for the based on the Department of Defense’s American people in fiscal 2002 from past work documentation. done under this goal, GAO also recorded the fol- lowing results: Given the large portion of the U.S. budget that defense spending consumes, we expect our work ■ Past recommendations implemented—We under this goal to continue to produce economies documented that federal agencies had and efficiencies that yield billions of dollars in finan- implemented 83 percent of the recommendations cial benefits for the American people each year. we made in fiscal 1998, results that exceeded the Our assessments of the executive branch’s current target of 75 percent and were up 2 points over efforts to implement GAO’s recommendations, the previous year. The target for fiscal 2003 is a however, have led us to target financial benefits of 77 percent implementation rate. about $6.8 billion for fiscal 2003, an amount that is ■ New recommendations made—We issued 618 more in line with the trends reflected in the 4-year new recommendations for additional averages for this goal than with the unusually high improvements to government accountability, 2001 figure. operations, and services during fiscal 2002, exceeding the target of 460 and matching the previous year’s results. Among the recommendations made were those to the Secretary of State calling for the development of a governmentwide plan to help other countries 60 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II combat nuclear smuggling and those to the and for satisfying our clients’ requests with timely, Secretary of Defense calling for the maturity of objective information. We expect to be critical technologies required for the Joint Strike reasonably accurate in setting achievable targets Fighter to be proven before the Pentagon makes in the future but will continue to encourage our engineering and manufacturing investments in managers to shift resources and reprioritize work the program. The target for fiscal 2003 is 521 whenever necessary to meet unforeseen new recommendations. congressional requests rather than to focus exclusively on meeting targets. For fiscal 2003, ■ Testimonies—Our witnesses testified at 38 we have set a target of presenting testimony at 36 congressional hearings related to this strategic hearings related to this goal. goal, an increase of about 12 percent over fiscal 2001 but falling short of our target of presenting ■ Two-year performance goals—At the close of testimony at 49 hearings. We believe this fiscal 2002, GAO was halfway through the 2-year happened, in part, because at the time we set our assessment cycle for the performance goals that targets, we did not foresee precisely how the provide the strategies we use to achieve our ramifications of the September 11 terrorist attacks broader strategic goals and objectives. Strategic would affect the extent and type of our goal 2 has 21 performance goals, which call for contributions to the Congress under this goal. We GAO to undertake work ranging from assessing anticipated more testimonies on the national the effectiveness of efforts to prevent the security issues embodied in goal 2, but in fact, far proliferation of nuclear, biological, and chemical more testimonies were requested on homeland weapons to analyzing how trade agreements and security functions such as aviation security and programs serve U.S. interests. As the table at the bioterrorism, subjects handled under goal 1, start of this section shows, at the halfway mark, where the number of testimonies rose 52 percent GAO’s managers reported that enough work was over 2001’s figure. Under the circumstances, we under way or completed to allow us to meet all do not regard the missed goal 2 target as 21 of the performance goals by the end of fiscal problematic because it does not represent a lack 2003; the key efforts to be undertaken to meet of success in serving the Congress. In the past, each of the goals are online in the supplements under less extraordinary circumstances, we have to GAO’s strategic plan at www.gao.gov/sp/html/ been able to make reasonably accurate forecasts goal_2.html. The performance goals GAO will of congressional demand for testimonies goal by begin work on in fiscal 2004 will be published in goal and, thus, to hold ourselves accountable for our annual performance plan after our having resources in place to meet the demand appropriations for the year are known. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 61 Goal 2’s Cost: $110.5 Million Goal 2 24% of GAO’s Total Goal 1 Goal 2 Goal 3 Goal 4 Changing security threats and challenges of globalization Results $8.4 billion in financial benefits -Reducing DOD’s foreign currency exchange funding, $1.5 billion -Consolidating and modernizing DOD's computer center activities, $859 million -Reducing funding for the V-22 development program, $763.8 million -Better management of DOD’s satellite capacity, $702 million -Additional financial benefits, $4.6 billion 218 other benefits -First steps toward unifying homeland security efforts -Stronger measures to prevent unapproved export of missile parts -More effective delivery of disaster recovery assistance to other nations -Improving Peace Corps’ safety and security practices -214 additional benefits 618 new recommendations made -Develop governmentwide plan to help other countries combat nuclear smuggling -Make engineering and manufacturing investments in technologies proven to be mature -Develop overall investment plan for the National Security Space Strategy -615 additional improvements recommended 38 testimonies -Combating terrorism -Chemical and biological preparedness -Conflict diamonds -Foreign language needs -34 additional hearings on topics of national importance Source: GAO. PART II Goal 3 Results Help Transform the Federal Government’s Role and How It Does Business to Meet 21st Century Challenges The federal government faces an array of chal- lenges, including the national response to terrorism, transition to a knowledge-based economy, rapid technological advances, and changing demograph- ics. These challenges require a fundamental reex- amination of the government’s priorities, processes, policies, and programs to effectively address shift- ing public expectations, needs, and fiscal pressures. helps transform the role of the government and What has become obvious since September 11 is how it does business to meet 21st century chal- that the federal government will need to work more lenges, we have established strategic objectives to effectively with other governments, nongovernmen- tal organizations, and the private sector—both ■ analyze the implications of the increased role of domestically and internationally—to achieve results. public and private parties in achieving federal Because the public expects demonstrable results objectives; from the federal government, government leaders ■ assess the government’s human capital and other need to increase strategic planning, address man- capacity for serving the public; agement challenges and high-risk issues, use inte- grated approaches, enhance their agencies’ results ■ support congressional oversight of the federal orientation, and ensure accountability. Examining government’s progress toward being more existing programs and operations for potential cost results-oriented, accountable, and relevant to savings can create much needed fiscal flexibility to society’s needs; and address emerging needs. Moreover, addressing ■ analyze the government’s fiscal position and today’s priorities must be balanced against the long- approaches for financing the government. term fiscal pressures of financing existing programs and operations. To do our work under these four objectives during fiscal 2002, we conducted extensive audits, evalua- In light of the comprehensive reassessment called tions, and analyses in response to congressional for in the current environment, GAO’s third strategic requests and through our own independent “R&D” goal focuses on the collaborative and integrated ele- work. As the table below shows, the results for the ments needed to achieve results, and it highlights year exceeded four of the strategic goal’s five per- the intergovernmental relationships that are neces- formance targets. This section analyzes those sary to achieve national goals. To ensure that GAO results, discusses the reason for the unmet target, and lays out our targets for fiscal 2003. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 63 PART II Strategic Goal 3 Performance Data Annual Measures and Targets 2002 4-year 1999 2000 2001 avg. 2003 Performance measure Actual Actual Actual Target Actual Actual Target Financial benefits (billions) $4.5 $5.1 $7.0 $5.3 $5.2a $5.5 $4.6 Other benefits 414 503 401 374 462 445 392b Past recommendations implemented 78% 77% 85% 75% 82% N/A 77% New recommendations made 335 413 549 381 808 526 366b Testimonies 100 105 42 58 65 78 52b aChanges GAO made to its methodology for tabulating financial benefits caused the fiscal 2002 results to increase about 11 percent. See page 47 for details. bThistarget was revised after we issued GAO’s performance plan for fiscal 2003. The original targets were other benefits, 375; recommendations made, 356; and testimonies, 62. N/A = not applicable 4-Year Averages Performance measure 1999 2000 2001 2002 Financial benefits (billions) $5.7 $5.7 $5.3 $5.5 Other benefits 274 361 407 445 New recommendations made 355 383 439 526 Testimonies 79 90 86 78 Note: Four-year averages can be useful when examining trends over time because they minimize the effect of an atypical result in any given year. 64 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II 2-Year Performance Goals, Fiscal 2002–2003 ■ On track to meet ❏ Not on track to meet Strategic objective/performance goal The implications of the increased role of public and private parties in achieving federal objectives ■ Analyze the modern service-delivery system environment and the complexity and interaction of service-delivery mechanisms ■ Assess how intergovernmental relationships and the participation of nongovernmental organizations affect the implementation of federal programs and the achievement of national goals ■ Assess the effectiveness of regulatory administration and reforms in achieving government objectives The government’s capacity to better deliver public services ■ Identify and facilitate the implementation of human capital practices that will improve federal economy, efficiency, and effectiveness ■ Identify ways to improve the financial management infrastructure capacity to provide useful information to manage for results and costs day to day ■ Assess the government’s capacity to manage information technology to improve performance ■ Assess efforts to manage the collection, use, and dissemination of government information in an era of rapidly changing technology ■ Assess the effectiveness of the Federal Statistical System in providing relevant, reliable, and timely information that meets federal program needs ■ Identify more business-like approaches that can be used by federal agencies in acquiring goods and services The federal government’s progress toward being more results-oriented, accountable, and relevant to society’s needs ■ Analyze and support efforts to instill results-oriented management across the government ■ Highlight the federal programs and operations at highest risk and the major performance and management challenges confronting agencies ■ Identify ways to strengthen accountability for the federal government’s assets and operations ■ Promote accountability in the federal acquisition process ■ Assess the management and results of the federal investment in science and technology and the effectiveness of efforts to protect intellectual property ■ Identify ways to improve the quality of evaluative information This goal has been revised to reflect that our work on governmentwide performance indicators has been moved to the new performance goal below. ■ Develop new resources and approaches that can be used in measuring performance and progress on the nation’s 21st century challenges This performance goal has been added to guide our efforts to help to support public debate and inform decisions on an emerging issue: the use of national performance indicators to gauge progress in meeting societal needs. The government’s fiscal position and approaches for financing the government ■ Analyze the long-term fiscal position of the federal government ■ Analyze the structure and information for budgetary choices and explore alternatives for improvement ■ Contribute to congressional deliberations on tax policy ■ Support congressional oversight of the Internal Revenue Service’s modernization and reform efforts ■ Assess the reliability of financial information on the government’s fiscal position and financing sources Note: Each performance goal is supported by a set of key efforts. For a performance goal to be considered “met” after 2 years, at least 75 percent of its key efforts must have been accomplished. To view the key efforts for any of the performance goals above, go to www.gao.gov/sp/spsupp.html. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 65 PART II Financial Benefits provided to the Congress resulted in statutory or regulatory changes. This total of 462 other benefits The financial benefits reported for this goal in fiscal exceeded our target of 374 for the year by almost 24 2002 totaled $5.2 billion, down 26 percent from fis- percent and was an increase of 15 percent over fis- cal 2001’s total of $7 billion. Fiscal 2001’s results cal 2001’s total of 401 other benefits. were atypical; as the 4-year averages show, financial benefits for this goal trend under $6 billion. Fiscal Among the key accomplishments in this category 2002’s annual results were less than 2 percent were greater accountability in the federal acquisi- below fiscal 2002’s target. Because the performance tion process, improved implementation of the target was set at an approximate level and the devi- Paperwork Reduction Act, and our development of ation from that level was slight, missing this target “data stewardship” strategies to protect the privacy had no effect on GAO’s overall performance. of individuals when researchers use federal data- bases. These and other accomplishments are Documenting financial benefits for the American reported in detail in the goal 3 section of people through the work done under this goal is appendix 1. particularly challenging for GAO’s staff. Under goal 1, our people work on issues involving the big enti- Looking ahead, our assessments of the executive tlement programs like Medicare and Social Security. branch’s current efforts to implement GAO’s recom- Under goal 2, our people work on issues involving mendations made under this goal led us to set a fis- large-dollar defense programs. But under goal 3, cal 2003 target of 392 other benefits from goal 3. our people typically work on core government business processes and governmentwide manage- ment reforms that can yield important nonfinancial Additional Measures benefits but often have little or no potential for measurable financial benefits. Unlike the other two In addition to the benefits that accrued in fiscal 2002 goals, goal 3 had no accomplishments over the $1 from past work done under this goal, GAO also billion mark in fiscal 2002. The goal’s top-dollar recorded the following results: accomplishment stemmed from our work helping the Department of Defense improve the manage- ■ Recommendations implemented—We ment of its initiatives to consolidate and modernize documented that federal agencies had its computer centers and to outsource some of the implemented 82 percent of the recommendations centers’ activities and processes, an effort that we made in fiscal 1998, results that exceeded the yielded $859 million in savings and costs avoided target of 75 percent but were down 3 points from over a 4-year period. This and other accomplish- the previous year. The target for fiscal 2003 is a ments are reported in detail in the goal 3 section of 77 percent implementation rate. appendix 1. ■ Recommendations made—We issued 808 new recommendations for additional improvements to Our assessments of the executive branch’s current government operations and services during fiscal efforts to implement the recommendations we 2002, exceeding the target of 381 by 112 percent made in our work under this goal led us to target and the fiscal 2001 total of 549 by 47 percent. financial benefits of about $4.6 billion for fiscal Among the recommendations were those to the 2003. Secretary of the Army calling for stronger measures to protect government credit cards from improper use and those to the Director of the Other Benefits Office of Management and Budget calling for agency auditors to pay special attention to The other tangible benefits reported for goal 3 in agencies’ ability to meet cost accounting fiscal 2002 included 450 instances in which agen- standards and to report on agencies’ compliance cies’ core business processes were improved or with them. The target for fiscal 2003 is 366 new governmentwide management reforms were recommendations, significantly lower than the advanced as a result of GAO’s work. In addition, actual results in recent years because a body of there were 12 instances in which information GAO 66 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II work partly responsible for the high number of provide the strategies we use to achieve our recommendations made under goal 3 since fiscal broader strategic goals and objectives. Strategic 2000 is coming to a close, namely the compliance goal 3 has 21 performance goals, which call for work on agencies’ computer security measures. GAO to undertake work ranging from analyzing the delivery of federal services to assessing the ■ Testimonies—During fiscal 2002, our witnesses reliability of information on the government’s testified at 65 congressional hearings related to fiscal position and financing sources. As the table this strategic goal, exceeding the target of 58 by at the start of this section shows, at the halfway about 12 percent and the fiscal 2001 total of 42 by mark, GAO’s managers reported that enough almost 55 percent. Among the testimonies work was under way or completed to allow us to presented were those given at a series of field meet all 21 of the performance goals by the end hearings held by the House Subcommittee on of fiscal 2003; the key efforts to be undertaken to Efficiency, Financial Management, and meet each of the goals are online in the Intergovernmental Relations on the supplements to GAO’s strategic plan at intergovernmental coordination aspects of www.gao.gov/sp/html/goal_3.html. The homeland security. For fiscal 2003, we have set a performance goals GAO will begin work on in target of presenting testimony at 52 hearings. fiscal 2004 will be published in our annual ■ Two-year performance goals—At the close of performance plan after our appropriations for the fiscal 2002, GAO was halfway through the 2-year year are known. assessment cycle for the performance goals that GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 67 Goal 3’s Cost: $141 Million Goal 3 31% of GAO’s Total Goal 1 Goal 2 Goal 3 Goal 4 Transforming the federal government’s role Results $5.2 billion in financial benefits -Improving Defense Department’s computer centers’ operations, $859 million -Improving collection of nontax debts owed to the U.S. government, $300 million -Additional financial benefits, $4 billion 462 other benefits -Greater accountability in the federal acquisition process -Improved implementation of Paperwork Reduction Act -Data stewardship strategies to protect individuals’ privacy -Audit testing approach for forensic audits to identify fraud, waste, and abuse -Improved government debt management -457 additional benefits 808 new recommendations made -Better protect government credit cards from misuse -Audit agencies’ compliance with cost accounting standards -Reassess the requirements for recertifying eligibility for the Earned Income Tax Credit -805 additional improvements recommended 65 testimonies -Intergovernmental aspects of homeland security -Contract management -Corporate governance and accountability -Human capital -Illegal tax schemes and scams -U.S. government's financial statements -59 additional hearings on topics of national importance Source: GAO. PART II Goal 4 Results Maximize the Value of GAO by Being a Model Federal Agency and a World-Class Professional Services Organization The focus of our fourth strategic goal is to make GAO a model organization—one that is driven by our external clients and internal customers, one that exhibits the characteristics of leadership and man- agement excellence, one that is devoted to ensuring quality in its work process and products through continuous improvement, and one that employees and potential employees regard as an excellent Fiscal 2002 was also the greatest hiring year in place to work. GAO’s specific objectives are to GAO’s recent history. As large numbers of our staff reached retirement age, we hired nearly 430 perma- ■ sharpen GAO’s focus on clients’ and customers’ nent staff (and 140 interns), mostly as entry-level requirements, professionals. To support this effort, we expanded our college recruitment efforts, contracted to use a ■ enhance leadership and promote management Web-based application-handling system, and excellence, enhanced diversity recruiting to ensure an outstand- ■ leverage GAO’s institutional knowledge and ing, diverse pool of new talent for the agency. We experience, continued revamping and expanding our training ■ continuously improve GAO’s business and programs for both staff and executives and drafted a management processes, and human capital strategic plan that will be completed and implemented in fiscal 2003. We also began ■ become the professional services employer of implementing a competency-based performance choice. system to improve the way we assess how our peo- In fiscal 2002, we undertook a wide array of efforts ple perform, help them to improve and develop in pursuing those objectives. To sharpen our focus professionally, and reward good performance. The on our congressional clients’ requirements, for system is in place for our analysts, specialists, and example, we completed a 7-month pilot of a Web- attorneys and will be extended to the professionals based feedback system that allows recipients of our and support staff on the administrative side of the reports and testimonies on the Hill to provide can- agency in the near future. did reactions through a short e-mail questionnaire. We will expand our use of the feedback system in Also during the year, we replaced our staff’s aging 2003. We also provided emergency relocation assis- desktop workstations with fast, lightweight note- tance to the House of Representatives when three book computers to allow them to work more effi- House office buildings were closed down to be ciently in the field; increased the security of our checked for anthrax and decontaminated. In 48 computer network and of our facilities; and intro- hours, we moved 1,200 of our headquarters staff to duced an information technology measurement temporary locations and modified our phone and program. We routinely contract for an independent computer networks to give Members of Congress review of our computer operations. The results of and their staffs, a total of 1,800 people, a safe and earlier reviews allowed us to improve performance efficient base from which to conduct the nation’s in such areas as quality, value, and customer satis- business. faction. GAO is now well above the average agency in these categories. We plan to expand our GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 69 PART II measurement program to include application and ronment that is world-class. As the table below asset measurements. For details on these and other shows, at the halfway mark, GAO’s managers accomplishments under this goal, see appendix 1. reported that enough work was under way or com- pleted to allow us to meet 14 of the performance The annual measures used to assess our perfor- goals by the end of fiscal 2003. Work on the key mance under our external strategic goals are not efforts supporting 5 other goals is behind schedule, applicable to this internal strategic goal, but 2-year however, raising the possibility that these goals will performance goals do apply. At the close of fiscal not be met by the end of the assessment period, 2002, GAO was halfway through the 2-year assess- typically because resources were diverted to higher ment cycle for these goals, which provide the strate- priorities. The key efforts to be undertaken to meet gies we use to achieve the broader strategic goal each of the goals are online in the supplements to and its objectives. Strategic goal 4 has 19 perfor- GAO’s strategic plan at www.gao.gov/sp/html/ mance goals, which call for GAO to complete initia- goal_4.html. The performance goals GAO will tives that range from implementing an integrated begin work on in fiscal 2004 will be published in strategic management approach to providing our our annual performance plan after our appropria- people with tools, technology, and a working envi- tions for the year are known. Strategic Goal 4 Performance Data 2-Year Performance Goals, Fiscal 2002–2003 ■ On track to meet ❏ Not on track to meet Strategic objective/performance goal Sharpen GAO’s focus on clients’ and customers’ requirements ■ Continuously update client requirements ❏ Develop and implement stakeholder protocols and refine client protocols The key efforts for this goal call for us to implement three types of protocols to guide our work with other organizations: congressional, agency, and international. We have refined our congressional protocols and are piloting our agency protocols. But we may not meet this performance goal by the end of fiscal 2003 because work on the international protocols was delayed until all stakeholder comments on the agency protocols were resolved. We expect to pilot the international protocols before the end of fiscal 2003 and to implement them in fiscal 2004. ■ Identify and refine customer requirements and measures Enhance leadership and promote management excellence ■ Foster an attitude of stewardship to ensure a commitment to GAO’s mission and core values ■ Implement an integrated approach to strategic management ■ Continue to provide leadership in strategic human capital management planning and execution ■ Maintain integrity in financial management ■ Use enabling technology to improve GAO’s crosscutting business processes ■ Provide a safe and secure workplace Leverage institutional knowledge and experience ■ Expand GAO’s use of the World Wide Web as a knowledge tool 70 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II Strategic Goal 4 Performance Data 2-Year Performance Goals, Fiscal 2002–2003 ■ On track to meet ❏ Not on track to meet Strategic objective/performance goal ❏ Develop a framework to manage the collection, use, distribution, and retention of organizational knowledge We have made substantial progress under this performance goal by improving our records management program and have begun work on increasing our knowledge sharing and collaboration efforts. However, we may not meet this performance goal by the end of fiscal 2003 because resources had to be reallocated to finding alternatives to safeguard our mail following the 2001 anthrax incident and to higher-priority work to improve GAO’s report production and graphics processes. We anticipate providing additional resources to this performance goal in fiscal 2004. ■ Strengthen relationships with other national and international accountability and professional organizations Continuously improve our business and management processes ❏ Reengineer internal business and administrative processes We have made progress under this performance goal by assessing our administrative processes to identify more efficient alternatives and by developing ways to assess internal customers’ satisfaction. But we may not meet this performance goal by the end of fiscal 2003 because developing a framework for identifying priorities for process improvement is behind schedule because resources were reallocated to higher-priority efforts on workforce planning. In addition, the mapping of our business processes has progressed more slowly than expected. We plan to devote more resources to this performance goal in fiscal 2004. ❏ Reengineer GAO’s product and service lines We have made progress toward this performance goal by benchmarking our products and services against those of high-performing organizations. But we may not meet this performance goal by the end of fiscal 2003 because our efforts to work with our congressional clients to identify appropriate media for communicating results and to establish a systematic process to act on their feedback are more extensive than previously estimated. We plan to work with the new Congress on these matters and hope to accelerate our efforts in fiscal 2003 as we attempt to meet this goal. ■ Improve GAO’s job management processes Become the professional services employer of choice ■ Maintain an environment that is fair, unbiased, family-friendly, and promotes and values opportunity and inclusiveness ❏ Improve compensation and performance management systems We have made substantial progress toward this performance goal by implementing a new competency-based performance system for major portions of our staff—analysts, specialists, and attorneys—and revising their compensation systems to make them more performance-based. But developing the new performance and compensation systems for the Administrative Professional and Support Staff has been more difficult than anticipated because of the large number and wide variety of positions to be covered. We plan to implement those systems in fiscal 2004. ■ Develop and implement a training and professional development strategy targeted toward competencies ■ Provide our people with tools, technology, and a working environment that is world-class Note: Each performance goal is supported by a set of key efforts. For a performance goal to be considered “met” after 2 years, at least 75 percent of its key efforts must have been accomplished. To view the key efforts for any of the performance goals above, go to www.gao.gov/sp/spsupp.html. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 71 Goal 4’s Cost: $25.3 Million Goal 4 6% of GAO’s Total Goal 1 Goal 2 Goal 3 Goal 4 Maximize the value of GAO Results Sharpen focus on clients’ and customers’ requirements -Piloted Web-based feedback system for congressional clients -Provided emergency relocation support -Developing agency and international protocols Enhance leadership and promote management excellence -Increased security of GAO’s facilities and information systems -Maintained integrity in financial management -Continued to provide leadership in human capital strategy and management Leverage institutional knowledge and experience -Improved management of agency records -Piloted knowledge-sharing among GAO units -Increased capacity through knowledge-sharing and collaboration Continuously improve business and management processes -Improved guidance and tracking for GAO engagements -Developed “highlights” page to encapsulate information from a GAO report on a single page -Donated excess computer equipment to schools Become professional services employer of choice -Implemented competency-based performance system for analysts, specialists, and attorneys -Developed new training process and expanded executive training opportunities -Continued recruitment focus on diversity Source: GAO. PART II Data Quality and Program Evaluation This section describes how GAO ensures the com- pleteness and reliability of the performance data in this report and the program evaluations conducted during fiscal 2002 on GAO’s operations. Completeness and Reliability Our performance data are complete because actual data are reported for every performance measure, and the data are actual results for full fiscal years rather than projections from partial years. Our data dards and internal policies and procedures applied are reliable because we followed the verification to GAO’s audit, evaluation, and research work. and validation procedures described in the next sec- And management’s routine use of our performance tion to ensure their quality. Most of the data limita- information further helps to ensure its quality and tions explained below result in conservative validity. The data are provided to managers for use estimates of our actual performance. in decision making, and their feedback on these data helps to ensure that the data are properly recorded. The specific sources of our performance Procedures to Ensure Data data and procedures for independently verifying Quality and validating the data for each of our performance measures are shown in the table on the next page. In verifying and validating our own performance We continue to explore ways to strengthen our pro- data, we benefit from lessons learned from our cedures to ensure data integrity. assessments of other agencies’ performance infor- mation. We adhere to the same professional stan- GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 73 PART II Performance measure Background and context Data sources Financial benefits GAO’s findings and recommendations may produce measurable GAO staff wishing to claim that financial benefits for the federal government when the Congress their work has created financial or agencies act on them to reduce annual operating costs or the benefits must file an costs of multiyear projects and entitlements or to increase accomplishment report backed revenues from asset sales and changes in tax laws or user fees. by documentation linking their The funds made available in response to our work may be used work to the benefits and to reduce government expenditures or may be reallocated to providing an independent third other areas. party’s estimate of the benefits’ monetary value. The third party To claim that financial benefits have been achieved, GAO’s staff is typically the agency that acted must document the cause-and-effect relationship between the on GAO’s work, a congressional benefits reported and work GAO did, and they must obtain committee, or the Congressional estimates of the benefits’ monetary value from independent third Budget Office. parties. Prior to fiscal 2002, GAO limited the period over which the benefits from an accomplishment could be accrued to no Once accomplishment reports more than 2 years. Beginning in fiscal 2002, GAO is extending are approved, they are compiled the period to 5 years for types of accomplishments known to by the Quality and Risk have multiyear effects: those associated with longer-term Management (QRM) office, changes embodied in law, program terminations, or sales of which annually tabulates total government assets yielding multiyear savings. GAO is retaining benefits by goal and the 2-year maximum for all other accomplishments. Also in fiscal agencywide. 2002, GAO began requiring benefits to be calculated in net present value terms. Not every financial benefit from our work can be readily estimated or documented as attributable to GAO’s work. As a result, the amount of financial benefits is a conservative estimate. Other benefits The other benefits that GAO reports reflect instances in which GAO staff wishing to claim that (1) information GAO provided to the Congress resulted in their work has created other statutory or regulatory changes, (2) agencies took actions in benefits must file an response to GAO’s findings and recommendations to improve accomplishment report backed government services and operations, or (3) GAO’s work led to by documentation linking their improvements in agencies’ core business processes or to the work to the benefits. advancement of governmentwide management reforms. Once accomplishment reports These benefits cannot be expressed in monetary terms, but to are approved, they are compiled claim that these benefits have occurred, GAO’s staff must file by QRM, which annually accomplishment reports that document the actions that have tabulates total benefits by goal been taken and the cause-and-effect relationship between the and agencywide. actions and GAO’s work. 74 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II Verification and validation Data limitations Policies and procedures guide the estimation of financial benefits Estimates are from independent third parties but are and their attribution to GAO. Estimates must be based on based on both objective and subjective data, and as a independent sources and reduced by any identifiable offsetting result, professional judgment is required in reviewing costs. accomplishment reports. All accomplishment reports filed by staff wishing to claim that benefits have resulted from their work are reviewed by a member of staff not involved in the work, by the senior executive in charge of the unit, and by QRM. Accomplishment reports claiming benefits of $100 million or more must also be approved by QRM. In fiscal 2002, 93 percent of the dollar value of financial benefits claimed by GAO were approved by QRM. Accomplishment reports claiming benefits of $1 billion or more are also reviewed by GAO’s Inspector General. Thus, in fiscal 2002, 58 percent of the dollar value of financial benefits claimed by GAO were reviewed by both QRM and the IG. QRM provides summary data on approved financial benefits to unit managers, who check the data on a regular basis to make sure that approved accomplishments from their staff have been accurately recorded. Policies and procedures require accomplishment reports to record A direct cause-and-effect relationship between GAO’s the other benefits of our findings and recommendations. work and benefits it produced cannot always be documented. As a result, the number of other benefits All accomplishment reports filed by staff wishing to claim that is a conservative measure of our overall contribution benefits have resulted from their work are reviewed by a member toward improving government. of staff not involved in the work, by the senior executive in charge of the unit, and by QRM to ensure the appropriateness of the claimed accomplishment, including attribution to GAO’s work. QRM provides summary data on other benefits to unit managers, who check the data on a regular basis to make sure that approved accomplishments from their staffs have been accurately recorded. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 75 PART II Performance measure Background and context Data sources Recommendations GAO makes recommendations designed to improve the GAO’s document database implemented operations of the federal government. For GAO’s work to records recommendations as produce financial or other benefits, the Congress or other federal they are issued. agencies must implement these recommendations. As GAO’s staff monitors As part of our audit responsibilities under generally accepted implementation, they submit government auditing standards, we follow up on updated information to the recommendations we have made and report to the Congress on database. their status. GAO reports annually to the Past experience has shown that it takes time for some Congress on recommendations recommendations to be implemented. For this reason, this that have not been implemented measure is the percentage rate of implementation of and maintains a publicly recommendations made 4 years prior to a given fiscal year (e.g., available database of open the fiscal 2002 implementation rate is the percentage of recommendations, which is recommendations made in fiscal 1998 products that were updated daily. implemented by the end of fiscal 2002). Prior experience has shown that if a recommendation has not been implemented within 4 years, it is not likely to be implemented. This measure assesses action on recommendations made 4 years previously, rather than the results of GAO’s activities during the fiscal year in which the data are reported. For example, the percentage of recommendations made in fiscal 1998 that were implemented in the ensuing years is as follows: 44 percent by the end of the first year (fiscal 1999); 62 percent by the end of the second year; 69 percent by the end of the third year; and 79 percent by end of the fourth year. Recommendations GAO makes recommendations that specify actions that can be GAO’s document database made and taken to improve federal operations or programs. We strive for records recommendations as percentage of recommendations that are directed at resolving the cause of they are issued. products identified problems; that are addressed to parties who have the containing authority to act; and that are specific, feasible, and cost-effective. recommendations We track the number of recommendations made and the percentage of our written products that contain recommendations. The latter indicator recognizes that the number of recommendations alone is not necessarily a predictor of effect. For example, a product with a single recommendation can help bring about significant financial or other benefits. Together, these two measures provide a picture of the extent to which we are providing decision makers with information that will help improve government. Testimonies The Congress may request that GAO testify at hearings on The data on hearings at which various issues. Testimony is one of our most important forms of GAO testified are complied in our communication with the Congress, and the number of hearings congressional hearing system. at which we testify reflects the importance and value of our institutional knowledge in assisting congressional decision making. 76 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II Verification and validation Data limitations The database of GAO’s recommendations is maintained by the Affected agencies and GAO sometimes differ on a staff of an external contractor, who review all GAO products recommendation’s status. For example, agencies may distributed through a formal process to identify all report actions in response to our recommendations, recommendations made and then enter them into a database. but we may determine that these actions are insufficient or do not adequately implement our Policies and procedures specify that staff must verify, with recommendations. In these cases, recommendations sufficient supporting documentation, that an agency’s reported are recorded as not implemented even though the actions are adequately being implemented. Our staff may interview agency has proposed or taken some actions. agency officials, obtain agency documents, access agency databases, or obtain information from the agency’s Office of the Inspector General. GAO staff update the status of the recommendations on a periodic basis. Recommendations that are reported as implemented are reviewed by the senior executive in charge of the unit and by QRM. Summary data are provided to the units that issued the recommendations. The units check the data regularly to make sure the recommendations they have reported as implemented have been accurately recorded. Through a formal process, an external contractor reviews all GAO These measures are a conservative estimate of the products distributed, prepares summaries that identify products extent to which GAO assists the Congress and federal containing recommendations, and verifies this information through agencies because not all products and services we our recommendation follow-up system. provide lead to recommendations. For example, the Congress may request information on federal GAO managers are provided with reports on the recommendations programs that is purely descriptive or analytical and being tracked to help ensure that all recommendations have been does not lend itself to recommendations. captured and that each recommendation has been completely and accurately stated. The units responding to requests for testimony are responsible for The measure may be influenced by factors other than entering data in GAO’s congressional hearing system. the quality of GAO’s performance in any specific year. The number of hearings held each year depends on After a GAO witness has testified at a hearing, GAO’s the Congress’s agenda, and the number of times GAO Congressional Relations office verifies that the data in the system is asked to testify may reflect congressional interest in are correct and records the hearing as one at which we testified. work completed that year, the previous year, or work in Congressional Relations provides weekly status reports to unit progress. managers, who check to make sure the data are complete and The number of testimonies actually provided by GAO accurate. witnesses may be understated because we count statements from multiple GAO witnesses at a hearing as a single testimony. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 77 PART II Performance measure Background and context Data sources Timeliness The likelihood that GAO’s products will be used is enhanced if The data supporting this they are delivered when needed to support congressional and measure are from GAO’s Mission agency decision making. To determine whether GAO’s products and Assignment Tracking are timely, we measure the proportion of our products that are System, which is used to monitor issued by the dates agreed to with our clients or, for our R&D our progress on assignments. work, by the dates agreed to internally. We have made several improvements to clarify our guidance and controls covering our timeliness measure. We clarified the criteria for changing target dates. Initial target dates may be changed because the scope of an assignment is changed by its congressional requesters or, in the case of R&D work, by GAO’s senior leadership. Target dates may also change because of external factors beyond GAO’s control. In addition, senior executives are responsible for approving any changes and ensuring that the changes are clearly documented. 2-year (qualitative) Assessing the extent to which we achieve 2-year performance The data supporting this goals (referred to in past reports as qualitative goals) helps focus measure are from GAO our efforts on issues of critical importance and provides a tool for managers’ assessments, which holding ourselves accountable for the resources the Congress are supported by documentation, provides. They measure the extent to which we did the work we of work completed under had planned to do to support the Congress during a 2-year performance goals’ key efforts. period. For performance goals under For each performance goal, we identify the key efforts needed to strategic goals 1 through 3, the achieve it. To determine whether a performance goal has been supporting documentation met, we assess the work completed under the goal’s key efforts. comes from our automated In making this assessment, the responsible GAO manager Mission and Assignment considers the number of reports issued and recommendations Tracking System and document made for each key effort. database. For performance goals under strategic goal 4, the For strategic goals 1 through 3—which focus on supporting the supporting documentation Congress and improving the federal government—a comes from reports produced by performance goal is met when we provide information or make the managers responsible for recommendations on 75 percent of its key efforts. For strategic each key effort. goal 4—which focuses on improving GAO—a performance goal is met when we complete 75 percent of its key efforts. 78 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II Verification and validation Data limitations GAO staff enter the data supporting this measure into our Mission We measure the timeliness of most external products. and Assignment Tracking System. Aggregate and assignment- A small percentage of our products—staff studies and specific timeliness data are given to units monthly. Their staff guidance, for example—that are not part of our main advise of any anomalies. product lines are excluded. When an assignment is completed, data on its target and completion dates are reported to the project manager, who reviews and signs the report to confirm its accuracy. We consult with our congressional clients and other outside Professional judgment must be applied when experts in setting our 2-year performance goals. assessing the work done under each performance goal and when reviewing those assessments. The assessment of each 2-year performance goal under strategic goals 1 through 3 is supported by documentation showing, by key effort, the number of reports issued and recommendations made during the assessment period. QRM provides this information to GAO’s managers several times a year so that they can check its accuracy. The assessment of the performance goals under strategic goal 4 is supported by documentation showing the work completed under each key effort. QRM reviews the assessments and supporting documentation for all performance goals to ensure that criteria are consistently applied and that requirements are met. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 79 PART II Program Evaluation that the system is designed to meet applicable qual- ity control standards and that we complied with our We use several periodic evaluations to help us system in performing financial audits of other orga- assess progress toward our strategic goals and nizations during calendar year 2001. objectives and to update them for our strategic plan, which we revise every 2 years. Much of the value To help us assess our progress toward the strategic of GAO’s work—as reflected in our measures of objectives under goal 4 (which focuses on improv- financial and other benefits—results from agencies’ ing GAO), we completed a number of studies and acting on our findings and recommendations. evaluations: Thus, under strategic goals 1, 2, and 3 (which focus on serving the Congress and improving the federal ■ The effectiveness of GAO’s risk management government), we evaluate actions taken by federal approach to designing engagements and agencies and the Congress in response to our rec- developing quality products that meet GAO’s ommendations. The results of these evaluations are core values and professional standards—The conveyed in this performance and accountability assessment showed there has been an increase in report. In addition, we actively monitor the status the number of draft reports meeting all quality of open recommendations and report our findings standards the first time they are submitted for annually to the Congress and the public official review outside the originating team. This (www.gao.gov/openrecs.html). We use the results assessment is discussed in appendix 1. of that analysis to determine the need for further ■ The status of GAO’s information security work in particular areas. If, for example, an agency program—The assessment identified no material has not implemented a recommended action that weaknesses in our financial applications or we consider to be still valid and worthwhile, we general support system. It also showed that may decide to pursue further action with agency while we are making progress in implementing officials or congressional committees, or we may the information security requirements of the decide to undertake additional work on the matter. Government Information Security Reform provisions, we do have several areas that need Another major evaluation we use to assess the improvement. The results of this assessment are extent to which we are achieving our strategic discussed in the management challenges section objectives under goals 1, 2, and 3 is our biennial and appendix 4. Performance and Accountability Series: Major Man- agement Challenges and Program Risks ■ The vulnerability of our building and grounds to (www.gao.gov/pas/2003/). This series addresses a security risks—We identified a number of actions range of challenges and opportunities to enhance to improve the safety and security of our performance and accountability governmentwide workplace. We implemented several measures, and at federal agencies. The series also includes a such as reinforcing vehicle and pedestrian entry companion volume that provides a status report on points, and are researching and designing other those major government operations considered projects to improve safety and security. The “high risk” because of their greater vulnerabilities to results of this assessment are discussed in the waste, fraud, abuse, and mismanagement. The management challenges section and in series is a valuable evaluation and planning tool for appendix 1. our own agency because it helps us to identify ■ The efficiency and effectiveness of a number of those areas where continued GAO efforts are our core and support businesses processes—We needed to maintain the focus on important policy found opportunities to improve, and and management issues that the nation faces. implemented changes in, several areas, including enhancing GAO’s guidance and tools to make it A third major evaluation completed in fiscal 2002 easier for staff to find and follow our policies and was an independent peer review of GAO’s quality procedures; centralizing our process for control system for financial audits. The report of coordinating work with other agencies, which the independent peer reviewer, KPMG LLP reduced delays in meeting with agency officials; (www.gao.gov/special.pubs/kpmgqc.pdf), contains an unqualified opinion, meaning that KPMG found 80 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART II and reducing costs for electrical services. These operations are efficient and economical. The evalu- actions and several others are discussed in the ations are listed in our discussion of financial sys- goal 4 section of appendix 1. tems and controls. While most of the evaluations done on the strategic objectives under goal 4 are Finally, GAO’s Inspector General evaluates the not available publicly, they are discussed in other administration of the agency. The Inspector Gen- sections of this report as noted above. eral’s evaluations are useful in ensuring that our GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 81 PART II 82 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 Part III: Financial Information PART III From the Chief Financial Officer January 31, 2003 I am pleased to present the U.S. General Accounting Office’s financial statements for fiscal 2002. Our financial statements, which are integral to our performance and accountability report, have received an unqualified opinion from our independent auditors for the 16th consecutive year. This clean bill of financial health is particu- larly important to GAO because of our agency’s strong commitment to accounting for the taxpayer dollars we have been provided. GAO’s financial condition is sound. As of September 30, 2002, GAO had enough funds to carry out our mission and had appropriate controls in place to ensure that the agency did not exceed our budget authority. We continue to look for ways to better serve the Congress, make the best use of our available resources, and strengthen our financial position. GAO’s work in fiscal year 2002 led to hundreds of actions to improve the economy, efficiency, and effective- ness of government programs and policies. GAO also provided a superb return on investment. Financial benefits from the agency’s work totaled a record $37.7 billion last year—an $88 return on every dollar invested in GAO. We made significant progress in linking our strategic goals with relevant costs. For the second year, our performance and accountability report provides the costs of our operations by strategic goal and clearly explains the results we have achieved. The Association of Government Accountants awarded the Certificate of Excellence in Accountability Reporting to GAO for our performance and accountability report for fiscal 2001, citing its comprehensiveness and readability. We have introduced an information technology measurement program, and we rou- tinely contract for an independent review of our computer operations. The results of earlier reviews allowed GAO to improve performance in such areas as quality, value, and customer satisfaction. GAO is now well above the average agency in these categories. In fiscal 2003, guided by our core values of accountability, integrity, and reliability, GAO will continue to strive to become a model federal agency and a world-class pro- fessional services organization. Our focus, as it has been since 1921, will be to help the Congress improve government operations for the benefit of the American people. Sallyanne Harper Chief Financial Officer 84 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART III Overview of Financial Statements GAO’s financial statements and accompanying notes begin on page 88. Our financial statements for the fiscal years ended September 30, 2002 and 2001, were audited by an independent auditor, Cot- ton & Co., LLP. Cotton & Co., LLP, rendered an unqualified opinion on GAO’s financial statements and an unqualified opinion on the effectiveness of GAO’s internal con- trols over financial reporting and compliance with laws and regulations. The auditor also reported that GAO had substantially complied with the appli- GAO reports net cost of operations according to our cable requirements of the Federal Financial Man- four strategic goals, consistent with our strategic agement Improvement Act (the Improvement Act) plan. Activities in goals 1 and 2 were responsible of 1996 and found no reportable instances of non- for most of the increase in GAO’s net cost of opera- compliance with selected provisions of laws and tions between fiscal 2002 and 2001. In goal 1, work regulations. In the opinion of the independent on education, workforce, and income security auditor, the financial statements are presented fairly issues represented most of the goal’s increase. In in all material respects and are in conformity with goal 2, work on defense capabilities and manage- generally accepted accounting principles. ment and on international affairs and trade issues constituted most of the goal’s increase in costs. The net cost of operating GAO during fiscal 2002 and 2001 was approximately $453 million and $413.1 million, respectively. Expenses for salaries GAO’s Net Costs by Goal and related benefits accounted for 78 and 80 per- Dollars in millions cent of GAO’s net cost of operations in fiscal 2002 200 and 2001, respectively. The pie chart illustrates how GAO’s costs break down by category. 150 Uses of Funds by Category 100 FY 2002 – percentage of total net costs 50 Salaries and benefits 77.8% 0 Building and Goal 1 Goal 2 Goal 3 Goal 4 hardware maint. services 10.5% 2000 153.4 97.0 134.6 19.8 Rent (space 2001 161.1 93.4 139.5 20.7 and hardware) 3.8% 2002 178.3 110.5 141.0 25.3 Source: GAO. Depreciation 3.8% Other 4.1% Note: The net costs are in actual dollars and have not been adjusted for inflation. Source: GAO. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 85 PART III Financial Systems and complies with its requirements. We believe that we have implemented and maintained financial systems Internal Controls that comply substantially with federal financial man- agement systems requirements, applicable federal GAO recognizes the importance of strong financial accounting standards, and the United States Gov- systems and internal controls to ensure our account- ernment Standard General Ledger at the transaction ability, integrity, and reliability. To achieve a high level as of September 30, 2002. GAO made this level of quality, management maintains a quality assessment based on criteria established under the control program and seeks advice and evaluation Improvement Act and guidance issued by the Office from both internal and external sources. of Management and Budget. Also, an auditor reported that GAO had substantially complied with GAO is committed to fulfilling the internal control the applicable requirements of the Improvement objectives of 31 U.S.C. 3512, formerly the Federal Act as of September 30, 2002. Managers’ Financial Integrity Act (the Integrity Act). Although GAO is not subject to the act, we comply GAO’s Inspector General conducts audits and inves- voluntarily with its requirements. Our internal con- tigations and functions as an independent fact-gath- trols are designed to provide reasonable assurance ering and technical adviser to the Comptroller that obligations and costs are in compliance with General. This year, as a result of the Inspector Gen- applicable laws and regulations; funds, property, eral’s efforts, we have improved our policies or and other assets are safeguarded against loss from internal controls regarding (1) processing of unauthorized acquisition, use, or disposition; and invoices to preclude duplicate payments and for revenues and expenditures applicable to GAO’s meeting the prompt-payment standards, (2) protec- operations are properly recorded and accounted for tion of sensitive personal information, (3) cellular to enable our agency to prepare reliable financial telephone usage, and (4) pay-setting procedures for reports and maintain accountability over our assets. certain employees. Management agrees with all of the Inspector General’s eight open recommenda- GAO’s management assesses compliance with these tions and plans to take actions that are appropriate controls through a series of comprehensive internal to address the underlying issues. There are no reviews, applying the evaluation criteria in the unresolved issues. Office of Management and Budget’s guidance for implementing the Integrity Act. The results of these GAO’s Audit Advisory Committee assists the Comp- reviews are discussed with GAO’s Audit Advisory troller General in overseeing the effectiveness of Committee, and action is taken to correct deficien- our financial reporting and audit processes, internal cies as they are identified. controls over financial operations, and processes to ensure compliance with laws and regulations rele- GAO assessed our internal controls as of September vant to GAO’s financial operations. As of September 30, 2002, based on the criteria mentioned above for 30, 2002, the committee consisted of Sheldon S. effective internal controls in the federal govern- Cohen (Chairman), Alan B. Levenson, and ment. On the basis of this assessment, we believe Katherine D. Ortega, whose relevant experience that as of September 30, 2002, we have effective was described earlier in this report. The commit- internal controls in place. Additionally, an indepen- tee’s report follows our financial statements and dent auditor found that GAO maintained effective accompanying notes. internal controls over financial reporting and com- pliance with laws and regulations. Consistent with GAO’s evaluation, the auditor found no material internal control weaknesses. Purpose of Each Financial Statement In addition, GAO is committed to fulfilling the objectives of the Federal Financial Management The financial statements on the next five pages Improvement Act of 1996 (the Improvement Act). present the following information: Although not subject to the act, GAO voluntarily 86 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART III ■ The balance sheet presents the combined ■ The statement of changes in net position presents amounts GAO had available to use (assets) versus the accounting items that caused the net position the amounts GAO owed (liabilities) and the section of the balance sheet to change from the residual amounts after liabilities were subtracted beginning to the end of the fiscal year. from assets (net position). ■ The statement of budgetary resources presents ■ The statement of net cost presents the annual cost how budgetary resources were made available to of GAO’s operations. The gross cost less any GAO during the fiscal year and the status of those offsetting revenue earned from GAO’s activities is resources at the end of the fiscal year. used to arrive at the net cost of work performed ■ The statement of financing reconciles the under GAO’s four strategic goals. resources available to GAO with the net cost of operating the agency. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 87 PART III Financial Statements U.S. General Accounting Office Balance Sheet As of September 30, 2002 and 2001 (Dollars in thousands) 2002 2001 Assets Intragovernmental Funds with the U.S. Treasury and cash (Note 2) $62,055 $56,482 Accounts receivable (Note 1) 387 254 Total Intragovernmental 62,442 56,736 Property and equipment, net (Note 3) 63,888 66,318 Other (Note 1) 486 401 Total Assets $126,816 $123,455 Liabilities Intragovernmental Accounts payable (Note 1) $11,044 $6,711 Employee benefits (Note 5) 1,185 2,683 Workers’ compensation (Note 4 and 6) 2,102 2,136 Deferred lease revenue (Note 4 and 7) 2,514 5,532 Total Intragovernmental 16,845 17,062 Accounts payable (Note 1) 13,023 10,258 Salaries and benefits (Note 4 and 5) 10,204 18,378 Accrued annual leave and other (Note 4) 29,357 27,836 Workers’ compensation (Note 4 and 6) 12,331 7,954 Capital leases (Note 4 and 8) 9,968 5,360 Total Liabilities 91,728 86,848 Net Position Unexpended appropriations 29,925 21,258 Cumulative results of operations 5,163 15,349 Total net position 35,088 36,607 Total Liabilities and Net Position $126,816 $123,455 The accompanying notes are an integral part of these statements. 88 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART III Financial Statements U.S. General Accounting Office Statement of Net Cost For Fiscal Years Ended September 30, 2002 and 2001 (Dollars in thousands) 2002 2001 Net Costs by Goal Goal 1: Well-Being/Financial Security of American People $178,455 $161,142 Less: reimbursable services (74) (30) Net goal costs 178,381 161,112 Goal 2: Changing Security Threats/Challenges of Global Interdependence 110,692 93,456 Less: reimbursable services (155) (16) Net goal costs 110,537 93,440 Goal 3: Transforming the Federal Government’s Role 142,204 140,215 Less: reimbursable services (1,237) (756) Net goal costs 140,967 139,459 Goal 4: Maximize the Value of GAO 25,278 20,695 Less: reimbursable services - - Net goal costs 25,278 20,695 Less: reimbursable services not attributable to goals (2,128) (1,652) Net Cost of Operations (Note 9) $453,035 $413,054 The accompanying notes are an integral part of these statements. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 89 PART III Financial Statements U.S. General Accounting Office Statement of Changes in Net Position For Fiscal Years Ended September 30, 2002 and 2001 (Dollars in thousands) 2002 2001 Cumulative 2002 Cumulative 2001 Results of Unexpended Results of Unexpended Operations Appropriations Operations Appropriations Balances, Beginning of Fiscal Year $15,349 $21,258 $18,761 $23,515 Budgetary Financing Sources Current year appropriations - 421,844 - 384,020 Transfers of budget authority (Note10) - 7,600 - 983 Lapsed budget authority - (1,731) - (112) Appropriations used 419,046 (419,046) 387,148 (387,148) Other Financing Sources Intragovernmental transfer of property and equipment (222) - (205) - Federal employee retirement benefit costs paid by OPM and imputed to GAO (Note 5) 21,007 - 19,681 - Amortization of deferred lease revenue (Note 7) 3,018 - 3,018 - Total Financing Sources 442,849 8,667 409,642 (2,257) Net Cost of Operations (453,035) - (413,054) - Balances, End of Fiscal Year $5,163 $29,925 $15,349 $21,258 The accompanying notes are an integral part of these statements. 90 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART III Financial Statements U.S. General Accounting Office Statement of Budgetary Resources For Fiscal Years Ended September 30, 2002 and 2001 (Dollars in thousands) 2002 2001 Budgetary Resources (Note 10) Current year appropriations $421,844 $384,020 Transfers of budget authority 7,600 983 Unobligated appropriations, beginning of fiscal year 7,512 4,264 Reimbursable services (Note 9) 3,594 2,454 Cost sharing and pass-through CPA contract reimbursements 2,093 1,222 Total Budgetary Resources $442,643 $392,943 Status of Budgetary Resources Obligations incurred $426,714 $385,319 Unobligated appropriations, end of fiscal year 14,198 7,512 Lapsed budget authority 1,731 112 Total Status of Budgetary Resources $442,643 $392,943 Relationship of Obligations to Outlays Obligations incurred $426,714 $385,319 Obligated balance, net - beginning of fiscal year 48,970 50,851 Less: Obligated balance, net - end of fiscal year (47,856) (48,970) Total Outlays 427,828 387,200 Less: Reimbursable services (3,594) (2,454) Cost sharing and pass-through CPA contract reimbursements (2,093) (1,222) Net Outlays $422,141 $383,524 Outlays Disbursements $427,828 $387,200 Collections (5,687) (3,676) Net Outlays $422,141 $383,524 The accompanying notes are an integral part of these statements. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 91 PART III Financial Statements U.S. General Accounting Office Statement of Financing For Fiscal Years Ended September 30, 2002 and 2001 (Dollars in thousands) 2002 2001 Resources Used to Finance Activities Budgetary Resources Obligated Obligations incurred $426,714 $385,319 Less: Reimbursable services (Note 9) (3,594) (2,454) Cost sharing and pass-through CPA contract reimbursements (Note10) (2,093) (1,222) Net obligations 421,027 381,643 Other Resources Intragovernmental transfer of property and equipment (222) (205) Federal employee retirement benefit costs paid by OPM and imputed to GAO (Note 5) 21,007 19,681 Amortization of deferred lease revenue (Note 7) 3,018 3,018 Net other resources used to finance activities 23,803 22,494 Total resources used to finance activities 444,830 404,137 Resources Used to Finance Items Not Part of the Net Cost of Operations Net (increase) decrease in unliquidated obligations (1,980) 5,505 Costs capitalized on the balance sheet (13,180) (13,983) Total resources used to finance items not part of the net cost of operations (15,160) (8,478) Total resources used to finance the net cost of operations 429,670 395,659 Costs That Require Resources in Future Periods Expenses to be funded by future appropriations (Note 11) 6,213 298 Costs That Do Not Require Resources Depreciation 17,152 17,097 Net Cost of Operations $453,035 $413,054 The accompanying notes are an integral part of these statements. 92 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART III Notes to Financial Statements Note 1. Summary of Significant Accounting Policies Reporting Entity The accompanying financial statements present the financial position, net cost of operations, changes in net position, budgetary resources, and financing of the United States General Accounting Office (GAO). GAO, an agency in the legislative branch of the fed- eral government, supports the Congress in carrying out its constitutional responsibilities. GAO carries Basis of Presentation out its mission primarily by conducting audits, eval- GAO’s financial statements have been prepared on uations, analyses, research, and investigations and the accrual basis of accounting in conformity with providing the information from that work to the GAAP for the federal government. Accordingly, Congress and the public in a variety of forms. The revenues are recognized when earned and financial activity presented relates primarily to the expenses are recognized when incurred, without execution of GAO’s congressionally approved bud- regard to the receipt or payment of cash. get. GAO’s budget consists of an annual appropria- tion covering salaries and expenses and revenue The statements were also prepared in conformity from reimbursable audit work and rental income. with Office of Management and Budget (OMB) Bul- This revenue is included on the Statement of Bud- letin 01-09, Form and Content of Agency Financial getary Resources as “reimbursable services.” The Statements. The provisions of this bulletin are financial statements, except for federal employee effective in their entirety for the preparation of benefit costs paid by the Office of Personnel Man- financial statements for the fiscal year ending Sep- agement (OPM) and imputed to GAO, do not tember 30, 2002, and thereafter. GAO chose to include the effects of centrally administered assets implement the provisions of this bulletin with the and liabilities related to the federal government as a preparation of its fiscal 2001 financial statements. whole, such as interest on the federal debt, which may in part be attributable to GAO; they also do not Assets include activity related to GAO’s trust function Intragovernmental assets are those assets that arise described in Note 12. from transactions with other federal entities. Funds with the U.S. Treasury composed the majority of Basis of Accounting intragovernmental assets on GAO’s balance sheet. GAO’s financial statements conform to Generally Accepted Accounting Principles (GAAP) as promul- Funds with the U.S. Treasury gated by the Federal Accounting Standards Advisory The U.S. Treasury processes GAO’s receipts and Board (FASAB). The American Institute of Certified disbursements. Funds with Treasury represent Public Accountants (AICPA) recognizes FASAB Stan- appropriated funds Treasury will provide to pay lia- dards as GAAP for federal reporting entities. These bilities and to finance authorized purchase commit- principles differ from budgetary reporting princi- ments. ples. The differences relate primarily to the capital- ization and depreciation of property and equipment, as well as the recognition of other long- term assets and liabilities. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 93 PART III Accounts Receivable Intragovernmental liabilities arise from transactions GAO’s accounts receivable are due principally from with other federal entities. Detail of GAO’s federal agencies for reimbursable services; there- intragovernmental liabilities by agency as of Sep- fore, GAO has not established an allowance for tember 30, 2002 and 2001 is as follows: doubtful accounts. Property and Equipment Dollars in thousands The GAO building is listed in the National Register Agency 2002 2001 of Historic Places and has been designated as and is General Services Administration $8,793 $5,553 GAO’s only heritage asset. Maintenance of the U.S. Army Corps of Engineers 3,716 5,774 building has been kept on a current basis. The Department of Labor 2,332 2,279 building is depreciated on a straight-line basis over All others 2,004 3,456 25 years. Total Intragovernmental Liabilities $16,845 $17,062 Property and equipment costing more than $5,000 are capitalized at cost. Bulk purchases of lesser- value items that aggregate more than $100,000 are also capitalized at cost. These assets are depreci- Accounts Payable ated on a straight-line basis over the estimated use- Accounts Payable consist of amounts owed to fed- ful life of the property as follows: building eral agencies and commercial vendors for goods, improvements, 10 years; computer equipment, soft- services, and other expenses received but not yet ware, and capital lease assets, ranging from 3 to 6 paid. years; leasehold improvements, 5 years; and other equipment, ranging from 5 to 20 years. GAO’s prop- Federal Employee Benefits erty and equipment have no restrictions as to use or GAO recognizes its share of the cost of providing convertibility except for the restrictions related to future pension benefits to eligible employees over the GAO building’s classification as a multi-use her- the period of time that they render such services. itage asset. The pension expense recognized in the financial statements equals the current service cost for GAO’s Other Assets employees for the accounting period less the The composition of Other Assets as of September amount contributed by the employees. The mea- 30, 2002 and 2001, is as follows: surement of the service cost requires the use of an actuarial cost method and assumptions, with the Dollars in thousands factors applied by GAO provided by OPM, the agency that administers the plan. The excess of the 2002 2001 recognized pension expense over the amount con- Operating supplies to be consumed tributed by GAO and employees represents the in normal operations (valued at cost) $404 $357 amount being financed directly through the Civil Service Retirement and Disability Fund administered Other receivables 82 44 by OPM. This amount is considered imputed Total Other Assets $486 $401 financing to GAO. GAO recognizes a current-period expense for the future cost of post retirement health benefits and Liabilities life insurance for its employees while they are still Liabilities represent amounts that are likely to be working. GAO accounts for and reports this paid by GAO as a result of transactions that have expense in its financial statements in a manner sim- already occurred; however, no liability is paid by ilar to that used for pensions, with the exception GAO absent an appropriation. that employees and GAO do not make current con- tributions to fund these future benefits. 94 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART III Federal employee benefit costs paid by OPM and imputed to GAO are reported on the Statements of Note 3. Property and Changes in Net Position and Financing and are also Equipment, Net included as a component of net cost by goal on the The composition of property and equipment as of Statement of Net Cost. September 30, 2002, is as follows: Annual, Sick, and Other Leave Annual leave is recognized as an expense and a lia- Dollars in thousands bility as it is earned; the liability is reduced as leave Classes of is taken. The accrued leave liability is principally property and Acquisition Accumulated Book long-term in nature. Sick leave and other types of equipment value depreciation value leave are expensed as leave is taken. Building $15,664 $8,772 $6,892 Land 1,191 – 1,191 Contingencies Building GAO has certain claims and lawsuits pending improvements 102,459 72,164 30,295 against it. Provision has been made in GAO’s finan- Computer and cial statements for losses considered probable and other estimable. These amounts are considered by man- equipment, agement to be immaterial. Management believes and software 33,441 18,132 15,309 that losses, if any, from other claims and lawsuits Leasehold would not be material to the fair presentation of improvements 4,847 4,614 233 GAO’s financial statements. Assets under capital lease 24,660 14,692 9,968 Total property Note 2. Funds with the U.S. and equipment $182,262 $118,374 $63,888 Treasury and Cash GAO’s funds with the U.S. Treasury consist of only appropriated funds. GAO also maintains cash The composition of property and equipment as of imprest funds for use in daily operations. The status September 30, 2001, is as follows: of these funds as of September 30, 2002 and 2001, is as follows: Dollars in thousands Classes of property and Acquisition Accumulated Book Dollars in thousands equipment value depreciation value 2002 2001 Building $15,664 $8,145 $7,519 Unobligated balance Land 1,191 – 1,191 Available $7,898 $2,855 Building Unavailable 6,300 4,657 improvements 98,924 64,114 34,810 Obligated balances not yet Computer and disbursed 47,821 48,928 other Total Funds with U.S. Treasury 62,019 56,440 equipment, and software 48,476 31,411 17,065 Cash 36 42 Leasehold Total Funds with U.S. Treasury and improvements 4,843 4,470 373 Cash $62,055 $56,482 Assets under capital lease 15,330 9,970 5,360 Total property and equipment $184,428 $118,110 $66,318 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 95 PART III In fiscal 2002, a full inventory and reconciliation ognized in GAO’s financial statements for fiscal was completed, resulting in an additional 2002 and 2001 amounted to approximately $8,200,000 in retirements of fully depreciated assets. $36,979,000 and $35,544,000, respectively. These amounts include pension costs financed by OPM and imputed to GAO of $11,145,000 and Note 4. Liabilities Not Covered $11,417,000, respectively. To the extent which employees are covered by FICA, the taxes they pay by Budgetary Resources to the program and the benefits they will eventually The liabilities on GAO’s Balance Sheet as of Sep- receive are not recognized in GAO’s financial state- tember 30, 2002 and 2001, include liabilities not ments. However, the payments to FICA that GAO covered by budgetary resources, which are liabili- makes are recognized as operating expenses. Dur- ties for which congressional action is needed before ing fiscal 2002 and 2001, these payments amounted budgetary resources can be provided. Although to approximately $12,164,000 and $10,616,000, future appropriations to fund these liabilities are respectively. To the extent that GAO employees are likely and anticipated, it is not certain that appropri- covered by the thrift savings component of FERS, ations will be enacted to fund these liabilities. The GAO payments to the plan are recognized as oper- composition of liabilities not covered by budgetary ating expenses. GAO’s costs associated with the resources as of September 30, 2002 and 2001, is as thrift savings component of FERS during fiscal 2002 follows: and 2001 amounted to approximately $6,090,000 and $5,239,000, respectively. Dollars in thousands In addition, all permanent employees are eligible to 2002 2001 participate in the contributory Federal Employees Intragovernmental liabilities Health Benefit Program (FEHBP) and Federal Workers’ compensation $2,102 $2,136 Employees Group Life Insurance Program (FEGLIP) Deferred lease revenue 2,514 5,532 and may continue to participate after retirement. GAO makes contributions through OPM to FEHBP Total intragovernmental liabilities 4,616 7,668 and FEGLIP for active employees to pay for their Salaries and benefits—Comptrollers current benefits. GAO’s contributions for active General retirement plan 2,856 2,507 employees are recognized as operating expenses Accrued annual leave and other 29,357 27,836 and, during fiscal 2002 and 2001, amounted to Workers’ compensation 12,331 7,954 approximately $11,704,000 and $10,351,000, Capital leases 9,968 5,360 respectively. Total liabilities not covered by budgetary resources $59,128 $51,325 Amounts owed to OPM and Treasury as of Septem- ber 30, 2002 and 2001 are $1,185,000 and $2,683,000, respectively for FEHBP, FERS, and CSRS contributions and are shown on the Balance Sheet Note 5. Federal Employee as an employee benefits liability. Using the cost factors supplied by OPM, GAO has also recognized Benefits an expense in its financial statements for the esti- All permanent employees participate in the contrib- mated future cost of post retirement health benefits utory Civil Service Retirement System (CSRS) or the and life insurance for its employees. These costs Federal Employees Retirement System (FERS) that amounted to approximately $9,862,000 and became effective January 1, 1987. Temporary $8,264,000 during fiscal 2002 and 2001, respectively, employees and employees participating in FERS are and are financed by OPM and imputed to GAO. covered under the Federal Insurance Contributions Act (FICA). GAO makes contributions to CSRS, Comptrollers General and their surviving beneficia- FERS, and FICA and matches employee contribu- ries who qualify and so elect to participate are paid tions to the thrift savings component of FERS up to retirement benefits by GAO under a separate retire- 5 percent of basic pay. The pension expense rec- ment plan. These benefits are paid from current year appropriations and amounted to approxi- 96 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART III mately $267,000 and $260,000 during fiscal 2002 $2,102,000 and $2,136,000, respectively, but not yet and 2001, respectively. Because GAO is responsi- reimbursed to DOL by GAO. The amount owed to ble for future payments under this plan, the esti- DOL is reported on GAO’s Balance Sheet as an mated present value of accumulated plan benefits intragovernmental liability. of $2,856,000 as of September 30, 2002, and $2,507,000 as of September 30, 2001, is included as a component of salary and benefit liabilities on Note 7. Deferred Lease GAO’s Balance Sheet. The increase in this liability from prior year is due to revised actuarial assump- Revenue tions related to the interest rate and the mortality The U.S. Army Corps of Engineers (COE) entered table. into an agreement with GAO to lease the entire third floor of the GAO building. COE provided all funding for the third floor renovation. Occupancy Note 6. Workers’ began August 3, 2000, for an initial period of 3 Compensation years, with options to renew on an annual basis for 7 additional years. Total rental revenue to GAO The Federal Employees’ Compensation Act (FECA) includes a base rent, which remains constant for the provides income and medical cost protection to entire 10-year period, plus operating expense reim- covered federal civilian employees injured on the bursements at a fixed amount for the first 3 years, job, employees who have incurred a work-related with escalation clauses from year 4 through year 10 occupational disease, and beneficiaries of employ- if the option years are exercised. Beginning in fiscal ees whose death is attributable to a job-related 2002, COE leased additional space on the sixth floor injury or occupational disease. Claims incurred for with occupancy lasting through the original lease benefits for GAO employees under FECA are term. administered by the Department of Labor (DOL) and are paid, ultimately, by GAO. In addition, COE paid for the design, construction, and renovation of one-half of the sixth floor to be For 2002, GAO is using estimates provided by DOL occupied by GAO. In 2000, GAO capitalized the to report the FECA liability. This practice is consis- renovations at a cost of $9,053,000. GAO will repay tent with the practices of other federal agencies, but COE for the entire cost of the renovations in the was not available to GAO in past years. This form of rental credits during the first 3 lease years. change has resulted in an increase of the FECA lia- Rental credits have been recorded as deferred lease bility of $4,377,000 and is the result of DOL using revenue and are being amortized over the original different actuarial assumptions than those used by 3-year lease term. The current year amortization of GAO in the past. The actuarial assumptions deferred lease revenue is reported on the Statement increase the projected benefits liability due to the of Changes in Net Position as a financing source inclusion of claims incurred but not reported and and on the Statement of Financing as an other the extension of the duration covered by the model. resource. This fiscal 2002 charge of $4,377,000 is reflected as a current year expense distributed to the four goals The net amount of rental revenue due to GAO each on the fiscal 2002 Statement of Net Cost. year is the total revenue less the amortization of the deferred lease revenue. Fiscal 2002 and 2001 rents GAO recorded an estimated liability for claims received by GAO, net of the deferred lease revenue incurred as of September 30, 2002 and 2001, and amortization, amounted to $1,489,000 and expected to be paid in future periods. This esti- $1,171,000, respectively. This amount is included in mated liability of $12,331,000 and $7,954,000 as of reimbursable services on the Statements of Budget- September 30, 2002 and 2001, respectively, is ary Resources and Financing. Net rental revenue reported on GAO’s Balance Sheet. GAO also for the remaining period of the 10-year lease is as recorded a liability for amounts paid to claimants by follows: DOL as of September 30, 2002 and 2001, of GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 97 PART III Dollars in thousands Dollars in thousands Amortization Rental Fiscal year ending September 30 Total Fiscal year Total of deferred revenue 2003 $5,520 ending rental lease received or September 30 revenue* revenue due 2004 4,105 2003 $4,663 $2,514 $2,149 2005 1,087 2004 4,808 – 4,808 2006 1 2005 4,866 – 4,866 Total Estimated Future Lease Payments 10,713 2006 4,927 – 4,927 Less: Imputed Interest (745) 2007 4,989 – 4,989 Net Capital Lease Liability $9,968 2008-2010 14,495 14,495 Total $38,748 $2,514 $36,234 *If option years are exercised. Operating Leases GAO leases office space, predominantly for field offices, from GSA and has entered into various Note 8. Leases other operating leases for office communication and computer equipment. Lease costs for office space Capital Leases and equipment for fiscal 2002 and 2001 amounted GAO has entered into capital leases for office and to approximately $6,880,000 and $7,053,000, respec- computer equipment under which the ownership of tively. GAO’s leases are short term in nature and no the equipment covered under the leases transfers to liability exists beyond the years shown in the table GAO when the leases expire. When GAO enters below. GAO’s estimated future minimum lease into these leases, the present value of the future payments under the terms of the leases are as lease payments is capitalized, net of imputed inter- follows: est, and recorded as a liability. The acquisition value and accumulated depreciation of GAO’s capi- Dollars in thousands tal leases are shown in Note 3, Property and Equip- ment, Net. As of September 30, 2002 and 2001, the Fiscal year ending September 30 Total capital lease liability was $9,968,000 and $5,360,000, 2003 $7,180 respectively. 2004 2,801 2005 2,541 These lease agreements are written as annual fiscal- 2006 986 year contracts that are subject to the availability of 2007 397 funding. The agreements contain a lease-to-pur- chase provision and there is no penalty for cancel- Total Estimated Future Lease Payments $13,905 ing the lease and returning the equipment before the end of the lease term. GAO’s leases are short term in nature and no liability exists beyond the years shown in the table below. GAO’s estimated Leased property and equipment must be capitalized future minimum lease payments under the terms of if certain criteria are met (see Capital Leases descrip- the leases are as follows: tion). Because property and equipment covered under GAO’s operating leases do not satisfy these criteria, GAO’s operating leases are not reflected on the Balance Sheet. However, annual lease costs under the operating leases are included as compo- nents of net cost by goal in the Statement of Net Cost. 98 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 PART III Note 9. Net Cost of Operations from both revenues earned by GAO from providing goods and services to other federal entities for a Expenses for salaries and related benefits for fiscal price (reimbursable services), and cost-sharing and 2002 and 2001 amounted to $351,088,000 and pass-through contract arrangements with other fed- $326,772,000, respectively, which were about 78 eral entities. The major differences between fiscal percent and 80 percent, respectively, of GAO’s 2001 appropriations on the Statement of Budgetary annual net cost of operations. Included in the net Resources (SBR) and the appropriation amount in cost of operations are federal employee benefit the President’s Budget for 2001 are the imputed costs paid by OPM and imputed to GAO of pension and the future postretirement health bene- $21,007,000 in fiscal 2002 and $19,681,000 in fiscal fits and life insurance costs (see Note 5). OMB 2001. Also included in the net cost of operations directed agencies to include their share of pension for fiscal 2002 is a $4,377,000 charge resulting from costs currently funded by OPM in the total budget an increase in the workers’ compensation liability. authority in the President’s Budget, whereas these See further discussion in Note 6. amounts are properly not included in our SBR. In addition, as the actual fiscal 2002 President’s Budget Revenues from reimbursable services are shown as is not yet available, comparison between the SBR an offset against the full cost of the goal to arrive at and the President’s Budget cannot be performed. its net cost. These revenues consist primarily of billings to federal government corporations for Fiscal 2002 budget transfers consisted of budget financial statement audits performed by GAO. authority transferred to cover emergency response GAO’s pricing policy is to seek reimbursement for and preparedness activities, including activities actual costs incurred, including overhead costs related to the temporary relocation of Members of where allowed by law. Earned revenues that are the House Representatives and their staffs to the insignificant or cannot be associated with a major GAO building. Fiscal 2001 budget transfers con- goal are shown in total, the largest component of sisted of budget authority transferred in from funds which is rental revenue from the lease of space in allocated for legislative branch agencies’ Year 2000 the GAO building. Revenues from reimbursable (Y2K) needs to replace non-Y2K compliant comput- services for fiscal 2002 and 2001 amounted to ers remaining in GAO’s inventory. Reimbursements $3,594,000 and $2,454,000, respectively. Of the rev- from cost-sharing and pass-through contract enues from reimbursable services received in fiscal arrangements consisted primarily of collections 2002, $3,399,000 were intragovernmental—substan- from other federal entities for the support of FASAB tially from COE, $1,503,000, and Federal Deposit and collections from other federal entities that uti- Insurance Corporation (FDIC), $1,160,000. Like- lize standing GAO contracts for obtaining account- wise, in fiscal 2001 the amount of revenues from ing and auditing services from CPA firms. The costs reimbursable services from other governmental enti- and reimbursements for these activities are not ties was $2,237,000, of which $1,172,000 was from included in the Statement of Net Cost. COE and $731,000 was from FDIC. The net cost of operations represents GAO’s operat- Note 11. Expenses to Be ing costs that must be funded by financing sources other than revenues earned from reimbursable ser- Funded by Future vices. These financing sources are presented in the Appropriations Statement of Changes in Net Position. Expenses to be funded by future appropriations are reported in the Statement of Financing. These expenses represent the increase in liabilities not Note 10. Budgetary Resources covered by budgetary resources, as reported in Budgetary resources made available to GAO Note 4. include current appropriations, spending authority from budget transfers and reimbursements arising GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 99 PART III audited financial statements for this fund. GAO Dollars in thousands maintains this fund to pay claims relating to viola- Fiscal year ending September 30 2002 2001 tions of the Davis-Bacon Act and Contract Work Liabilities not covered by budgetary Hours and Safety Standards Act. Under these acts, resources, as disclosed in Note 4 $59,128 $51,325 DOL investigates violation allegations to determine Liabilities that are not components of if federal contractors owe additional wages to cov- net cost: ered employees. If DOL concludes that a violation Deferred lease revenue (2,514) (5,532) has occurred, GAO collects the amount owed from Capital leases (9,968) (5,360) the contracting federal agency, deposits the funds Current year liabilities not covered by into an account with the U.S. Treasury, and remits budgetary resources that are payment to the employee. GAO is accountable to components of net cost 46,646 40,433 the Congress and to the public for the proper Prior year liabilities that are not administration of the assets held in the trust. Trust components of current year net assets under GAO’s administration totaled approxi- costs (40,433) (40,135) mately $4,692,000 as of September 30, 2002. These Expenses to be funded by future assets are not the assets of GAO nor the federal appropriations, as reported on the government and are held for distribution to appro- Statement of Financing $6,213 $298 priate claimants. During fiscal 2002, receipts and disbursements in the trust amounted to $664,000 and $572,000, respectively. Because the trust assets and related liabilities are not assets and liabilities of Note 12. Davis-Bacon Act GAO, they are not included in the accompanying Trust Function financial statements. GAO is responsible for administering for the federal government the trust function of the Davis-Bacon Act receipts and payments and publishes separate, 100 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 Audit Advisory Committee’s Report The Audit Advisory Committee assists the Comptroller General in overseeing the U.S. General Accounting Office’s (GAO) financial operations. As part of that responsibility, the committee meets with agency management and its internal and external auditors to review and discuss GAO’s external financial audit coverage, the effectiveness of GAO’s internal controls over its financial operations, and its compliance with certain laws and regulations that could materially impact GAO’s financial statements. GAO’s external auditors are responsible for expressing an opinion on the conformity of GAO’s audited financial statements with U.S. generally accepted accounting princi- ples. The committee reviews the findings of the internal and external auditors, and GAO’s responses to those findings, to ensure that GAO’s plan for corrective action includes appropriate and timely follow-up measures. In addition, the committee reviews GAO’s draft performance and accountability report, including its financial statements, and provides comments to management, which has primary responsibility for the report. The committee met three times during fiscal 2002. During these ses- sions, the committee met with the internal and external auditors without GAO man- agement being present and discussed with the external auditors the matters that the Statement on Auditing Standards No. 61, Communications with Audit Committees, requires to be discussed. On the basis of the procedures performed as outlined above, we recommend that GAO’s audited statements and notes be included in the fiscal 2002 performance and accountability report. Sheldon S. Cohen Chairman Audit Advisory Committee GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 101 2003P&A.book Page 102 Monday, January 27, 2003 2:40 PM PART III Independent Auditor’s Report DAVID L. COTTON, CPA, CFE, CGFM CHARLES HAYWARD, CPA, CFE, CISA MICHAEL W. GILLESPIE, CPA, CFE CATHERINE L. NOCERA, CPA, CISA MATTHEW H. JOHNSON, CPA, CGFM SAM HADLEY, CPA, CGFM COLETTE Y. WILSON, CPA ALAN ROSENTHAL, CPA INDEPENDENT AUDITOR’S REPORT Comptroller General of the United States Cotton & Company LLP audited the General Accounting Office’s (GAO) Balance Sheets as of September 30, 2002, and 2001, and the related Statements of Net Cost, Changes in Net Position, Budgetary Resources, and Financing for the years then ended. We found: • The financial statements referred to above are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles, • GAO maintained effective internal control over financial reporting (including safeguarding of assets) and compliance with laws and regulations, • GAO’s financial management systems substantially complied with the applicable requirements of the Federal Financial Management Improvement Act of 1996 (FFMIA), and • No reportable noncompliance with laws and regulations we tested. The following four sections discuss the above conclusions in more detail. Our conclusions on Management’s Discussion and Analysis (MD&A) and other accompanying information appear below, under the caption Consistency of Other Information. Opinion on Financial Statements In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of GAO as of September 30, 2002 and 2001, and its net costs, changes in net position, budgetary resources, and financing for the years then ended in conformity with U.S. generally accepted accounting principles. Opinion on Internal Control In our opinion, GAO maintained, in all material respects, effective internal control over financial reporting (including safeguarding of assets) and compliance with laws and regulations as of September 30, 2002, based on criteria established under the Federal Managers’ Financial Integrity Act (FMFIA). established 1981 333 North Fairfax Street Suite 401 Alexandria, Virginia 22314 703/836/6701 FAX 703/836/0941 WWW.COTTONCPA.COM DCOTTON@COTTONCPA.COM 102 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 2003P&A.book Page 103 Monday, January 27, 2003 2:40 PM PART III Opinion on FFMIA Compliance In our opinion, GAO’s financial management systems substantially complied with the three FFMIA requirements: (1) Federal financial management system requirements, (2) Federal accounting standards, and (3) the U.S. Government Standard General Ledger (SGL) at the transaction level; as of September 30, 2002. Compliance with Laws and Regulations The objective of our audits was not to provide an opinion on overall compliance with laws and regulations. Accordingly, we do not express such an opinion. However, our tests for compliance with certain provisions of laws and regulations disclosed no instances of noncompliance that would be reportable under Government Auditing Standards or Office of Management and Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal Financial Statements. This conclusion is intended solely for the information and use of the management of GAO, OMB, and Congress and is not intended to be, and should not be, used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited. Consistency of Other Information We conducted our audits for the purpose of forming an opinion on the fiscal year 2002 and 2001 financial statements taken as a whole. Certain portions of the Performance and Accountability Report are not a required part of the basic financial statements, but are required by OMB Bulletin No. 01-09, Form and Content of Agency Financial Statements, and the Financial Accounting Standards Advisory Board’s Statement of Federal Financial Accounting Standards No. 15, Management’s Discussions and Analysis. There are two types of material within GAO’s Performance and Accountability Report that is not a part of GAO’s basic financial statements: MD&A and other accompanying information. MD&A describes GAO and its missions, activities, program and financial results, and financial condition. MD&A is required supplementary information. With respect to GAO’s MD&A, we made certain inquiries of management, compared the information for consistency with GAO’s audited financial statements and against other knowledge we obtained during our audits. Other accompanying information consists of the full Performance and Accountability report except for the MD&A, the basic financial statements and notes to the financial statements, and this auditor’s report. With respect to other accompanying information, we compared the information for consistency with the audited financial statements. Based on these limited procedures, we found no material inconsistencies between either the MD&A or the other accompanying information and the financial statements or notes. However, we did not audit the MD&A or the other accompanying information and express no opinion on them. Management’s Responsibility Management is responsible for: • Preparing the financial statements in conformity with U.S. generally accepted accounting principles; GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 103 2003P&A.book Page 104 Monday, January 27, 2003 2:40 PM PART III • Establishing, maintaining, and assessing internal control to provide reasonable assurance that the broad control objectives of FMFIA are met; • Implementing, maintaining, and assessing financial management systems to provide reasonable assurance of substantial compliance with the requirements of FFMIA; and • Complying with applicable laws and regulations. Auditor’s Responsibility and Methodology Cotton & Company LLP performed its audits and examinations in accordance with Government Auditing Standards, U.S. generally accepted auditing standards, the American Institute of Certified Public Accountants’ (AICPA) attestation standards, and OMB Bulletin No. 01-02. We believe our audits and examinations provide a reasonable basis for our opinions. We are responsible for planning and performing our audits to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating overall financial statement presentation. We have examined management’s assertion that GAO maintained effective control over financial reporting (including safeguarding of assets) and compliance with applicable laws and regulations as of September 30, 2002, based on internal GAO evaluations using criteria established in FMFIA. Our responsibility is to express an opinion on the effectiveness of internal control based on our examination. We conducted our examination in accordance with attestation standards established by the AICPA and Government Auditing Standards and, accordingly, obtained an understanding of internal control over financial reporting (including safeguarding of assets) and compliance with laws and regulations; tested and evaluated the design and operating effectiveness of internal control; and performed other procedures considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. With respect to internal control related to significant performance measures included in the MD&A, we obtained an understanding of the design of internal control relating to the existence and completeness assertions and determined whether they had been placed in operation, as required by OMB Bulletin No. 01-02. Our procedures were not designed to provide assurance on internal control over reported performance measures and, accordingly, we do not express an opinion on such control. Because of inherent limitations in internal control, misstatements, losses, or noncompliance may nevertheless occur and not be detected. Also, projections of any evaluation of internal control to future periods are subject to the risk that internal control may become inadequate as the result of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We have examined management’s assertion that, as of September 30, 2002, GAO’s financial management systems substantially complied with the three FFMIA requirements: (1) Federal financial management system requirements, (2) Federal accounting standards, and (3) the SGL at the transaction level. Management’s assertion was based on internal GAO evaluations using compliance indicators set forth in OMB guidance, dated January 4, 2001, Revised Implementation Guidance for FFMIA, and criteria in OMB Circulars A-127, Financial Management Systems, and A-130, Management of Federal Information Resources. Our responsibility is to express an opinion on whether GAO’s financial 104 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 2003P&A.book Page 105 Monday, January 27, 2003 2:40 PM PART III management systems substantially complied with the above-mentioned requirements, based on our examination. We conducted our examination in accordance with attestation standards established by the AICPA and Government Auditing Standards and, accordingly, we examined, on a test basis, evidence about GAO’s substantial compliance with those requirements, and performed such other procedures as we considered necessary in the circumstances. We believe our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination of GAO’s financial management systems compliance with specified requirements. We are responsible for testing compliance with selected provisions of laws and regulations that have a direct and material effect on the financial statements. We did not test compliance with all laws and regulations applicable to GAO. We limited our tests of compliance to those laws and regulations required by OMB audit guidance that we deemed applicable to the financial statements for the fiscal year ended September 30, 2002. We caution that noncompliance may occur and not be detected by these tests and that such testing may not be sufficient for other purposes. ***** We noted other nonreportable matters involving internal control and its operation that we will communicate in a separate management letter. COTTON & COMPANY LLP Charles Hayward, CPA Alexandria, Virginia December 11, 2002 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 105 PART III 106 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 Part IV: Appendixes 1. Accomplishments and Other Contributions In pursuing its strategic goals during fiscal 2002, The other contributions describe instances in which GAO recorded hundreds of accomplishments and GAO provided information or recommendations made numerous other contributions. This appendix that aided congressional decision making or provides details on the most significant. informed the public debate to a significant degree. Typically, the other contributions refer to GAO The accomplishments document financial or other work completed in fiscal 2002. benefits achieved through action on GAO’s findings or recommendations. Typically, the accomplish- In reporting these accomplishments and other con- ments describe GAO work that was done in prior tributions, GAO is holding itself accountable for the fiscal years because it takes time to implement rec- resources it received to implement its strategic plan ommendations, realize benefits, and record them. for serving the Congress. 108 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 Strategic Goal 1 Provide Timely, Quality Service to the Congress and the Federal Government to Address Current and Emerging Challenges to the Well-Being and Financial Security of the American People The Health Care Needs of an Aging and Diverse Population Strengthening FDA’s Prescription Drug Oversight Activities: The 1992 Prescription Drug User Fee Act, which was reauthorized in 1997, has given the Food and Drug Administration (FDA) the funding to approve new drugs and biologics more quickly. GAO’s work showed that (1) drugs have been with- Medicaid Services, which oversees nursing facilities, drawn from the market for safety reasons at a has increased the rigor of inspections conducted by greater rate since the law’s enactment in 1992 and state survey agencies, required states to be more (2) FDA has reduced its funding and staffing for responsive to complaints alleging patient harm, and other activities, such as the regulation of food and mandated the application of sanctions to offending medical devices, so that it could fund its drug facilities. Our work has spurred a growing under- reviews adequately. Partly on the basis of our standing of the dimensions of the problem and work, the Congress reauthorized the act in 2002 and increased the likelihood that effective federal allowed FDA to use user fees to fund a new risk actions will be taken. management system for newly approved drugs that could lead to earlier detection of unanticipated drug Maintaining an Adequate Blood Supply: Maintain- side effects. ing a safe and adequate blood supply is key to meeting the nation’s emergency needs. In a 2002 Improving the Nation’s Supply of Childhood Vac- report and associated testimony, GAO documented cines: Over the past 2 years, supplies of vaccines deficiencies in the collection and distribution of for childhood illnesses, such as measles, mumps, blood, as evidenced by experiences after September rubella, and tetanus, have proved inadequate to 11, 2001. Blood donations increased significantly meet public needs, causing some states to postpone then, leading to a nationwide surplus that stressed vaccination requirements for schoolchildren and the collection system and resulted in six times the prompting federal authorities to recommend defer- usual proportion of blood becoming outdated and ring some immunizations. GAO identified factors discarded in the months following the attacks. that contribute to the shortage of childhood vac- Blood suppliers and the federal government now cines and helped policymakers frame the problems, are reevaluating how blood is collected during and such as how to expedite the licensing of vaccine after disasters to avoid a repeat of this experience products and how to manage vaccine stockpiles, so and to ensure that the inventory of blood on hand that shortages do not become commonplace. in the nation’s blood banks is always sufficient to meet the medical needs of disaster victims. Improving Nursing Home Care: GAO’s work over the past 5 years has helped raise public awareness Helping the Nation Prepare for Bioterrorism: Ana- of the unacceptable conditions prevalent in some lyzing the results of its earlier work on the outbreak 15 percent of America’s nursing homes, where seri- of West Nile virus, GAO identified a need for state ous and recurring problems have harmed patients. and local governments to have the capacity to deal As we recommended, the Centers for Medicare and with conventional basic public health needs, because all epidemics, whether natural or terror- GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 109 APPENDIX 1 related, pose detection and treatment challenges. called the Veterans Equitable Resource Allocation The Department of Homeland Security is expected (VERA) system. We reported that VA could most to play a critical role in preparing for and respond- improve VERA by better adjusting for differences in ing to bioterrorism; therefore, we are working with networks’ patient health care needs. In response to the Congress and with federal public health agen- our report, VA acknowledged the limitations of its cies to better understand how to prepare for bioter- current adjustment process and said it is working rorism without compromising the government’s internally and with an outside contractor on how ability to respond to basic public health needs. In best to correct these limitations. VA is also examin- addition, we are advising the Congress on ways the ing other improvements to VERA that we recom- federal government can more effectively coordinate mended. These include determining why some of efforts to detect bioterrorism and treat its VA’s health care networks experience budget short- consequences. falls after receiving their VERA allocations and establishing a financial mechanism to partially offset Preventing Inappropriate Medicare Payments: the risk that some networks may have an unusually Responding, in part, to a body of GAO work and large number of high-cost, chronic care patients, recommendations, the Congress passed legislation whose costs are not well predicted by current cost in 1996 that increased funding from fiscal 1998 predictors. through fiscal 2003 for activities to help safeguard the Medicare program from improper payments. Ensuring Accountability in Medicaid and State Chil- With this increased funding, the Department of dren’s Health Insurance Programs: GAO informed Health and Human Services created a fraud and policy deliberations on the appropriateness of abuse control program and a Medicare integrity recent Department of Health and Human Services program for a variety of abuse-constraining activi- (HHS) waivers of federal requirements granted to ties. The increased funding for these two programs states for managing their Medicaid and State Chil- helped the Medicare program control improper dren’s Health Insurance Programs. We found that payments by an additional $8.1 billion for fiscal HHS had approved waivers for purposes not autho- 2001 and 2002. rized by statute and had not ensured that the waiv- ers received adequate public input before being Management Initiatives Reduce TRICARE’s Open approved. We suggested that the Congress and Change Orders: The Department of Defense HHS take several actions to correct these problems. (DOD) supplements its health care program, TRI- HHS has since revised its guidance to states on CARE, with contracts for civilian services. These obtaining public input and has made waiver appli- contracts are modified through the use of change cations and decisions more readily available to the orders when new benefits are provided or when public. The leadership of the Senate Finance Com- administrative changes occur. DOD’s lack of focus mittee, after highlighting the concerns with the on the change order process resulted in a backlog waiver approvals and approval process in publicly of over 500 outstanding change orders, with a released letters to HHS, proposed legislation to potential liability in the hundreds of millions of dol- address the unauthorized uses of funds and inade- lars. As a result of our work, DOD implemented a quate public input process. new process that provides a structured approach to approve, prioritize, and track prospective changes. Understanding Increasing Long-Term Care Changes are now negotiated and settled before they Demand and Expenditures: In a series of testimo- are implemented. With DOD’s increased emphasis, nies and a report, GAO showed that spending for the number of outstanding changes orders declined long-term care could nearly quadruple by 2050 as from more than 560 in July 2000 to about 50 in the baby boom generation ages and demand for August 2002. services increases. This burgeoning spending will especially impose burdens on federal and state bud- Improving VA’s Health Care Resource Allocation: In gets because public programs—particularly Medic- one report and two testimonies in 2002, we identi- aid—finance most long-term care expenditures. We fied changes that the Department of Veterans Affairs also demonstrated that services offered to elderly (VA) needed to make in its system for allocating individuals needing long-term care could vary financial resources to its 21 health care networks, widely, depending on the coverage available 110 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 through states’ Medicaid programs and case manag- tion. In response to our work, both agencies have ers’ assessments of individuals’ needs. The U.S. taken steps to increase the participation of women Senate Special Committee on Aging drew exten- in study populations. Most recently, NIH took sively on our work in developing its findings and in action in response to our recommendation that, to its ongoing consideration of long-term care financ- better monitor inclusion, NIH staff who transmit ing reform. data on study populations to the agency’s tracking system should receive ongoing training on the sys- Improving Veterans’ Access to Medicines for Treating tem’s purpose and requirements. After deploying a Psychosis: GAO reported that because of cost con- new tracking system to monitor the inclusion of siderations procedures at some VA facilities have women and minorities in clinical research, NIH pro- limited or could restrict access to an atypical antip- vided extensive training, including demonstrations sychotic drug on VA’s national list of drugs for treat- and hands-on training. In addition, all training mate- ing schizophrenia and bipolar disorders. Such rials will remain available to NIH staff on-line. procedures are contrary to VA’s prescribing guide- line for atypical antipsychotic drugs. In response to Improving Pediatric Drug Research and Labeling: our work, VA has reiterated to all its employees that Partly on the basis of GAO’s testimony, the Con- they should follow the prescribing guideline that gress passed the Best Pharmaceuticals for Children allows veterans access to the most appropriate med- Act of 2001, which reauthorizes what is known as ication for treatment. Furthermore, VA has the pediatric exclusivity provision of the Food and enhanced the capability of its pharmacy database so Drug Administration Modernization Act of 1997—a that VA management can now monitor physicians’ provision that extends manufacturers’ exclusive prescribing practices for these medications at each marketing rights by 6 months for drugs that are facility. studied in pediatric patients. We testified that this provision had been successful in generating clinical Improving Communication between Medicare and studies for drugs tested by manufacturers for pediat- Physicians: GAO identified problems in the way ric use. The 2001 act also addresses another key that Medicare program requirements are communi- issue we identified. Specifically, it requires that cated to physicians. We reported that Medicare safety information from pediatric studies be added instructions and guidance, which enable physicians to drug labels in a timely manner and provides a to bill properly, were often difficult to use, out of process by which the Food and Drug Administra- date, inaccurate, and incomplete. Our work helped tion can seek labeling changes to drugs granted the Centers for Medicare and Medicaid Services pediatric exclusivity. (CMS), the agency that administers the Medicare program, focus on the need to provide physicians The Education and Protection of the Nation’s with better information in its written communica- Children tions and through its telephone call centers and Understanding What It Takes to Ensure Account- Web sites. CMS has taken several steps to improve ability for Public Education: In 2001, the Congress communication with physicians, including publish- passed the No Child Left Behind Act, building on ing a national bulletin that describes physicians’ earlier efforts to make the states more accountable responsibilities and requirements under Medicare for public education and signaling the continuing law, establishing new performance standards for its importance of improving student achievement. In call centers so that questions are answered 1994, concerned that federal funding was not signif- promptly and correctly, and reexamining its proce- icantly improving the educational progress of at-risk dures for monitoring regional Web sites to ensure students, the Congress changed title I of the Ele- that the sites provide consistent and accurate mentary and Secondary Education Act to require information. that the states ensure accountability in their public school systems. A key requirement was student Including Women in Health Research: GAO has testing. The No Child Left Behind Act raised the issued a series of reports on the inclusion of women stakes for schools that fail to achieve adequate test as study subjects in clinical research funded by the scores. But this year, collaborating with other audit National Institutes of Health (NIH) and clinical drug organizations, GAO studied the states’ implementa- trials reviewed by the Food and Drug Administra- tion of the 1994 requirements and found wide- GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 111 APPENDIX 1 spread shortcomings, raising the question of the their objectives. Without this information, it was states’ capacity to fulfill the additional requirements not possible to determine the programs’ impact on of the 2001 legislation. For Americans concerned children’s development. In 1998, the Congress about improving public education, the lesson of our passed the Community Opportunities, Accountabil- work is that setting accountability requirements, ity, and Training and Educational Services Act of such as student testing standards, is only part of the 1998, which required HHS to study the impact of job. Effective implementation, including such the Head Start Programs, as we had recom- basics as ensuring that tests are scored accurately, is mended. We had also recommended that HHS also important. develop and implement a plan for assessing individ- ual Head Start grantees’ performance to ensure that Obtaining Information on the Effectiveness of Fed- the grantees are held accountable for achieving the eral Student Aid: The federal government uses a programs’ purposes. In response to our recommen- range of policy tools to help students finance post- dation and the 1998 legislation, HHS put a process secondary education, including primarily grants, in place to assess grantees’ outcomes. loans, and tax credits. In 2002, GAO issued a report, prepared by a team of staff from across the Improving Measures of Educational Progress: In agency, that addressed the relative effectiveness of 2000, GAO found that states chose different criteria these tools in promoting postsecondary attendance, for measuring the yearly progress of public school choice, and completion, as well as the tools’ impact students and that all but two states defined progress on college costs. We found that little information solely in terms of assessment results, without was available for the Congress to weigh the relative including other educational outcome measures such effectiveness of the tools and recommended that as graduation, attendance, or dropout rates. React- the Secretaries of Education and the Treasury take ing to these findings, the Congress, in enacting the steps to address this lack of information. Both No Child Left Behind Act of 2001, required that agencies agreed with our recommendations and states apply the same standards of academic perfor- plan to do research on the relative effectiveness of mance to all public school students in the state, various policy tools in providing access to higher measure the progress of public schools and local education. educational agencies primarily on the basis of yearly student academic assessments, and include a Establishing Criteria for Educational Progress for time line for achieving specific academic perfor- Disadvantaged Children: In 2000, GAO reported mance goals. In addition, the legislation required that states’ criteria for assessing the performance of the states to include graduation rates for high school children did not allow for specifically identi- schools and an additional outcome measure for fying the performance of disadvantaged children. middle and elementary schools, such as attendance As a result, the states could not gauge the impact of rates, when defining adequate yearly progress. title I funds on these children. We recommended that the Congress consider requiring that the states Ensuring the Timely Transfer of Information on establish criteria for progress specifically for disad- Migrant Children: Children in migrant agricultural vantaged children, as well as for all students. worker families often face significant developmental Responding to our recommendation, the No Child and educational obstacles that are compounded as Left Behind Act of 2001 required that the states, in families move from site to site in search of work. defining adequate yearly progress, set separate Recognizing the needs of these children, the Con- objectives for improvement in the achievement of gress created the Department of Education’s Migrant economically disadvantaged students, students of Education Program in 1965 and the Department of major racial and ethnic groups, students with dis- Health and Human Services’ Migrant Head Start pro- abilities, and students with limited English gram in 1969. In reviewing these programs, GAO proficiency. found that neither Education nor HHS has a system to transfer information on participants between Evaluating Outcomes of the Head Start Program: In locations, despite the need to transfer key informa- 1998, GAO found that the Department of Health tion in a timely way as students move around the and Human Services (HHS) had little information country. As a result, students may experience inap- on whether Head Start Programs were achieving propriate classroom placements or delays in receiv- 112 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 ing services, may be given repeat immunizations, or found that funds for existing programs could be may fail to complete high school graduation used to accomplish the goals of three newly pro- requirements. In enacting the No Child Left Behind posed programs. We pointed out that these new Act of 2001, the Congress required, as we had rec- programs, which were designed to strengthen ommended, that Education and HHS develop a fatherhood and to provide group homes to teenage nationwide system to transmit essential information mothers and their children and mentoring services about migrant children from school district to to the children of prisoners, could be funded school district. through the Social Services and Temporary Assis- tance for Needy Families block grants. Our work Better Targeting of Education Funds to High-Poverty resulted in financial benefits of $164 million. School Districts: In 2001, GAO briefed congres- sional staff on the extent to which title I funds were Improving Child Care Quality and Availability: targeted to low-income children. We pointed out During fiscal 2002, we conducted work in prepara- (1) that the “hold harmless” provisions in the appro- tion for the reauthorization of the Child Care and priations laws limited the extent to which funds Development Block Grant and briefed congres- were targeted because the provisions guaranteed sional staff on developing and marking up the reau- school districts 100 percent of their previous year’s thorization legislation. We reported the levels of allotment of title I funds, rather than reflecting state spending on child care quality initiatives, the changes in their numbers of poor children; (2) the factors that states weigh in determining these potential negative effects of the Title I Finance spending levels, and the ways states set reimburse- Incentive Grants, which had not been funded at the ment levels for child care providers. Our work was time of our briefing, on directing funds to higher- reflected in provisions of the reauthorization legisla- poverty school districts; and (3) the benefits of tion that addressed the quality set-aside (the per- funding a Targeted Grant Formula in allocating pro- centage of their grant funding that states must set portionally more funding per poor child to districts aside to improve the quality and availability of child with higher numbers and percentages of poor chil- care) and state reporting on child care fees. dren. In enacting the No Child Left Behind Act of 2001, the Congress took action to remedy the prob- The Promotion of Work Opportunities and the lems we had identified and to ensure that funds are Protection of Workers better targeted to high-poverty school districts. Computerized Interfaces Identify Undisclosed Earn- ings: In 1998, GAO reported that an Office of Child Improving the District of Columbia’s Child Welfare Support Enforcement database, known as the System: In 2000, GAO studied efforts by the District National Directory of New Hires, could be used to of Columbia to reform its child welfare system. We help prevent or reduce overpayments of supple- found that a lack of integration in the District’s child mental security income that occur when recipients welfare system worked against preventing children fail to fully disclose their earnings. We recom- from entering the system and reducing the length of mended that the Social Security Administration their stays. Compounding these challenges, we (SSA) develop computerized interfaces to access found, the child welfare system continued to oper- this database and detect undisclosed earnings dur- ate without a fully developed collaborative structure ing initial and subsequent determinations of eligibil- and the effective working relationship needed to ity. SSA developed these interfaces, gave all field provide integrated services to children and their offices direct access to the database, and instructed families. In response to these problems, the District field staff to use the database for cases meeting issued a Child Welfare System Emergency Reform specified criteria. These actions have resulted in Plan. Our work helped to guide the development financial benefits of about $797 million. of the plan, which contains several major elements intended to address the challenges confronting the Improving Verification of Continued Eligibility for child welfare system. Supplemental Security Income: In 1998, GAO described SSA’s heavy reliance on recipients to self- Avoiding Duplicative Funding for Social Service Ini- report information on their financial status and rec- tiatives: In reviewing the Department of Health and ommended that SSA enhance its ability to verify this Human Services’ fiscal 2002 budget request, GAO information by accelerating efforts to identify more GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 113 APPENDIX 1 timely and complete sources of financial eligibility of the $8 billion in additional federal unemployment information. In 2001, SSA distributed software to funding recently distributed to the states to help its staff examine a variety of databases quickly strengthen the program’s integrity. to detect possible changes in factors that can affect recipients’ continued eligibility for benefits. After Eliminating Maintenance-of-Effort Funding for a scanning the available databases, the new software Food Stamp Program: In 1996, welfare reform tight- creates an integrated review sheet for each recipi- ened work requirements for some food stamp par- ent. With this information, SSA staff can more easily ticipants, potentially making it difficult for them to query recipients about factors that can affect their obtain benefits if they were unable to find jobs. To eligibility for benefit payments. Thus, the software avoid cutting off benefits for participants who were improves the efficiency of SSA’s continuing eligibil- willing to work but unemployed, the Congress ity reviews. authorized increased funding for the food stamp employment and training programs. These funds Increasing Reliance on Electronic Data Sharing: were called maintenance-of-effort funds because Under certain circumstances, SSA reduces disability the states were required to maintain their state- benefits if a person receives benefits from both the funded expenditures for employment and training Disability Insurance (DI) and the Workers’ Compen- at a level no lower than in fiscal 1996. GAO found sation programs. SSA relies heavily on beneficiaries that the states had spent $98 million, or 30 percent to report their Workers’ Compensation benefits. of the funds available, for the food stamp employ- GAO found that a lack of reliable information on ment and training program in fiscal 2000. Because the Workers’ Compensation benefits they received unobligated balances are carried over from prior caused some DI beneficiaries to be overpaid and years, $426 million was available for employment others to be underpaid. Our report gave new impe- and training in fiscal 2001. Our findings led the tus to SSA’s efforts to obtain better information Congress to eliminate the maintenance-of-effort through data sharing on the Workers’ Compensation funding and thereby reduce funding for the overall benefits received by DI beneficiaries. SSA awarded program by $343 million in fiscal 2002. a grant to an industry association to gather more information about the capacity of states to provide Simplifying Requirements for Determining Food computerized Workers’ Compensation benefit infor- Stamp Eligibility and Benefits: In 2001, GAO mation for individual claimants and to educate state reported and testified on the complexity of the reg- Workers’ Compensation agencies on the advantages ulations for determining eligibility and benefits for and ease of sharing electronic records with SSA. food stamps. Because of this complexity, the pro- gram was costly to administer and decisions were Preventing Overpayments of Unemployment Insur- inherently error-prone. Accordingly, we recom- ance: This year, GAO examined the Department of mended that the Department of Agriculture work Labor’s Unemployment Insurance program, a key with the Congress to identify ways to simplify cer- component in ensuring the financial security of tain program requirements. When the Congress America’s workforce. In calendar year 2001, this reauthorized the Food Stamp program in 2002, it federal-state partnership program paid out some made a number of revisions to simplify the require- $30 billion in benefits to workers who lost their ments for determining program eligibility and jobs. But of this $30 billion, Labor estimated that benefits. some $2.4 billion consisted of overpayments attrib- utable to weaknesses in the program’s manage- Improving the Job Corps Program: Between 1996 ment, oversight, and internal controls. Labor also and 1999, GAO did a substantial body of work that estimated that nearly $600 million of the overpay- provided information and recommendations to ments involved fraud. Citing our findings, the improve the operations of the Department of Chairman of the Subcommittee on Human Labor’s Job Corps program. As a result of our work, Resources, House Committee on Ways and Means, the program has (1) revised its definition of what called on the nation’s governors to combat unem- constitutes completion of vocational training, (2) ployment insurance fraud and abuse and to use part modified its performance measures for placement contractors to make them more meaningful, (3) revised its policy guidance on eligibility determina- 114 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 tion and screening factors to make the guidance pose of the disability insurance program by remov- clear and consistent, (4) implemented new perfor- ing the connection between eligibility for benefits mance measures and monitoring procedures to and the inability to work. As a result of our testi- hold national training contractors more accountable, mony, the Congress retained the SGA for the blind, and (5) improved the accuracy of reports of jobs resulting in a financial benefit of $1.124 billion in obtained by participants. In addition, the Congress fiscal 2001 and 2002. passed legislation in 1998 requiring Job Corps to institute a policy of assigning Jobs Corps students to A Secure Retirement for Older Americans centers in their home states. Previously, students Informing the Public about Employee Pension could be sent to centers outside their home states Issues: The bankruptcy of Enron came as a particu- and traveled an average of four times as far as they larly painful shock to its employees, whose pen- would have if they had been assigned to the closest sions were tied to the fate of the company. In the center in their state of residence. wake of the bankruptcy and the questions it raised for workers nationwide, GAO took steps to help the Improving Data Collection for Agricultural Guest- Congress and the public better understand private worker Program: Under the H-2A guestworker pro- pension issues. For example, we alerted the Con- gram, employers may bring workers into the gress to potential weaknesses in the legal protec- country temporarily, as nonimmigrants, to perform tions for employee pensions. In addition, we seasonal agricultural work when domestic workers showed how employers’ stock investment decisions are unavailable. In 1997, the Congress was con- can increase the risks to which their employees’ cerned that this program would not be able to pro- pension plans are exposed and recommended vide enough workers in the event of a farm labor improvements in the information employees must shortage. GAO found that the Department of Labor receive. Moreover, we provided technical assis- collected limited data for overseeing the program’s tance to Senators and their staffs in drafting pension daily operations and could not determine the extent reform legislation. Finally, our “pension primer,” to which regional offices complied with statutory called Answers to Key Questions about Private Pen- and regulatory deadlines for processing applica- sion Plans, offered Members of Congress, their tions. In response to our recommendation, Labor staffs, and the public information about concepts awarded a contract to a private firm to develop and and rules that have become increasingly relevant for implement an automated reporting and application- Americans concerned about their future economic processing system. The system, to be implemented security. in March 2003, will allow Labor to use data to mon- itor and improve the performance of the H-2A pro- Improving the Management of the Pension and Wel- gram. fare Benefits Administration’s (PWBA) Enforcement Program: In 2002, GAO reported that PWBA had Retaining the Substantial Gainful Activity Level for not realized the expected level of participation in the Blind: To establish and maintain eligibility for the Voluntary Fiduciary Correction program, which disability insurance benefits, beneficiaries must not encourages employee benefit plan officials to iden- only meet medical eligibility criteria but also dem- tify and correct violations of the Employee Retire- onstrate that they are not earning above a certain ment Income Security Act of 1974 (ERISA) on their amount—known as the Substantial Gainful Activity own. PWBA had anticipated that 700 plans would (SGA) level. In March 2000, congressional hearings apply for and use the program; however, only 37 focused on the role of earnings in determining ini- plans had applied at the time we did our study. We tial and continuing eligibility for disability benefits found that certain requirements, such as those for for individuals who are blind or have other disabili- notifying plan participants of potential violations ties. Prior to these hearings, bills introduced in the and for levying excise taxes on prohibited transac- House and Senate had proposed eliminating the tions, may hinder participation in the program. We SGA level for the blind. While an advocate organi- recommended that PWBA analyze barriers to the zation for the blind testified that it wanted the Con- program and explore ways to reduce them. In gress to eliminate the SGA level for the blind, GAO response to our recommendation, PWBA modified responded that doing so would increase the costs of key features of the program. For example, it elimi- disability insurance and fundamentally alter the pur- nated the requirement for plans to notify partici- GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 115 APPENDIX 1 pants of potential violations and established a weekly basis, and the Service began making it avail- limited excise tax exemption for plans that partici- able to its customers weekly. SSA also now updates pate in the Voluntary Fiduciary Correction program. the Death Master File electronically. Limiting Potential Abuse of the Government Pension Evaluating the Department of Labor’s Retirement Offset Exemption: In August 2002, GAO completed Saving Activities: In 2001, GAO reported that a time-sensitive and high-profile review of potential Labor’s Pension and Welfare Benefits Administration abuse by state and local government employees of (PWBA) had not assessed the effectiveness of its an exemption to the Government Pension Offset—a activities to promote saving for retirement. In par- provision designed to equalize the treatment of ticular, PWBA had little specific information about workers covered by Social Security and those with the effectiveness of individual publications and noncovered government pensions. This review other outreach activities. We recommended that resulted in a congressional briefing and final GAO PWBA measure the effectiveness of its outreach report documenting a practice that could cost the program so that it could best target its limited Social Security Trust Fund hundreds of millions of resources. In response to our recommendation, dollars. The Congress is currently considering legis- PWBA contracted for focus group evaluations of its lation drafted in response to our report that would retirement savings materials to determine their use- address the potential abuse. fulness. In addition, PWBA received recommenda- tions from a contractor on ways to better target its Safeguarding Personal Information: In 2002, GAO outreach program. reported and testified on the ways in which govern- ments at all levels use the Social Security number Informing the Public about the Implications of the and the extent to which they protect it. Our work Aging of the U.S. Workforce: In November 2001, pointed particularly to the challenge of safeguarding GAO issued a report describing and analyzing the personal information, including Social Security challenges posed to the nation by the aging of the numbers, that appears on public records, which are U.S labor force. This report alerted the public and sometimes available to the public and in some the Congress to potential adverse effects, not only instances available over the Internet. Our contacts on Social Security and the federal budget, but also with a variety of local record-keeping officials and on employers’ ability to retain skilled workers and national organizations representing such officials ultimately on long-term economic growth. We rec- has helped bring these issues to public attention, ommended that executive agencies develop com- and actions to secure such information, or remove it prehensive policy responses to these challenges. from public records entirely, are under consider- The Department of the Treasury and the Internal ation by such groups. Revenue Service are already taking some action. For example, they have issued a notice requesting Improving Distribution of the Social Security Admin- comments on issues relating to phased retirement istration’s Death Master File Information: In light of arrangements under qualified defined benefit plans. concerns about identity theft and the potential for misuse of a deceased person’s Social Security num- Reforming Social Security: This year, the Comptrol- ber, it is important for the Social Security Adminis- ler General testified before the House Budget Com- tration (SSA) to gather death information and mittee on issues related to reforming the Social distribute it expeditiously to financial institutions. Security program. GAO has also provided numer- GAO found that death information collected by SSA ous informal briefings on this topic. These contri- generally reached financial institutions and other butions have strengthened our reputation as an entities within 1 to 2 months of a person’s death; honest broker of objective information on this con- however, delays in processing and distributing the tentious and controversial issue. Using a complex information sometimes occur. In testimony, we simulation model, we have supplemented the concluded that SSA and the National Technical agency’s analytical work in this area and enhanced Information Service could make death information our ability to analyze the effects of different reform available to financial institutions more quickly. proposals on the level and distribution of Social Partly in response to our testimony, SSA began fur- Security benefits. nishing its death file information to the Service on a 116 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 An Effective System of Justice such as crimes of violence, narcotics trafficking, and Contributing to Election Reform: Voting problems terrorism. GAO reviewed the Service’s efforts to during the September 2002 primaries demonstrated combat benefit fraud and identified shortcomings in the continuing relevance of GAO’s work arising the agency’s enforcement strategy, working level from the November 2000 election. In a series of guidance, case tracking and management, informa- reports, we disclosed major challenges relating to tion sharing, and performance measurement. The the people, processes, and technology involved at Service agreed with our findings and has begun each stage of the election process—registration, implementing the corrective actions we absentee and early voting, preparing for and con- recommended. ducting election day activities, and vote tabulations. We shared our observations and criteria for evaluat- Improving the Monitoring and Evaluation of ing reform proposals not only with the Congress Department of Justice Grants: In a series of reports, but also with state and local election commission- GAO cited poor documentation of grant monitoring ers. Nationwide, there are more than 10,000 local and weak impact evaluations as problematic in election jurisdictions, and our work has relevance ensuring the efficiency and effectiveness of the for all of them. Our work also contributed to the Department of Justice’s grants. The Department’s elections reform legislation passed by the Congress, Office of Juvenile Justice and Delinquency Preven- which addresses such matters as federal subsidies tion and Office of Justice Programs have taken steps for voting machinery, standards for the equipment, to address the shortcomings we identified, both in improvements in voter registration rolls, and better the monitoring of grants to ensure that funds are access for voters with disabilities. spent as intended and in the design of impact eval- uations to ensure that they are more likely to yield Alerting the Congress to the Prevalence and Cost of valid results or have been scaled back and redi- Identity Theft: Identity theft is the fastest-growing rected to achieving other research purposes. In type of crime in the United States. It involves “steal- addition, proposed legislation responsive to our rec- ing” another person’s personal identifying informa- ommendations for improvements in evaluations of tion—such as the Social Security number, date of the Department’s Drug Court program would man- birth, and mother’s maiden name—and then using date more rigorous data collection and affect the information for fraudulent purposes. GAO’s evaluation. reporting helped the Congress devise the Identity Theft and Assumption Deterrence Act of 1998. The Promotion of Viable Communities Since then, most states have enacted laws that make Improving Human Capital Management at the identity theft a crime. Still, the growth of identity Small Business Administration (SBA): GAO exam- theft and the frequently multi- or cross-jurisdictional ined SBA’s organizational alignment and the effect nature of this type of crime underscore the impor- this alignment has on SBA’s ability to fulfill its mis- tance of cooperation among federal, state, and local sion. GAO found that SBA’s current structure con- law enforcement authorities. This year, we reported tributes to the challenges it faces in delivering further on the prevalence and cost of identity theft services to the small business community. In partic- and worked to promote awareness and use of inter- ular, ineffective lines of communication; confusion governmental mechanisms for enhancing data shar- over the mission of district offices; complicated, ing and enforcement. overlapping organizational relationships; and a field structure not consistently matched with mission Improving Efforts to Combat Immigration Benefit requirements combine to impede the efforts of SBA Fraud: Immigration benefit fraud involves attempts staff to deliver services effectively. To guide the by aliens to obtain benefits such as naturalization, organizational changes needed to improve its deliv- work authorization, or adjustment of status (e.g., ery of services and to respond to issues and chal- from student to permanent resident) through illegal lenges raised by GAO, the Office of Management means—for example, using fraudulent documents. and Budget, and the SBA Inspector General, SBA Immigration and Naturalization Service officials has drafted a plan for a 5-year workforce transfor- believe that the problem is serious; they also mation. The draft plan recognizes SBA’s need to believe that some aliens are applying for benefits so restructure its workforce and streamline its head- that they will be able to carry out illegal activities, quarters operation. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 117 APPENDIX 1 Reducing the Cost of Federal Housing Programs: In Contributing to the Debate on Homeland Security: response to GAO reports and recommendations In a series of testimonies delivered in Washington, over the past several years, the Congress, the D.C., and throughout the country, GAO discussed Department of Housing and Urban Development the need for coordination and cooperation among (HUD), and the U.S. Department of Agriculture’s all levels of government to develop a strategy to Rural Housing Service took actions that produced improve national preparedness and an effective financial benefits totaling $6.1 billion. Over $4.8 bil- response in the event of future terrorist attacks. lion resulted from GAO’s recommendation that Drawing on our body of work on terrorism, emer- HUD review unexpended balances in all of its pro- gency preparedness, and policy options for the grams to ensure timely expenditure of appropriated design of federal assistance, the testimonies noted program funds. The remaining benefits resulted the need for a national homeland security strategy from a series of actions in response to our work. to help redefine the roles of local, state, and federal For example, the Congress (1) funded fewer new government entities in light of new and emerging programs or set-asides than HUD had requested, (2) threats. The testimonies also discussed the need for terminated Operation Safe Home, and (3) enacted developing performance goals and measures to legislation that replaced HUD’s home mortgage assess the preparedness of all levels of government assignment program with less costly alternatives. and for carefully choosing assistance tools, such as Additionally, the Rural Housing Service centralized grants, regulations, and tax incentives, to facilitate its servicing for rural single family housing loans. the targeting of resources to the areas of highest risk and greatest need. Providing a “Roadmap” for Management Reform at HUD: GAO has designated programs in the Depart- Responsible Stewardship of Natural Resources ment of Housing and Urban Development as high and the Environment risk since 1994. Although we removed the high-risk Improving the Process for Recognizing Indian designation from one of HUD’s programs (commu- Tribes: GAO assisted the Congress in its delibera- nity planning and development) after the depart- tions over how to reform the Bureau of Indian ment strengthened its management controls, Affairs’ regulatory process for federally recognizing programs in two other areas (single-family mort- Indian tribes. In fiscal 2002, GAO issued a report gage insurance and rental housing assistance), and testified twice on the need for the Bureau to which account for about two-thirds of HUD’s bud- provide clear, timely recognition decisions. As of get, remain high risk. In response to requests from July 2002, there were 562 federally recognized the Senate Committee on Banking, Housing and Indian tribes, and hundreds more had petitioned Urban Affairs, we reported and testified in 2002 on the Bureau for federal recognition. We reported HUD’s progress in achieving management reform as that because of weaknesses in the recognition pro- well as in addressing three major management chal- cess, the basis for the Bureau’s tribal recognition lenges—improving its human capital policies, pro- decisions is not always clear and the time required grammatic and information management systems, to reach a decision can be substantial. Without and contracting practices. HUD management is tak- improvements to address these problems, confi- ing action in response to our work. During his con- dence in the regulatory process will continue to firmation hearings in early 2001, HUD Secretary Mel erode. In response to our recommendations, the Martinez, citing our work, made improving HUD’s Bureau has developed a strategic plan to improve management the department’s highest priority. The the objectivity and efficiency of the tribal recogni- administration then introduced HUD’s first Perfor- tion process. mance Plan, noting that HUD was using our reports as a “roadmap” for making management improve- Formulating a Plan for the Multi-Billion-Dollar ments. In July 2002, the Deputy Secretary reiterated Everglades Restoration: Restoring the Everglades the department’s position before the Senate Com- will take billions of dollars over 50 years and mittee on Banking, Housing and Urban Affairs and require many federal and nonfederal agencies to endorsed our characterization of HUD’s three major work together to achieve the goals of a healthy, management challenges. restored ecosystem. Since 1999, we have identified several components missing from the initiative’s basic planning and organizational structure and 118 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 have made recommendations to improve the pros- ees and revise its outdated grant regulations to pects for restoration. In response, the Congress conform with current practices. EPA provides over required the task force that administers the initiative half of its budget of about $8 billion to grantees to to develop a strategic plan and a conflict resolution accomplish its environmental programs, and effec- process and to prepare a land acquisition plan. The tive oversight of these grantees is critical to achiev- task force developed its first strategic plan in 2000 ing the agency’s environmental goals. We found and updated the plan, in part to address our com- that EPA was not effectively scrutinizing grantees for ments, in 2002. It is currently finalizing the land unallowable costs or using single audit information acquisition plan and a conflict resolution process. as effectively as it could. We also found that exist- Our ongoing work on the initiative includes a study ing grant regulations did not reflect actual practices. on the coordination of scientific activities to support In response to our recommendations, EPA revised restoration and contributions to congressional over- its grant regulations in 2002 to require testing for sight hearings on the progress made in developing unallowable costs and to accurately reflect its grant scientific information. fellowship practices. EPA also improved its training for grant personnel so that they could make better Improving the Management of Nuclear Waste use of single audit information. Cleanup Projects: In 2000 and 2001, GAO reported on the Department of Energy’s (DOE) cleanup of Reducing Nuclear Waste Treatment Costs: In 1996, nuclear waste contamination at two nuclear pro- GAO reviewed DOE’s Hanford tank waste privatiza- cessing sites, in Paducah, Kentucky, and West Val- tion project and found many unresolved technical ley, New York. At Paducah, we found that and financial uncertainties. In 1998, GAO com- significant quantities of hazardous materials had not pared DOE’s Hanford approach with several alter- been included in the site cleanup plan. At West Val- native contracting and financing strategies and ley, we found that differing cleanup standards and suggested that DOE reassess its approach in light of disagreements between DOE and the state were significant cost growth. In June 2000, GAO testified hindering progress. In response to our recommen- that DOE should reevaluate its Hanford approach dations, (1) DOE incorporated the excluded hazard- and consider other contracting and financing ous materials into the Paducah site’s cleanup plan options. DOE subsequently terminated the Hanford and agreed to specify the plan’s priorities, costs, and tank waste project, and, after evaluating alternative schedules, and (2) federal regulators agreed on contracting and financing options, awarded a new cleanup standards for the West Valley site and the contract that is expected to achieve significant cost Congress, as we had suggested, directed DOE and reductions—about $4 billion—over the life of the the state to resolve their differences. construction phase. The financial benefit for fiscal 2003, 2004, and 2005 is about $1.5 billion. Increasing the Capacity of the International Audit Community to Assess Environmental and Agricul- Helping Enhance Federal Oversight of Restructured tural Programs: GAO staff helped strengthen audit- Energy Markets: With the restructuring of the elec- ing practices in foreign countries by taking tricity and natural gas industries, from regulated leadership roles in the activities of the International monopolies to competitors in the marketplace, Organization of Supreme Audit Institutions (INTO- GAO has contributed to the Congress’s understand- SAI). In 2002, GAO staff on INTOSAI’s Environ- ing of key issues in ongoing energy policy debates. mental Working Group were instrumental in These issues include the implications of the Enron developing guidance for conducting environmental collapse for the markets, the exercise of market audits, and GAO staff at a joint United Nations/ power in California, reasons for price spikes in the INTOSAI meeting took the lead in developing guid- natural gas markets, and the Federal Energy Regula- ance for auditing agricultural programs. Both guid- tory Commission’s capacity to oversee energy mar- ance documents are being translated and published kets. Our work has also influenced federal in five languages. agencies’ decisions affecting concentration in the ethanol market and the petroleum industry. Improving Grant Management and Oversight: GAO recommended in 2001 that the Environmental Pro- tection Agency (EPA) improve its oversight of grant- GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 119 APPENDIX 1 Protecting the Taxpayer against Faulty Analyses in major causes of these types of fires and setting pri- Public Works Programs: GAO found that the Corps orities for reducing their effect, and (3) identifying of Engineers’ economic justification for the pro- ways for the agencies to enhance their prepared- posed deepening of the Delaware River ship chan- ness for fighting these fires. As a result of our nel was seriously flawed. The Corps’ justification efforts over the years, the Department of Agriculture contained numerous material errors, including mis- and the Department of the Interior have developed calculations, invalid assumptions, and the use of a cohesive strategy to help restore and maintain the significantly outdated information. Furthermore, the health of ecosystems damaged or threatened by cat- Corps’ quality control process failed to identify astrophic wildfires. This strategy includes setting these major flaws. Acting on GAO’s findings, the priorities to deal with the problem, establishing a Corps’ Director of Civil Works suspended this $311 Wildlands Fire Leadership Council to provide coor- million project pending a comprehensive reanalysis. dination and leadership to address catastrophic Moreover, in light of the many problems identified wildfire threats, and beginning to hire additional for this individual project, the Director ordered a firefighters and purchase additional fire-fighting review of 164 other projects. equipment to enhance the agencies’ fire-fighting capability. Making the Food Supply Safer for the American Peo- ple: Although the U.S. food supply is considered Improving Farm Loan Programs: In 1990, GAO des- one of the safest in the world, foodborne illness ignated the Department of Agriculture’s Farm Loan remains an extensive and expensive problem, rais- Programs as a high-risk area because of billions of ing concerns about the federal government’s ability dollars of losses attributable to significant problems to ensure the safety of domestic and imported primarily with the department’s direct loan portfo- foods. Recently, the threat of deliberate contamina- lio. Since then, the department has implemented tion of our food by terrorists has significantly ele- many of our recommendations to improve the pro- vated those concerns. After we issued a series of gram, and the 1996 Farm Bill incorporated our key reports and testimonies on the federal government’s legislative recommendations. These changes elimi- ability to ensure the safety of the food supply, the nated the revolving-door credit for which the Congress and federal agencies took action to department had become known and gave farmers strengthen oversight and enforcement of the federal strong incentives to repay their loans rather than to food safety system. For example, the Congress seek loan forgiveness or loan refinancing that included several food safety provisions in the Public included write-offs of delinquent debt. We esti- Health Security and Bioterrorism Preparedness and mated that, during the 5 years following enactment Response Act of 2002, including those that (1) of the 1996 Farm Bill, improvements in the program strengthen the Food and Drug Administration’s reduced losses on direct loans by about $4.8 billion, (FDA) authority to prevent the reimportation of compared with the losses for the 5 preceding years. potentially unsafe food that has been refused entry into the United States and (2) require domestic Enhancing the Credibility of Environmental Regula- food-processing firms to register with FDA to tions: In developing regulations to protect the envi- ensure that they are known to the agency and sub- ronment and public health, the Environmental ject to its processing regulations. In addition, the Protection Agency (EPA) relies extensively on its U.S. Department of Agriculture developed a training Science Advisory Board for independent peer and certification program and required statistical reviews of key scientific studies and methodologies. process controls for a pilot program testing a new GAO found that the board’s peer review results inspection approach for slaughter facilities. could be undermined by allegations of conflict of interest and bias because its policies and proce- Strengthening Federal Efforts to Prevent and Fight dures were not sufficient to (1) ensure the indepen- Wildfires: In 1998, GAO first reported on the poten- dence of peer review panel members, (2) ensure a tial for large catastrophic wildfires to cause exten- balance of viewpoints on each panel, or (3) inform sive damage to forests and nearby communities. the public about the points of view represented. In Since then, we have facilitated the involvement of 2002, EPA responded fully to our recommendations, federal agencies in (1) coordinating their actions implementing new policies and procedures that sig- and providing overall leadership, (2) identifying the nificantly enhance the board’s ability to identify and 120 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 address potential conflicts of interest, develop bal- FAA in overseeing the act’s implementation and in anced panels, and better inform the public about determining whether carriers have conducted the the panels. required background checks before making final pilot hiring decisions. A Secure and Effective National Physical Infrastructure Reducing the Federal Aviation Administration’s Proceeds from States’ Sale of Real Property Remain Budget: GAO assisted the Senate Appropriations Federal Funds: In a legal opinion, GAO disagreed Committee, Subcommittee on Transportation, with with a Federal Highway Administration’s interpreta- markups of the Federal Aviation Administration’s tion of a statute that allowed states to use the pro- budget. In briefings, we identified several facilities ceeds from sales of real property purchased with and equipment projects as candidates for budget federal funds for other eligible projects. The Fed- reductions. On the basis of our analysis, the House eral Highway Administration interpreted the statute and Senate Appropriations Committees reduced the to mean that proceeds from real property sales pur- agency’s fiscal 2002 budget by $99 million. chased with federal funds lose their federal charac- ter and become state funds. We concluded that the Serving as a Catalyst to the Postal Service’s Transfor- federal government retains its interest in the sale mation Efforts: Since we placed the Postal Service’s proceeds and, consequently, states may not convert transformation efforts and outlook on our High-Risk federal money to state money by buying and selling List and recommended in April 2001 that the Service real property. develop a transformation plan, much of the public debate in the Congress and among postal stake- Contributing to the Debate on Spectrum Reform: holders has focused on such a plan. In April 2002, With the dramatic growth in wireless technologies the Postal Service issued a transformation plan. In during the past decade, government users and the response to requests from the Senate Committee on commercial sector are competing more intensely for Governmental Affairs, we reported and testified in access to the radio frequency spectrum to meet 2002 on the Service’s deteriorating financial situa- needs for national defense, public safety, and the tion and highlighted why the Service’s primary mis- general public. In 2002, GAO testified before the sion of providing universal postal service is at risk Senate Committee on Commerce, Science and and transformation is needed. We noted that the Transportation and subsequently reported on prob- Service’s current business model, which assumes lems with the federal government’s management of that growing mail volumes and revenues will cover the spectrum. We recommended the development the costs of an expanding infrastructure, is at odds of a clearly defined national spectrum strategy to with the decline in mail volumes attributable to sev- guide domestic and international spectrum manage- eral factors, including increased competition and ment decision making, actions to address human electronic communication alternatives. We identi- capital needs in federal spectrum management, and fied key transformation issues that need to be enhanced accountability for federal agencies’ use of addressed, such as the Service’s mission and role for this limited resource. the 21st century and possible approaches to addressing these issues. Enhancing Aviation Safety: In response to a request from the Subcommittee on Aviation, House Making Key Contributions to Transportation Secu- Committee on Transportation and Infrastructure, rity: Drawing on an extensive body of completed GAO reviewed the Federal Aviation Administration’s work, GAO provided significant background infor- (FAA) implementation of the Pilot Records Improve- mation to a number of committees as the Congress ment Act of 1996. This act responded to seven fatal drafted the Aviation and Transportation Security Act. commercial airline accidents that were attributed, in We have also continued to provide the Congress part, to errors by pilots who had been hired without with information on aviation, port, and transit secu- background checks. Our 2002 report found compli- rity. For example, in response to requests from ance problems at some airlines. In addition, we House and Senate authorizing committees, we pro- pointed out that FAA did not incorporate guidance vided timely information on U.S. and foreign- on the act in its training or handbooks for inspec- owned screening companies and the capabilities of tors. We made recommendations designed to assist explosives detection systems and trace devices. We GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 121 APPENDIX 1 also provided information on the pros and cons of highway account of the Highway Trust Fund over moving the Transportation Security Administration the next authorization period and beyond, and to the Department of Homeland Security and of identified alternative approaches to funding invest- arming commercial pilots. Additionally, we testified ments in surface transportation. In addition, our before the House Subcommittee on National Secu- work on highway research provided assistance to a rity that ports present security risks, not only Senate authorizing committee in drafting new because of the possibility that ships could carry legislation. weapons of mass destruction or other hazardous cargoes, but also because of the potential for terror- Improving Federal Real Property Management: In a ists to attack cruise ships or petrochemical facilities number of reports and testimonies for the House at or near ports. Finally, we testified before the Committees on Transportation and Infrastructure Senate Committee on Banking, Housing and Urban and Government Reform and the Senate Committee Affairs on the challenges that transit agencies face in on Governmental Affairs, GAO identified problems making their systems secure. These challenges with and made recommendations to improve the include the systems’ accessibility and high ridership, management, acquisition, maintenance, protection, the high cost of security improvements, and the usage, and disposal of federal real property. The need to coordinate security concerns among fed- Congress considered legislation related to this work eral, state, and local government agencies and pri- that would have given federal agencies more man- vate sector companies. agement tools, such as the ability to enter into pub- lic/private partnerships to better use and maintain Aiding in Deliberations on New Surface Transporta- their facilities. The General Services Administration tion Legislation: Responding to requests from made significant progress in 2002 toward pursuing authorizing committees, GAO provided information all available alternatives to deal more expeditiously in testimonies and reports to the Congress as it pre- with deteriorated and underused buildings and to pared to reauthorize surface transportation pro- improve the quality of the data it uses in its reports. grams. In 2002, GAO identified major challenges in Finally, we made recommendations to strengthen surface and maritime transportation systems, building security and informed the Congress of reviewed the Departments of Treasury’s and Trans- issues to be considered in deliberations on estab- portation’s procedures for projecting receipts for the lishing a Department of Homeland Security. 122 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 Strategic Goal 2 Provide Timely, Quality Service to the Congress and the Federal Government to Respond to Changing Security Threats and the Challenges of Global Interdependence Respond to Diffuse Threats to National and Global Security Progress Made in Unifying Homeland Security Efforts: The federal government has taken impor- tant first steps to unify the efforts of all levels of government and the private sector with regard to homeland security. As GAO recommended in reports from 1997 to 2002, the federal government Improving Department of Defense Force Protection has established a focal point for combating terror- Efforts: At the request of two congressional com- ism (the Office of Homeland Security), developed a mittees, GAO is continuing to evaluate the plan for countering terrorism, implemented risk approach taken by each military service to protect management to enhance security at certain federal military personnel, equipment, and capabilities from departments, and defined key terms such as “home- terrorist attacks and is examining the protection land security” and included the definitions in the measures taken at domestic and overseas ports used National Strategy for Homeland Security. These for military deployments. In a collaborative effort, actions will promote leadership among the many GAO worked with the Department of Defense to entities involved in homeland security and help to identify and implement changes needed to improve ensure that their efforts are mutually reinforcing and the effectiveness of the department’s force protec- that they are using resources efficiently. tion approach. This year, as a result of GAO recom- mendations, the department took steps to (1) Evaluating DOD’s Chemical and Biological Defense improve its threat assessment methodology, (2) Program: In response to congressional concern, develop a departmentwide antiterrorism/force pro- GAO has been increasing its review efforts on the tection strategy, and (3) consistently apply risk man- status and progress of the Department of Defense’s agement principles to prioritize requirements. (DOD) Chemical and Biological Defense Program and military service readiness in this area. GAO’s Upgrading U.S. Export Controls on Sensitive Tech- reports have identified problems and recommended nologies: GAO’s many reviews of U.S. export con- a number of corrective actions, particularly in areas trol laws and programs have contributed to the such as chemical and biological defense equipment congressional debate over how to revamp the cur- and training, unit readiness reporting, program rent system and prevent sensitive technologies from organization, and command emphasis and leader- falling into the hands of terrorists or states that sup- ship. DOD has concurred with the vast majority of port them. Among the improvements needed, GAO GAO’s recommendations and is presently working noted better justification for loosening controls over on several major initiatives to resolve identified high-performance computers, better monitoring of problems and make program improvements. These the recipients of sensitive technologies, and greater initiatives have resulted in savings of approximately information-sharing among supplier countries that $2 million during fiscal 2002. export sensitive technologies. GAO’s reports and testimonies have helped the Congress understand the weaknesses in the current process of controlling sensitive technology exports and how proposed changes to the Export Administration Act will affect GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 123 APPENDIX 1 the delicate balance between protecting our eral agencies involved have (1) begun to develop national security and promoting U.S. economic an overall plan to coordinate their international interests. efforts, (2) consolidated programs to better target limited resources, (3) focused on ensuring that Helping Reduce Risks Involving Information Secu- security improvements are sustained by the host rity: GAO has identified information security as a countries, (4) decided to upgrade radiation detec- governmentwide high-risk area, and its ongoing tion equipment already installed and establish mini- work identifying information security vulnerabili- mum standards for new installations, and (5) begun ties has helped mitigate risks to critical federal oper- to develop a strategic plan for installing nuclear ations/assets and improve the government’s ability detection equipment on U.S. borders. to respond to cyber attacks and intrusions. Improve- ments stemming from recommendations in prior Testing the Security of Federal Buildings: In a test of years’ audits and recent follow-up work included the adequacy of security measures in federal offices actions by the Departments of Commerce, Defense, around the country, GAO investigators breached Interior, Education, and Veterans Affairs. Further, the security of four federal office buildings in the GAO’s recommendations during fiscal 2002 Atlanta area. Using fictitious law enforcement cre- prompted new actions at the Departments of dentials and a pretext for their presence, agents Defense and Treasury and at the Federal Deposit were able to enter the buildings without proper Insurance Corporation to strengthen information authority, carrying a briefcase or package and security for protecting sensitive data from unautho- bypassing magnetometers and x-ray machines. rized disclosure, modification, and loss. They moved freely throughout the facilities during day and evening hours. As a result of this test, GSA Focusing on Information Security As a Critical Ele- strengthened its process for verifying credentials ment of National Preparedness: In the aftermath of and identification and issued guidance and recom- the September 11, 2001, attacks, GAO assessed gov- mendations for security operations at GSA-managed ernmentwide progress in implementing critical facilities throughout the country. infrastructure protection efforts, including (1) a dis- cussion of related challenges facing the proposed Ensure Military Capabilities and Readiness Department of Homeland Security, (2) an analysis Promoting a Clearer Understanding of Gulf War Ill- of the numerous organizations involved in protect- ness: Since the mid-1990s, GAO has given visibility ing the nation’s computer-based infrastructure, and to ongoing privately funded research into the nature (3) an identification of information-sharing practices and causes of Gulf War Illness and the methodolog- that can benefit critical infrastructure protection. ical obstacles faced by researchers. Early research GAO’s reports and testimonies detailed the growing sponsored by the Department of Defense empha- array of threats, including cyber-terrorism, and sized stress as a potential causal factor in Gulf War related risks to our increasingly computer-depen- veterans’ illnesses; however, privately funded dent infrastructures, such as electric power, tele- research augmented this with the investigation of a communications, and key government services. In range of physical exposures, including chemical addition, GAO’s products identified shortfalls and agents. One result of our attention to this issue has recommended solutions pertaining to the ability of been DOD’s growing acceptance of alternative the government to analyze threats effectively, views on the nature and causes of Gulf War Illness. respond to potentially damaging incidents, and work with the private sector to implement compre- More Efficient Use of In-orbit Satellite Capabilities: hensive risk-reduction measures. In 1998, GAO reviewed DOD’s development of the Space-Based Infrared System (SBIRS), under which Protecting the Public from Nuclear Terrorism: The the launch of the first SBIRS satellite was planned United States has spent over $5 billion to prevent for fiscal 2002. We reported that implementing this the transfer of nuclear material and scientific exper- plan would put eight excess satellites in orbit with- tise that could be used to develop a nuclear bomb out providing sufficient ground processing capabili- or a radiological weapon from Russia and other ties for the data the satellites generated. We states of the former Soviet Union to terrorists or recommended that the Secretary of Defense review countries of concern. Because of our work, the fed- and assess launch alternatives. As a result, DOD 124 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 delayed the launch of the first SBIRS satellite from Reducing the Risk of Major Weapon System Acquisi- fiscal 2002 to fiscal 2004 and subsequently delayed tions: Since 1998, GAO’s work on best commercial other such launches. These delays, which allow practices has shown that maturing key technologies DOD to use existing satellites until the end of their before they were included in new product develop- expected lives and avoid 8 years of excess satellite ment was a key factor in successful programs. We capability, saved about $702 million in satellite also reported on a technique—technology readiness costs. levels—that accurately gauges the maturity of tech- nology. The Department of Defense agreed, mak- Reducing Risks in F/A-22 Aircraft Program: In a ing technology maturity a key factor in determining March 2002 mandated report, GAO recommended whether new programs should be started and limiting production in the Air Force’s F/A-22 aircraft endorsing use of technology readiness levels. We program until operational testing is complete to have since applied technology readiness levels in minimize the risks of producing large quantities of our assessments of several major weapon system aircraft that may require costly modifications. We programs, leading to recommendations on how reported the extent of the delay to development changes in the programs could avert costly and testing and predicted how this delay would likely time-consuming problems. Citing GAO’s work on further affect subsequent operational testing and best practices, the Senate added its support for tech- thus increase program risks. Our analysis helped nology maturity through a provision to the Defense the House Appropriations Committee include lan- Authorization Act for Fiscal Year 2002 requiring that guage in the Fiscal Year 2003 Defense Appropria- critical technologies be successfully demonstrated tion Act to delay funding for seven F/A-22 before they are incorporated into a major defense production aircraft until DOD completes a formal acquisition program. risk assessment. This assessment will identify the potential cost, technical, schedule, or other risks Improving DOD’s Major Weapon System Acquisition resulting from increased F/A-22 production quanti- Process: GAO issued a report in fiscal 2002 that ties prior to the conclusion of operational testing. identified best practices for capturing knowledge about a product’s design and manufacturing at criti- Delaying Full-Rate Production of the V-22: In Janu- cal points during its development, thereby reducing ary 2001, GAO briefed the Secretary of Defense’s V- cost and schedule risk. On the basis of our analysis, 22 Blue Ribbon Panel about our findings on the air- we concluded that DOD could achieve better out- craft. The Blue Ribbon Panel was formed to investi- comes from its acquisition programs by ensuring gate the V-22 after a fatal crash in December 2000, that knowledge is captured at key decision points. just prior to the aircraft’s planned full-rate produc- We recommended that DOD require specific infor- tion. The panel received information from GAO mation as exit criteria at these key points during about reductions in development testing, test waiv- product development and require the program ers, deficiencies identified during operational tests, manager to document that information. We also and results of an earlier April 2000 crash investiga- recommended that DOD structure its contracts for tion that also involved fatalities. Much of the infor- major weapon system acquisitions to provide incen- mation in our briefing about the V-22 had not been tives to the contractor to capture knowledge by previously disclosed. The panel used the informa- making such information the basis for continuing tion to support its position that the V-22 was not the program. DOD accepted our recommenda- ready for full-rate production and that only a mini- tions, endorsed the use of these best practices, and mum production rate should be continued during wrote several of them into its newly revised acquisi- additional testing and evaluation of the aircraft. The tion policy. If DOD successfully applies this policy Congress subsequently rescinded $446.5 million to individual weapon system programs, it will from the fiscal 2001 supplement request and enable better design and production decisions and reduced the fiscal 2002 request by $296.3 million. will lessen the likelihood of unanticipated cost and The net present value of the two actions is $763.8 schedule increases. million. Senate Defers Procurement of Second Special Opera- tions Mini Submarine: GAO’s 2002 mandated review of the Special Operations Command’s GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 125 APPENDIX 1 Advanced Sea, Air, and Land Delivery System identi- management of its privatization of military family fied significant problems with the first mini subma- housing. We reported that privatization projects rine’s performance, cost, and schedule. Our were not supported by reliable needs assessments analysis showed that if the problems were not and that the overall requirement for military hous- resolved, they could lead to additional cost, sched- ing was not well defined. We concluded that the ule delays, and an inability to meet program objec- military might be entering into unnecessary, long- tives. In May 2002, citing GAO’s analysis, the term privatization contracts to construct, replace, or Senate reduced the Special Operation Command’s renovate housing. Accordingly, we recommended fiscal 2003 budget request, canceling funds for a that DOD use a broader range of factors in defining second mini submarine until the problems with the military housing requirements, modify its guidance first submarine are resolved. In August 2002, the for performing life-cycle cost analyses, and imple- Department of Defense agreed, and the program is ment several changes to enhance government pro- being restructured to ensure that the first mini sub- tections in the privatization program. DOD marine is fully operational and meets the user’s generally agreed with the recommendations and requirements before procuring additional vehicles. has outlined ongoing management actions to address our suggestions. As a result of our report, Ensuring Contingency Funds Are Spent Properly: congressional staff also opened up a dialogue with Since 1991, the Department of Defense has spent DOD officials on issues related to privatizing mili- more than $25 billion in support of military opera- tary family housing. tions in the Balkans and the Persian Gulf. In assess- ing DOD’s use of contingency operations funds in Contributing to the Military Base Closure and fiscal 2000 and 2001, we identified millions of dol- Realignment Process: Since 1979, GAO has issued a lars in questionable expenditures resulting from lim- number of reports documenting excess infrastruc- ited guidance and oversight combined with a lack ture within the Department of Defense and support- of cost consciousness. In responding to our find- ing the need for a base closure and realignment ings, the Congress reduced DOD funding for those process. The Congress authorized such a process operations by $650 million in fiscal 2002. In com- and enacted legislation requiring us to provide it menting on our report, DOD also stated its inten- with a series of reports and testimonies validating tion to improve its guidance for and oversight over DOD’s implementation. We monitored and the use of contingency funds. assessed all phases of the decision-making process, including executive-level sessions, for compliance Assisting in Decisions on Funding for Military Oper- with congressional requirements. In addition, GAO ations: The Congress appropriated more than $10 staff assisted commissions that recommended base billion in support of ongoing military operations in closures and realignments in 1991, 1993, and 1995. fiscal 2002, including those to combat terrorism and The staff helped shape the commissions’ decisions to support peacekeeping in the Balkans and the through analyses of issues associated with closing Persian Gulf. In a series of briefings for the Senate or realigning specific installations. Last year, we Appropriations Committee, GAO provided informa- reported cost reductions of about $6 billion associ- tion on costs incurred to date for these operations, ated with our work. Updated DOD data indicate likely future costs, the adequacy of funds appropri- further cost reductions of $545 million. ated to support the operations, and the actual expenditures made with these funds. GAO also Increasing Use of Excess Property: GAO reported issued reports in May 2002 and September 2002 on that $2.7 billion worth of military property recorded the expenditure of such appropriated funds and as shipped to disposal offices was never recorded funding needs in the Balkans, respectively. The as received, resulting in losses and write-offs of the committee used GAO’s information in deciding on property from the military services’ books and appropriations levels for these operations. inventory records. GAO recommended changes that avoided the write-offs and kept the items as Improving the Management of DOD’s Privatization part of the services’ inventory records until the of Military Family Housing: During fiscal 2002, we property was actually disposed of. As a result, the issued a report and briefed congressional staff sev- inventory was available for use by DOD customers eral times on areas where DOD could improve the 126 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 during the period prior to disposal. For the first 2 Managing Encroachment on Military Training years that the changes were in effect, they resulted Ranges: During fiscal 2002, we issued two reports in savings of $526 million. and testified on the constraints that encroachment (the cumulative effect of outside influences that Improving Military Benefits: In response to a con- inhibit military training and testing) places on train- gressional request, GAO assessed the military bene- ing in the continental United States and overseas. fits package provided to active duty members and We recommended executive action that requires the their dependents. We noted in both our testimony Department of Defense to finalize a comprehensive and report that the military offered all the core ben- plan for managing encroachment issues, develop efits extended by most private sector firms, includ- the ability to report critical encroachment-related ing health care, paid time off, life insurance, and training problems, and develop and maintain inven- retirement pay. Furthermore, military benefits, such tories of its training infrastructure and quantify its as free housing, free health care for members, and training requirements. DOD agreed with and has discount shopping at commissaries and exchanges, initiated actions to implement our recommenda- may exceed private sector benefits. We also tions. Our work also supported the House Commit- reported that although military benefits have gener- tee on Government Reform’s hearings on the effects ally kept pace with the demographic changes in the of encroachment on military training and readiness active duty force, there are opportunities for and the congressional deliberations on DOD’s improvement. We recommended that DOD (1) appropriations for fiscal 2003. develop measures for tracking and assessing the effectiveness of the employment assistance services Adjusting Department of Defense Funding: GAO offered to military spouses at military installations reviewed the reasonableness of DOD’s budget and (2) assess the feasibility, costs, and benefits of requests for fiscal 2002 to assist subcommittees in offering extended time off to new parents as a way their appropriation and authorization deliberations. to increase retention of trained, experienced On the basis of GAO’s findings, the Congress personnel. adjusted DOD’s budget request by about $2.1 bil- lion. Specifically, the Congress adjusted (1) the mil- Relations between Reservists and Their Employers: itary personnel request by almost $600 million; (2) GAO reported in June 2002 that despite increases in the operations and maintenance request by about military operations since 1992, the average opera- $1 billion; and (3) the procurement and research, tional tempo (the total days reservists spend partici- development, test, and evaluation request by $539 pating in normal drills, training, exercises, and million. Also, the Congress rescinded about $562 domestic and operational missions) DOD-wide million from DOD’s fiscal 2001 funds for DOD’s increased only slightly between 1992 and 2001— supplemental appropriation. In addition, during from 43 days to 46 days a year. However, reservists internal DOD budget deliberations, DOD officials in certain units or occupations, such as those in avi- reduced the agency’s foreign currency exchange ation, special forces, security, and civil affairs, expe- estimates by $1.5 billion for fiscal 2002 and 2003. rienced operational tempos two to seven times These adjustments did not affect readiness, and the higher than those of other reservists. Among our Congress used the adjusted funds for other needs. findings on the department’s outreach efforts to reservists’ employers, we found that DOD lacks Assessing the Army’s Transformation Efforts: GAO information on who reservists’ employers are, and it issued two reports assessing the Army’s transforma- views the Privacy Act as a constraint that prevents it tion efforts. Our report on the Army’s Transforma- from requiring reservists to provide this information. tion Campaign Plan identified six challenges the We also found that although approximately one- Army faces as it manages transformation over the third of reservists are students, DOD does not have next 30 years: technology, schedule, acquisitions, an active program in place to address problems that operations, human capital, and funding. DOD con- may arise between student reservists and their edu- curred with the findings and stated that it will con- cational institutions. We made, and DOD agreed tinue to address these challenges as it attempts to with, several recommendations designed to address maintain timeliness. Our second report evaluated these and other problems we identified during the the Army’s formation of the first two of the six course of our study. planned Interim Brigade Combat Teams. The GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 127 APPENDIX 1 report outlined challenges to logistical support plan- improve program effectiveness. Subsequently, the ning and shortfalls in combat capability that the Navy took actions to report premature parts failures Army is facing as it forms the teams. We made rec- as quality deficiencies. ommendations designed to assist the Army in over- coming these challenges. DOD generally concurred Improving Operations at the National Nuclear Secu- with the findings, and the Army began to take rity Administration: Through a series of reports action to implement the recommendations. and testimonies, the first of which were issued in 2001, GAO has monitored the start-up of the Improving Equipment Maintenance Practices: National Nuclear Security Administration (NNSA), a GAO’s reviews of maintenance programs in each of separately organized entity within the Department the military services supported congressional over- of Energy (DOE). The Congress created NNSA to sight of these issues and led to management actions correct long-standing management and security by DOD to improve its depot maintenance opera- problems at DOE. At the time of NNSA’s creation, tions. As we had recommended, the Air Force the House Armed Services Committee established a developed and provided to the Congress a depot special panel to oversee NNSA. We have provided maintenance strategic plan that, among other things, the panel with briefings, testimonies, and reports on addressed human capital and facilities recapitaliza- the problems NNSA has experienced in developing, tion needs. Using a strategic approach is key to as its implementing legislation requires, effective ensuring that necessary repair capabilities are avail- planning, budgeting, and organizational able to meet the Air Force’s needs. Our review of approaches. Our work has contributed to language the Army workload and performance system in NNSA’s appropriations and authorization acts resulted in improvements that have increased the requiring improved operations and has led NNSA to quality of the maintenance information available to implement some of our recommendations for Army depot managers, providing them with the improving its organization. means to improve the efficiency and effectiveness of depot maintenance operations. Further, as a Advance and Protect U.S. International result of our recommendation, DOD implemented Interests policy guidance to improve the management of Adopting Standard State Department Embassy Con- public-private depot maintenance partnerships. struction Project Designs: For several years, GAO has encouraged the State Department, through Improving Accountability Over Defense Inventory: improved planning, to exercise better control over In response to various congressional requests, GAO the cost of new embassies it constructs overseas. To issued several reports on DOD’s inventory manage- reduce costs and construction time, GAO strongly ment practices, which resulted in management encouraged State to use standard designs for its improvements and enhanced congressional over- new embassy construction projects. In 2001, State sight. As a result of our recommendations, the took several actions to improve planning and hold Army has significantly enhanced inventory manage- down construction costs, including the use of stan- ment and integrated the wholesale and retail supply dard size and design criteria. Using this approach, systems to create a single system, which the Army State adopted three size and cost categories for its calls the single stock fund. The creation of a single construction projects and was able to reduce the stock fund has allowed the Army to consolidate cost of six construction projects in late 2001. As a redundant inventory and reduce customer wait result, the expected costs for these projects were time, and it is expected to result in savings of over reduced by more than $90 million. $1 billion. GAO also found that the Navy’s Product Quality Deficiency Reporting Program was largely Enhancing the Disposal and Sale of Overseas Prop- ineffective in gathering data needed for analyses. erty: GAO’s work concerning the State Department’s Without these data, managers lost opportunities to responsibility for managing overseas property initiate important corrective and preventive actions showed that (1) State’s property inventory con- with suppliers. To correct these weaknesses, GAO tained inaccuracies that could prevent it from identi- recommended that the Navy take steps to increase fying and selling some unneeded properties and (2) the level of training, incentives, management the 2001 Agriculture Appropriations Act restricted emphasis, and results reporting as necessary to State’s authority to sell some valuable properties. 128 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 Regarding State’s overseas property inventory, we and examining the legal basis and potential finan- recommended that the department improve its cial impact of possible incentives and initiatives. accuracy, and State agreed. Regarding the 2001 Since we issued our report, the Director-General of Agriculture Appropriations Act, we suggested that the Foreign Service has made the staffing of hard- the Congress consider repealing the requirement ship posts a top priority. that State obtain approval from the Foreign Agricul- tural Service before selling agricultural attaché resi- Improving Language Skills in Key Federal Agencies: dences and use the sales proceeds to purchase new GAO’s reports and testimony on problems with for- attaché residences. The Congress repealed these eign language skills in federal agencies have restrictions in September 2002, clearing the way for focused congressional attention on a critical gap in State to proceed with the sale of several valuable the nation’s fight against international terrorism, unneeded properties. Increased sales of unneeded drug trafficking, and gang violence. Federal agen- overseas property reduces the cost of U.S. diplo- cies have critical shortfalls in the numbers of Arabic, matic and consular operations in foreign countries Chinese, Korean, and Russian interpreters and lin- and provides funds for acquiring new property and guists on their staffs. The Federal Bureau of Investi- capital construction projects, such as building gation has thousands of hours of audiotape and secure embassies. thousands of pages of written material that have not been translated. Our reports analyzed the nature Supporting Embassy Rightsizing Initiatives: GAO and extent of foreign language shortages, the strate- prepared a rightsizing framework, which the Office gies four federal agencies used to address short- of Management and Budget is now using to assess ages, and the agencies’ efforts to implement an staffing levels at U.S. embassies in Europe and Eur- overall strategic workforce plan to address current asia. We reported that such a systematic framework and projected shortages. Numerous congressional could aid executive branch efforts to have the right committees have cited our work frequently as they number of staff in overseas posts and recom- considered strategies to prepare the federal work- mended that the Office of Management and Budget force for the complex intelligence and foreign use this framework to assess overseas posts’ staffing affairs challenges the nation faces. levels. As a result of our report, the Office of Man- agement and Budget sent a questionnaire to U.S. Redirecting Development Assistance Program diplomatic posts in Europe and Eurasia to assess Funds: During 2001, GAO examined the U.S. staffing levels. This effort should help achieve a Agency for International Development’s (USAID) more efficient allocation of limited overseas staffing efforts in Colombia to provide growers of illicit resources and reduce operating costs. crops a legal means to earn a living—generally called “alternative development.” Colombia Improving Human Capital Management: GAO accounts for 90 percent of the cocaine entering the examined the State Department’s process for and United States and approximately two-thirds of the performance in assigning staff to hardship posts heroin available on the East Coast. We found that where employees experience a variety of adverse the alternative development program in Colombia living conditions. State’s assignment system is not was not likely to achieve success until, at a mini- effectively meeting the staffing needs at these posts. mum, the Colombian government could provide As a result, diplomatic readiness could be at risk at security in the illicit crop-growing areas, provide posts that are of significant importance to the safe access to project sites, and attract the private United States, such as those in China, Saudi Arabia, investment needed for long-term development. We and Ukraine. We recommended that State improve recommended that USAID modify its plans and its human resources data, determine staffing priori- spending proposals to better reflect the extreme dif- ties, consider a target hiring strategy, and develop ficulty in gaining access to the illicit crop-growing incentives and implement actions to steer Foreign regions. In December 2001, on the basis of our Service employees toward serving in hardship findings and recommendation, USAID suspended its posts. In response, State has indicated that the $31.7 million alternative development program in department is expanding its information manage- Colombia and began revising its approach. As a ment system to improve its personnel and assign- result, USAID halted its largely agricultural program ment data, filling positions in hardship posts first, and reoriented its efforts to emphasize social infra- GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 129 APPENDIX 1 structure and other projects that are not as depen- menting its safety and security initiatives, and (4) dent on security. USAID also initiated alternative launched a comprehensive review of the effect of development projects in areas where the security the 5-year rule on agency operations. situation was more favorable. By making these adjustments, USAID redirected over $30 million to Controlling the Illicit Diamond Trade: Rebel move- activities and areas of Colombia that offered a ments in a number of African countries, including greater likelihood of success. those attempting to overthrow legitimate govern- ments, have used diamonds to finance their military Improving the Delivery of Disaster Recovery Assis- activities. GAO’s work demonstrated that the ease tance: GAO evaluated $621 million in emergency of transporting and selling diamonds creates oppor- supplemental funding appropriated in May 1999 for tunities for illicit trade. Specifically, we focused on countries affected by Hurricanes Mitch and assessing an effort to develop and implement an Georges. As a result of our observations, among international diamond certification scheme to deter other things, the quality of rural road projects diamonds coming from countries subject to United improved, an abandoned rural health clinic was Nations and U.S. sanctions from entering legitimate staffed and made operational, new latrines were markets. We recommended that the diamond certifi- built for a school, and an agricultural project cation scheme incorporate better internal controls received an irrigation component. Also, two other and other accountability activities into its deterrence U.S. government agencies supporting the recovery efforts. Our testimony and report on this issue have effort modified their programs to meet reconstruc- contributed to the debate over U.S. legislation and tion needs, and one agency returned unused funds to congressional oversight concerning the U.S. role to the Treasury. In July 2002, GAO recommended in the negotiations over the diamond certification several actions for USAID that will help ensure that scheme. it has the flexibility needed to better respond to sim- ilar disaster recovery needs, such as in Afghani- Respond to the Impact of Global Market stan. USAID has begun several reforms in the areas Forces on U.S. Economic and Security of strategic planning, funding alternatives, and Interests staffing. Improving the Management of the Foreign Military Sales Program: In 1999, GAO reviewed several Improving Peace Corps Safety and Security Prac- aspects of the Foreign Military Sales program. We tices: GAO found that the Peace Corps’ efforts to reported that program decisions were not being implement effective safety and security practices made on the basis of adequate information and that have produced mixed results and that a number of items controlled by an international missile nonpro- factors hamper the agency’s efforts to ensure overall liferation agreement were not properly reviewed high-quality performance, including unclear guid- and approved before being transferred to foreign ance, staff training that is sometimes inadequate, governments. As a result, in fiscal 2002, the uneven application of supervision and oversight Defense Security Cooperation Agency imple- mechanisms, and staff turnover (due largely to the mented a performance-based budgeting process to “5-year rule”—a statutory restriction on tenure for obtain sufficient information to enhance program U.S. direct-hire employees). As we completed our decision making and to add transparency. A pro- review, the Peace Corps announced a series of initi- cess to screen the program’s cases for controlled atives that, if effectively implemented, could missile items was established, which will prevent improve its practices and thus reduce the potential unapproved export of controlled missile items. risks facing volunteers. The Peace Corps has (1) developed a protocol for reporting on and review- Improving U.S. Customs Enforcement of Defense ing implementation of agency policies, (2) Exports: In March 2002, GAO reported that U.S. expanded its Government Performance and Results Customs inspectors did not have updated guidance Act reports to include 10 quantifiable performance to effectively conduct inspections of defense items indicators of safety and security performance, (3) subject to U.S. export control restrictions. As a stated that it will continue to update and strengthen result, in July 2002, U.S. Customs updated its guid- these indicators as it gains experience in imple- ance on defense export inspection requirements and is disseminating this guidance to inspectors at 130 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 the ports. Inspectors now have the necessary guid- grams used in other countries to cover losses from ance to help ensure that military weapons are terrorist or catastrophic events. In February 2002, exported in compliance with U.S. laws. GAO again testified before the Congress to report that the insurance industry intended to largely Identifying National Security-Related Foreign Acqui- exclude coverage for losses resulting from any sitions: In a June 2000 report, GAO found that the future terrorist attacks, creating further uncertainty Departments of Defense, State, and Treasury knew and economic vulnerability in the marketplace. about national security-related foreign acquisitions GAO also outlined the desirable features of any but did not inform the Committee on Foreign government-sponsored program established to help Investment. We recommended that U.S. govern- ensure the availability of terrorism insurance cover- ment agencies improve the process of identifying age in the financial marketplace. The House and and reporting acquisitions that may adversely affect Senate used this information in structuring reform national security. To implement our recommenda- proposals. tions, the Department of the Treasury initiated pro- cedures to formalize the way the Committee on Strengthening Oversight of Activities to Detect Money Foreign Investment shares information among Laundering: In July 2002, GAO reported that the member agencies about national security-related extent of money laundering through credit card foreign acquisitions. Further, the Departments of transactions was unknown. The Department of the Treasury, Commerce, Defense, and State developed Treasury used this report in drafting new require- procedures to ensure that when they identify ments for credit card system operators under the national security-related foreign acquisitions, they Provide Appropriate Tools Required to Intercept also provide relevant information to the committee and Obstruct Terrorism Act. Treasury similarly used for distribution among all member agencies. GAO’s October 2001 report on money laundering in the securities industry to draft and implement regu- Reducing Government Contingent Liabilities by Bil- lations requiring securities dealers to file Suspicious lions: As part of its plan for the Year 2000 transition, Activity Reports. These reports are the principal tool the National Credit Union Central Liquidity Facility used to detect money laundering. GAO’s September (CLF) was allowed to increase the limit on loans to 2002 interim report on Internet gambling also con- credit unions from about $2.7 billion to $20.7 bil- tributed to congressional debate on methods of pre- lion. The National Credit Union Administration venting payments to illegal Internet gambling requested that this higher lending limit be main- operations. tained after the Y2K transition. GAO found that, although CLF lending to credit unions did increase Enhancing the Effectiveness of the Securities and during the 3 months before 2000, most credit Exchange Commission (SEC): GAO found that SEC’s unions’ funding needs were met through corporate resources had not kept pace with the tremendous credit unions and CLF’s own resources, not through growth in securities markets and the increased com- the money CLF had borrowed for that period. GAO plexity and international scope of these markets. concluded that there would be no need to increase Since approximately 1996, SEC’s workload the lending limit. As a result, the Congress decided increased at a much higher rate than its staff years. to increase CLF’s lending limit by only a minimal High staff turnover exacerbated this problem, with amount, thereby reducing the government’s poten- staff inexperience contributing to delays in SEC’s tial liability. regulatory process. GAO made numerous short- term and long-term recommendations to shore up Contributing to the Debate on Terrorism Insurance: weaknesses in SEC operations. Our work contrib- In the aftermath of the September 11, 2001, attacks, uted to SEC obtaining authorization for additional GAO assessed the changes taking place in the insur- resources and prompted SEC to review its opera- ance industry, the potential implications of these tions and its resource needs. changes on the economy, and alternative approaches for government assistance to the indus- Promoting Use of Electronic Transfers: In September try. In October 2001, during testimonies before 2002, at the request of the House Committee on House and Senate Committees, GAO described Financial Services, Subcommittee on Oversight and alternative government-sponsored insurance pro- Investigation, GAO reported on Treasury’s efforts to GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 131 APPENDIX 1 promote the use of electronic fund transfers by fed- more consistently to make the best use of federal eral beneficiaries. On the basis of an analysis of export promotion resources. In addition, we pro- Census Bureau survey data, we determined that the vided the Congress with information on the U.S. main obstacle in promoting these transfers was the Export-Import Bank that improved the transparency high number of beneficiaries without bank accounts of the bank’s decision-making process so that the and that Treasury’s current efforts were unlikely to Congress could better perform its oversight overcome this obstacle. We identified alternative function. approaches to promote the use of electronic fund transfers, especially among those without bank Improving Services to Workers, Firms, and Commu- accounts. For example, some banks were allowed nities Affected by International Trade: In response to distribute information about bank products or to congressional concern about how job losses enroll beneficiaries at the local Social Security associated with international trade affect workers, Administration office. We recommended that Trea- firms, and communities, GAO prepared four reports sury use these approaches to develop a strategy for and a testimony that examined programs at the increasing the use of electronic fund transfers. As a Departments of Labor, Commerce, and Treasury. result of GAO’s analysis, Treasury is taking positive The reports provided comprehensive analyses of actions to further use of electronic fund transfers, benefit use, discussed problems with performance which could save the government millions. and outcome data, and discussed administrative changes needed to ensure improved program man- Helping Poor Countries Overcome Debt Problems: agement. In response to our recommendations, GAO’s work demonstrated that existing debt relief these agencies have taken multiple actions to efforts by the World Bank and the International improve program performance and accountability. Monetary Fund were insufficient to solve 42 impov- Members of Congress also frequently cited this erished countries’ (mostly African) debt problems body of work as they debated reauthorization of (amounting to more than $200 billion). In contrast, these programs and the granting of trade promotion we determined that the Bush administration’s pro- authority to the President. posal to shift 50 percent of future debt relief from loans to grants would provide significant debt relief Assessing Progress in Multilateral Trade Negotia- to these countries and would be affordable. GAO’s tions: In evaluating progress in multilateral trade findings contradicted the World Bank’s, which pro- negotiations, GAO issued two reports and a testi- jected a much higher cost over 40 years—$100 bil- mony on efforts to create a Free Trade Area of the lion for implementing the President’s proposal Americas (FTAA) and a report on ongoing negotia- compared to the $15.6 billion that we projected. tions in the World Trade Organization. Our work U.S. Treasury officials used our analysis and find- on the FTAA highlighted the challenges that negoti- ings in negotiations with the World Bank and Euro- ators face, the status of technical negotiations in 12 pean countries; this resulted in a major shift in key areas, and the potential economic effect of a World Bank policies that now provide about 20 per- completed FTAA on the United States. Our work cent of debt relief in the form of grants. on the World Trade Organization negotiations ana- lyzed the factors that led to the launch of the nego- Improving U.S. Export Promotion: GAO’s work tiations, identified the most critical milestones that demonstrated that the effectiveness of coordinating need to be met, and evaluated the most significant U.S. agencies’ activities designed to promote U.S. obstacles negotiators face. This body of work has exports abroad, through efforts such as providing provided the Congress with the first comprehensive, financing and identifying export opportunities, has objective analyses of the prospects for successful varied from year to year. GAO recommended that conclusion of both sets of negotiations, which they the interagency Trade Promotion Coordinating have been unable to obtain from U.S. trade Committee utilize the U.S. national export strategy agencies. 132 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 Strategic Goal 3 Help Transform the Federal Government’s Role and How It Does Business to Meet 21st Century Challenges Assess the Implications of the Increased Role of Public and Private Parties in Achieving Federal Objectives Assessing the Challenges in Maintaining the Federal- State Fiscal Balance under Welfare Reform: In a report issued last year, GAO assessed changes to the way states financed programs supporting low- income families after the passage of welfare reform the Congress for fiscal 2002 did not contain burden- legislation. In that report, we found that California hour or violations data on 12 agencies that had had improperly drawn down about $1.1 billion appeared in previous reports. OMB subsequently from the U.S. Treasury and passed these funds required federal agencies to provide strategies for along to its counties. The counties, in turn, depos- eliminating violations and targeted five agencies for ited the funds into interest-bearing accounts. By special attention. OMB also said that its fiscal 2003 distributing these funds to the counties before they report would include information on the 12 agen- were needed, the state was in violation of the Cash cies that had been omitted from the previous year’s Management Improvement Act, which seeks to min- report. imize the time between the transfer of federal funds and disbursement by the grantee or subgrantee. Improving Civil Penalty Enforcement: Civil mone- After we reported on this situation, California and tary penalties are one way federal agencies enforce the Department of Health and Human Services federal health, safety, and environmental statutes. agreed that the interest earned by the counties In 1996, the Congress amended the Federal Civil would be returned; and as of July 31, 2002, the Penalties Inflation Adjustment Act and required counties had returned $90 million in interest pay- agencies to adjust their penalties for inflation. GAO ments. examined the implementation of the statute and concluded that certain agencies had not made the Improving Implementation of the Paperwork Reduc- required penalty adjustments or had made adjust- tion Act: The Paperwork Reduction Act prohibits an ments that were inconsistent with the requirements agency from conducting or sponsoring the collec- of the act. Subsequently, two agencies published tion of information unless the Office of Manage- new penalty adjustment regulations, and six others ment and Budget (OMB) approves such a indicated that they would do so shortly. Also in collection. OMB is also required to keep the Con- 1996, Congress enacted the Small Business Regula- gress fully and currently informed about major tory Enforcement Fairness Act, part of which activities falling under the act. We have reported required agencies to establish a policy or program several times in recent years on the implementation of penalty relief for small entities (e.g., small busi- of the act, noting that there are hundreds of viola- nesses and small governments). In February 2001, tions each year under the act—some of which have GAO examined the implementation of that section continued for years—and that a few agencies of the act and concluded that the Congress should account for a disproportionate share of those viola- require agencies to maintain certain data on tions. We said OMB could do more to address enforcement actions and penalty relief to facilitate these violations and also noted that OMB’s report to oversight of the act. In June 2002, the Congress GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 133 APPENDIX 1 enacted legislation that required agencies to report DOD Expands Efforts to Control Contract Overpay- information on their small entity enforcement pro- ments: GAO issued a number of reports highlight- grams to certain congressional committees. ing the hundreds of millions of dollars that DOD overpaid its contractors each year. In response, Helping Improve Emergency Preparedness among DOD added a provision to the Federal Acquisition the Federal, State, and Local Governments: By par- Regulation requiring contractors to notify the gov- ticipating in field hearings in 11 cities across the ernment when the contractor sees an overpayment, United States this year, GAO provided the Congress the Defense Contract Audit Agency launched spe- with information on the need to effectively partner cial audits of contractor billing systems, and the with state and local governments (the “first Defense Contract Management Agency alerted its responders”) to improve emergency preparedness staff of high-risk situations so overpayments could and strengthen homeland security. At these hear- be avoided. Collectively, these actions will help ings, GAO reported on the need to clarify the DOD address its longstanding and chronic payment appropriate roles and responsibilities within and problems. between the levels of government; the lack of national performance goals and measures for pre- Improving DOD’s Acquisition of Services: DOD is paredness; and the importance of using the right the largest purchaser of services—including profes- policy tools—grants, regulations, or tax incentives— sional, administrative, and management support ser- to target areas of highest need and greatest risk. vices; engineering services; and information technology services—in the federal government, Assess the Government’s Human Capital and but GAO found that the department’s spending on Other Capacity for Serving the Public these purchases was not managed effectively. In Assessing the Implications of Applying Biometric January 2002, we recommended that DOD evaluate Technologies to Border Security: In fiscal 2002, Con- how a strategic reengineering approach—similar to gress asked GAO to conduct a technology assess- that employed by leading companies—could be ment pilot and examine the implications of using used as a framework to guide the department’s biometric technologies for border security. This reengineering efforts. In response, in May 2002, assessment became immediately significant because DOD issued new policy that called for taking a recent legislation, such as the Provide Appropriate more strategic approach to services acquisition and Tools Required to Intercept and Obstruct Terrorism elevated the importance of major purchases of ser- Act and the Enhanced Border Security and Visa vices to the same level as purchases of major Entry Reform Act, requires the use of biometric defense systems. This action should help improve identifiers along America’s borders by 2004. Pass- acquisition and result in significant financial savings. ports, visas, and other tools used to track and con- trol the flow of people during “border crossing Contributing to Improved Contracting Practices: events” will incorporate biometric technologies, GAO’s July 2002 report addressing governmentwide such as fingerprint recognition, facial recognition, or acquisition contracts was the first across-the-board iris recognition. Our research points out that the look at these relatively new contracting mecha- existing biometric technologies have not yet been nisms, in which agencies use contracts and acquisi- used at a scale comparable to the U.S. border con- tion services offered by other agencies and pay a trol system and that the price tag for a biometrics- fee for these services. As a result of our analysis, based system could be significant. We identified the two agencies have already taken actions to improve need for high-level policy decisions, such as defin- their financial reporting, and OMB has changed its ing the specific uses of biometrics technologies and guidance governing the use of such contracts. In performing a cost benefit analysis that weighs the addition, we found that the GSA schedule pro- effectiveness and security benefits of biometrics ver- gram’s fee structure generated excess revenues sus the resource costs and probable consequences amounting to $151 million for fiscal 1999-2001. As a of implementation, including the effects on the result, GSA agreed that it needs to revise its fee economy, privacy, travel, and international structure. relations. 134 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 D.C. Public Schools Modernization Program: In new standard. In July 2002, we issued detailed two reports and a testimony in 2001 and 2002, GAO questions and answers that offers concrete illustra- reported on numerous contracting problems in the tions of what does and does not meet the standard District of Columbia Public Schools and the lack of and makes clear that auditors are to be independent realistic cost, schedule, and budget assumptions in in both fact and appearance. the District’s plan to modernize all public schools over the next 10 to 15 years. Our warning that the Helping Congress Improve Corporate Governance school system must deal with a modernization pro- and Accountability: Building on prior work in cor- gram that will cost significantly more and take porate governance, GAO was well positioned to longer to accomplish than originally planned con- respond when the Congress asked for help protect- tributed to a public debate that has led the school ing the interests of American investors and workers system to reassess its modernization plans in light of in light of recent disclosures of financial irregulari- the District’s budget constraints. ties at companies such as Enron and WorldCom. In quick order, GAO’s testimonies and reports framed Improving the Sourcing Decisions of the Federal the issues for strengthening oversight of the Government: In response to a statutory mandate, accounting profession; auditor independence; finan- the Comptroller General convened the Commercial cial reporting; and corporate governance functions, Activities Panel to review the government’s policies including fundamental principles for reform. These and procedures for deciding whether commercially testimonies and reports provided the foundation for available services should be performed by federal the July 2002 passage of the Sarbanes-Oxley Act. employees or by the private sector. The panel, The act, the most far-reaching overhaul of the which included senior officials from government nation’s business practices since the Great Depres- agencies, federal labor unions, contractor groups, sion, is aimed at tightening oversight of accoun- and academia, issued its report to the Congress in tants, revamping securities laws, and imposing April 2002, unanimously adopting a set of principles tougher penalties for corporate fraud after disclo- to guide the government’s sourcing policies. The sures of irregularities. panel used these principles to craft a package of specific recommendations designed to improve the Accelerating Financial Management Reform: Dur- way federal agencies make sourcing decisions. The ing the past year, the Comptroller General, as chair Office of Management and Budget is revising the of the Joint Financial Management Improvement government’s sourcing procedures based largely on Program (JFMIP), initiated a series of sessions at the panel’s recommendations. which the JFMIP principals (the Comptroller Gen- eral, along with the heads of Treasury, OMB, and GAO Issues Standard to Increase Auditor Indepen- OPM) agreed on financial management approaches dence: This year, GAO significantly modified the for transforming the way government does busi- Government Auditing Standards related to auditor ness. They focused on restructuring the Federal independence to help protect the public interest Accounting Standards Advisory Board to allow and ensure public confidence in the independence more public input, establishing audit committees, of auditors of government financial statements, pro- defining what constitutes successful financial man- grams, and operations, and of organizations receiv- agement, addressing impediments to an audit opin- ing federal financial assistance. This new standard, ion on the U.S. government’s financial statements, which the Comptroller General has characterized as and accelerating agency financial statement “tough, but fair…to protect the public and insure reporting. the credibility of the auditing profession,” specifies that it is inappropriate for the entity performing the Improving Veterans Affairs’ Information Technology financial statement audit to also perform certain (IT) Management: GAO’s oversight at the Depart- consulting or other nonaudit services that could be ment of Veterans Affairs (VA) has helped to considered to be managerial in nature or perceived strengthen management and accountability for the as the auditor auditing his or her own work. The more than $1 billion spent annually on the depart- Comptroller General and GAO staff have launched ment’s IT program. In response to our recommen- an intensive outreach effort to the audit community dations, the department established the position to enhance understanding and acceptance of the and selected a permanent chief information officer GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 135 APPENDIX 1 to oversee its IT program and developed an initial important challenges to overcome in protecting version of its enterprise architecture for guiding the FirstGov’s sensitive Web-linked data. Similarly, department’s IT investments. Further, our work GAO’s detailed look into emerging technologies, highlighting the need for VA to restructure informa- such as public key infrastructure, identified poten- tion technology functions, programs, and funding tial opportunities for the government’s use of this under the department-level chief information officer powerful new technology for digitally signing and has helped to strengthen accountability over IT securely transmitting electronic messages and data. investments. Helping to Advance Major Information Technology Leveraging Technology to Make Government Infor- Modernizations: GAO’s ongoing work has helped mation More Accessible: GAO reviewed the current to strengthen the management of complex, multibil- status and implementation challenges associated lion-dollar information technology modernization with the Extensible Markup Language, an Internet- programs at the Internal Revenue Service (IRS) and based technology that promises to make it much the Customs Service to improve operations, pro- easier for government agencies to organize and mote better service, and reduce costs. For example, exchange information that may initially be dis- our constructive engagement with IRS on its $2.5 persed among different systems and organizations. billion systems modernization program contributed GAO’s report was widely publicized in the informa- to the development of enterprise architecture to tion technology community and sparked debate guide and constrain the acquisition and deployment among federal officials about the next steps in of information technology systems, ensuring that advancing adoption of the technology. Efforts are they operate together properly, thus avoiding under way to implement a key GAO recommenda- expensive rework. Similarly, Customs is following tion regarding establishment of an electronic regis- our recommendations to better align its ongoing try of government Extensible Markup Language modernization program with its enterprise architec- data definitions and structures. ture, as well as to improve cost estimating, human capital capacity, and software process maturity. Informing Congress about a Major Satellite Pro- gram: In July 2002, GAO testified on various aspects Effectively Managing and Archiving Electronic of a major polar-orbiting satellite acquisition pro- Records: Agencies are increasingly moving to an gram—the National Polar-orbiting Operational Envi- operational environment in which electronic ronmental Satellite System—a tri-agency program records provide comprehensive documentation of that is jointly managed by the National Oceanic and their activities and business processes—a transfor- Atmospheric Administration, the Department of mation that has created a new challenge to manage Defense, and the National Aeronautics and Space and preserve a vast and rapidly growing volume of Administration. We reported on the nation’s current electronic records. Working with the National polar-orbiting weather satellite program, plans for Archives and Records Administration and with the future satellite acquisition, and key challenges in selected agencies, GAO identified key weaknesses managing future satellite data volumes. Our analysis in federal records management policies; evaluated helped the Congress understand the scope and the Archives’ electronic records management and challenges of this planned $6.5 billion program and archival practices; and assessed its capability to led to increased coordination among the key agen- design, acquire, and manage an advanced elec- cies to address data management challenges. tronic record archive system. Our work in the elec- tronic records management area has helped to set Facilitating the Transition to E-Government: GAO the stage for a reassessment of federal electronic helped the Congress reach a balanced view of the record keeping and provided safeguards for the complex management and technical challenges multimillion-dollar acquisition of the proposed elec- involved in the transition to e-government and tronic record archive system. development of key tools. For example, as the gov- ernment’s FirstGov Web portal was being intro- Consolidation Initiatives at Department of Defense duced, GAO identified steps needed to enhance Computer Centers Result in Substantial Savings: and maintain the government’s new “electronic con- GAO recommended that DOD deploy cost savings nection” with citizens and threw the spotlight on measures such as consolidation, modernization, and 136 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 outsourcing of computer center activities and pro- Addressing Human Capital Issues in the Nation’s Air cesses to make computer center operations more Traffic Control System: Responding to a request economical and efficient. As a result, the Defense from the Subcommittee on Aviation, House Com- Information Systems Agency—the agency responsi- mittee on Transportation and Infrastructure, GAO ble for managing Defense Enterprise Computing reported in 2002 on a looming human capital crisis Centers—undertook a major DOD project that led at the Federal Aviation Administration. Thousands to savings or cost avoidance over a 4-year period of air traffic controllers, who were hired in the early covering fiscal 1998 through 2001. More specifically, 1980s to replace striking controllers who had been DOD estimated savings or cost avoidances of $700 fired, will soon become eligible to retire. The million from consolidation initiatives at computer agency adjusted its hiring plans and has begun centers, $39 million from consolidating software improving equipment at its training academy. licenses, and $19 million from optimization of stor- age capabilities. The net present value of the esti- Ensuring a Cost-Effective Census: Beginning in 2001, mated financial benefit is $859 million. GAO initiated a series of congressionally requested reviews of the lessons learned from the 2000 Cen- Facilitating Financial Management Improvements sus to help improve the cost-effectiveness of the at DOD: GAO helped craft legislation allocating next national headcount, for which planning is resources to correct deficiencies in DOD’s financial already under way. This past year, GAO’s recom- management systems. These resources would other- mendations led to operational improvements that wise have been used to produce financial state- could produce more accurate data and help control ments that were not auditable. DOD was incurring costs. For example, GAO’s review of the Census significant costs in producing annual financial state- Bureau’s field data collection activities prompted ments that were unreliable because of deficiencies the bureau to develop more rigorous quality assur- in its financial management systems. Legislation ance procedures, while GAO’s analysis of the Cen- drafted by GAO—Section 1008(b) of the National sus Bureau’s budget identified savings of $93 Defense Authorization Act for Fiscal Year 2002— million and helped make the bureau more finan- frees DOD of the responsibility of preparing finan- cially accountable. cial statements and directs DOD to use resources saved from not preparing the statements to correct Making Strategic Human Capital a Management the deficiencies in its financial management Priority: In March 2002, GAO issued a special publi- systems. cation identifying critical success factors that help high-performing organizations align their human Facilitating Financial Management Improvements: capital management with mission accomplish- GAO drafted legislation for both House and Senate ment. The model highlights the importance of a Subcommittees on Legislative Appropriations that sustained commitment by agency leaders to maxi- strengthened and improved the financial manage- mize the value of their human capital and manage ment infrastructures of the Architect of the Capitol related risks. Since releasing the model, GAO has and the U.S. Capitol Police. Language in the Legis- been working with the Office of Personnel Manage- lative Branch Appropriations Act of 2002 requires ment and the Office of Management and Budget to the Architect of the Capitol to develop and maintain revise the human capital Standards for Success as an accounting and financial management system part of the President’s Management Agenda and to that complies with federal accounting standards, explore other opportunities for developing more including financial reporting and internal controls. consistent guidance and tools for agencies to use to Additionally, both House and Senate bills for the fis- address their human capital challenges. cal 2003 Legislative Appropriations Act improve the Capitol Police financial management by naming the Support Congressional Oversight of the Chief of the Capitol Police as the single disbursing Federal Government’s Progress Toward Being officer for that agency and by eliminating its current More Results-Oriented, Accountable, and inefficient dual pay system. Relevant to Society’s Needs Helping Protect the Privacy of Individuals When Researchers Use Federal Data Bases: Academic and agency researchers and statisticians have access to a GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 137 APPENDIX 1 broad array of federal data bases, such as major for federal agencies to review all programs and public health survey results and Social Security activities, estimate the annual improper payments, records. Agencies share this information with the and submit those estimates to the Congress. understanding that the identities of individuals will be protected. However, the risk exists that the Improving Collection of Nontax Debt: GAO contin- “linkages” among various data sets can violate— ues to promote the various tools prescribed by the whether purposely or inadvertently—the privacy of Debt Collection Improvement Act of 1996 to recoup individuals. In response, GAO has developed strat- delinquent debt balances, which continue to be in egies for “data stewardship”—specific steps that the $60 billion range. Acting on our recommenda- agencies can take to lessen privacy risks even as tions, Treasury and other agencies have increased they put federal and other databases to their most collection by using more efficient processes to iden- productive uses. We have applied our understand- tify and transfer eligible amounts to Treasury for ing of technical and research concerns, as well as centralized debt collection action and by increasing political sensitivities, to alert researchers and agen- the types of federal payments that can be inter- cies to both the risks to privacy and the practical cepted to recover delinquent debt. Although debt means of mitigating those risks. collection continues to be a major challenge, the amounts collected from these efforts have added Improving NASA’s Lesson-Learned Processes: The over $300 million to a steadily growing stream of loss of the Mars Polar Lander and Climate Orbiter recoveries. spacecraft in the late 1990s raised concerns that the National Aeronautics and Space Administration Conducting Forensic Audits to Identify Waste, (NASA) was not applying lessons learned from past Fraud, and Abuse: GAO developed a forensic audit mistakes to future missions. GAO found that mis- approach that includes data mining, data matching, takes were not routinely identified, collected, or and various other analyses that can be used to iden- shared by NASA’s program and project managers. tify waste, fraud, and abuse of federal funds. This As a result, managers were unfamiliar with knowl- approach, which we have been sharing with other edge generated by other NASA programs and cen- agencies, has vast potential for assisting agencies in ters. NASA agreed with GAO’s findings and identifying questionable transactions and serving as recommendations and has begun implementing a basis to improve controls, recover losses, disci- measures to strengthen its lessons-learned pro- pline abusers, and deter future losses. Using the cesses and systems. By establishing more effective approach, we identified improper payments at lessons-learned processes and systems, NASA could HUD, Education, DOD, and other agencies. more successfully carry out its basic mission of Improper payments included contract fraud, illegal exploring space faster, better, and more cheaply. or abusive uses of purchase and travel cards, fraud- ulent Pell Grants, and purchases of computer equip- Quantifying Improper Payments in Federal Pro- ment that cannot be located. grams and Activities: Over the past several years, reviews of federal agency financial statements have Improving Financial Accountability for the Medi- identified about $20 billion in improper payments care Program: In a report issued in spring 2000, annually. However, GAO reports have demon- GAO cited the Centers for Medicare and Medicaid strated that most federal agencies are not identifying Services (CMS) for ineffective oversight of Medicare and reporting the extent of their improper pay- contractors’ multibillion-dollar financial activities, ments, the actions they are taking to reduce these lax policy guidance to contractors on financial payments, and the effect of these actions on reduc- accounting matters, and ineffective follow-up on ing the payments. Consistent with our recommen- findings from financial audits. We also cited CMS’s dations, the administration, through the President’s lack of a financial management strategy to identify Management Agenda and revisions to Office of goals, improvement initiatives, and human capital Management and Budget documents, has required planning. Our 2002 follow-up review showed that selected agencies to report improper payment rates CMS had implemented more in-depth reviews of and the causes of those payments. Also, the Medicare contractors’ internal controls; provided Improper Payments Information Act of 2002 calls these contractors with financial management guid- ance; developed written procedures for its staff in 138 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 handling audit findings; developed a comprehen- Supporting the Congress with Legal Research and sive financial management plan that defines finan- Analyses: GAO provided the Congress with legal cial management goals, objectives, and specific research and analyses that aided lawmakers in their corrective actions to address weaknesses; and deliberations. For example, our legal team pre- started to assess staff skills and competencies pared a detailed chronology of legal developments needed to manage Medicare’s finances. These in statutes and regulations, ranging from the enact- actions significantly improved CMS’s ability to pro- ment of the Communications Act of 1934 to the vide financial accountability for the more than $200 present, which was the centerpiece of a hearing billion spent annually to finance Medicare. concerning radio spectrum management. In work related to Department of Energy waste cleanup Improving Government Charge Card Programs: In a compliance agreements, we provided important series of recent reports and testimonies, GAO high- new insights into DOE’s environmental cleanup lighted pervasive weaknesses in the specific con- program, including the first ever documentation of trols and overall control environment surrounding the number and scope of these agreements. the government’s multibillion-dollar purchase and travel card programs. These weaknesses increased Tracking Funds for United Nations Population the government’s vulnerability to theft and misuse Fund: GAO investigated whether the Department of of property and funds and resulted in high DOD State failed to report an impoundment of $34 mil- travel card delinquency rates. GAO highlighted lion of a lump sum appropriation for International numerous instances of potentially fraudulent, Organizations and Programs. State was authorized improper, and abusive activity related to the gov- to make these funds available for the United ernment’s charge cards, including the purchase of a Nations Population Fund after it ensured that the wide variety of goods and services that were unre- Fund’s practices satisfied several statutory condi- lated to official business. GAO recommended many tions. The State Department determined that the specific corrective actions, particularly preventive Fund’s practices did not meet the conditions and actions, that, if implemented, should help reduce that the funds would not be released. We con- the government’s financial risk substantially. Agen- cluded that to avoid an impoundment of the funds, cies have started to lower the government’s vulnera- the State Department must make the funds available bility by decreasing the number of purchase cards for obligation to other programs financed by the by about 70,000 (15 percent), lowering excessive International Organizations and Programs lump sum card spending limits, and improving specific con- appropriation. trols and the overall control environment. Antideficiency Act Violation Results in Procedural Improving Medicare Debt Collection: In September Improvements: In July 2002, GAO reported to the 2000, GAO identified a multibillion-dollar backlog Chairman of the House Appropriations Committee of uncollected, delinquent Medicare debt owed by that OMB and the Air Transportation Stabilization providers. Medicare’s administering agency, the Board violated the Antideficiency Act when OMB Centers for Medicare and Medicaid Services, had apportioned $172 million in subsidy budget author- made little progress in referring such debt for col- ity to the Board for airline loan guarantees. The lection to the Department of the Treasury or its des- violation occurred because OMB’s apportionment ignee, as required by the Debt Collection and the Board’s obligation were made before the Improvement Act of 1996. We also found in 2000 President requested and designated the budget that Treasury had not worked with agencies, includ- authority as an emergency requirement as defined ing the Department of Health and Human Services, in the Balanced Budget and Emergency Deficit Con- to develop adequate debt referral plans and to over- trol Act of 1985. After GAO’s inquiry into the see debt referral. In fiscal 2001, CMS began imple- apportionment, the Board submitted an Antidefi- menting our recommendations and accelerated the ciency Act report to the President and to the Con- referral of its aged, delinquent debt. Under the gress. In the future, to prevent violations of this revised debt referral process, in fiscal 2001 and the type, any Board request for apportionment related first three quarters of fiscal 2002, collections of to a future loan guarantee will include a copy of its delinquent debt amounted to almost $55 million. corresponding Presidential emergency designation letter. OMB is modifying Circular A-34 instructions GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 139 APPENDIX 1 to include a notice that “Agencies may obligate con- whistleblowers, and the public at large. In fiscal tingent funds only after the President formally des- 2002, FraudNET analysts researched 1,023 reports of ignates the funds as an emergency requirement.” fraud and abuse and referred 213 of these to execu- tive branch agencies for further investigation. These Accountability in the Federal Acquisition Process: analysts also obtained records, located potential wit- GAO is statutorily vested with authority to resolve nesses, and assembled background information for disputes concerning the awarding of government GAO teams on a variety of subjects. In a coopera- contracts. In this role, GAO issues decisions on bid tive effort, staff briefed state officials on GAO’s protests, resolving complaints that solicitations for FraudNET operation and the elements of effective contracts unduly restrict competition or that con- hotline operations. tracts have been awarded improperly. When a bid protest is found to have merit, we recommend Fostering International Knowledge-Sharing: Con- actions appropriate to correct the violation of law tinuing to build working relationships with other involved in the procurement at issue. Our decisions international government organizations, GAO par- on several of these protests are widely viewed as ticipated in a 3-day symposium in Kunming, China, contributing significantly to ensuring a fair process sponsored by the Asian Development Bank. The and protecting the integrity of public/private com- meeting focused on construction of a legal frame- petitions. For example, bidders challenged the work for government procurement in the People’s Department of the Air Force’s award of an A-76 Republic of China. GAO’s presentation on bid pro- contract on the basis of cost comparisons. GAO tests introduced the mechanism for administrative found that the Air Force failed to ensure that the in- bid challenges and generated many questions. house cost estimate and the protester’s offer were Through this opportunity, GAO shared the benefits based upon the same scope of work and perfor- of transparency in the bid protest process. mance standards. As a result of GAO’s decision and recommendation, the agency awarded the contract Identifying Compromised Navy Purchase Card to the protesting bidder. Accounts: In reviewing a DOD investigation into the fraudulent use of 30 Navy purchase cards, GAO District of Columbia Authorized to Purchase Com- investigators identified as many as 866 purchase mercial Insurance against Catastrophic Risks: The card account numbers that had been compromised. District of Columbia Corporation Counsel asked Our findings enabled the Naval Criminal Investiga- GAO for an advance decision concerning whether tive Service to identity the source and point of com- the District of Columbia may properly use appropri- promise on the accounts. The numbers were ated funds to purchase insurance to cover cata- subsequently canceled or reissued, eliminating a strophic exposures to risk (e.g., loss or damage to significant potential for fraud. government property and tort liability). GAO con- cluded that the federal government’s policy of Ensuring Full and Open Competition for Contracts insuring itself does not apply to the District govern- at Washington-Area Airports: As mandated in the ment because the District does not have the U.S. Metropolitan Washington Airports Act of 1986, GAO government’s resources or its wide dispersion of reviewed contracting practices at the Metropolitan risk. Thus, we held that the District may use nonear- Washington Airports Authority. Our 2002 report marked appropriated funds generated by District made a number of recommendations designed to revenues to purchase insurance, allowing the Dis- ensure that the Authority provides full and open trict to protect itself against losses it could not cover competition when contracting for supplies and ser- from its own revenues and ensuring the proper use vices. We recommended, among other things, that of appropriated funds. the Authority (1) reevaluate its use of preset thresh- olds, which could exclude some contractors from Identifying Program Abuse: GAO identified pro- consideration for awards and (2) publish its con- gram abuse and mismanagement by developing tracting procedures for review and comment by the and analyzing information reported through Fraud- public. We also recommended that the Department NET. FraudNET is GAO’s system of collecting, eval- of Transportation follow up on the Authority’s uating, and acting on allegations of fraudulent actions to address our recommendations. In activity received from government employees, response, the Authority published a draft of its con- 140 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 tracting procedures, which prohibits the use of pre- ous inaccuracies in the amounts presented and set thresholds. Furthermore, the Department of descriptive information that, if not corrected, could Transportation has stated its willingness to comment have misled readers. on the Authority’s contracting procedures and pro- vide advice on significant procurement issues when Second Edition of the Principles of Federal Appropri- requested. ations Law Completed: GAO recently completed the second edition of its popular 2,500-page handbook Helping Address the Broad Challenges of National on federal appropriations law, which governs the Preparedness: Through numerous testimonies and availability and use of federal public funds. This reports, GAO has provided information and assis- handbook, known as the Red Book, gathers, orga- tance to the Congress as it addresses the challenges nizes, and explains statutes, regulations, and cases of transforming the federal government to reduce from all relevant authorities in this complex area. It risks from terrorist attacks. GAO’s work has empha- enables those responsible for federal funds to sized strengthening the risk management frame- understand and comply with the purpose, time, and work; developing and refining the national strategy, amount limitations imposed by the laws and Consti- policy, and guidance structures; and bolstering the tution of the United States. The Red Book is often fundamental management foundation integral to cited in executive branch agency memoranda, in effective public sector performance and account- congressional reports and debates, and in the deci- ability. In particular, the reorganization of home- sions of the Supreme Court and other courts of the land security activities to create the Department of United States. Homeland Security will be a very difficult undertak- ing, but also a unique opportunity to create an Improving Government Debt Management: In effective, performance-based organization. Strategic reviewing other nations’ experiences in managing planning, building partnerships, human capital strat- sovereign debt, GAO found that the selected egies, communication and information systems and nations used a number of the same debt manage- other factors will be critical to successful transfor- ment tools as the Department of the Treasury. We mation. Strong and visionary leadership will be identified additional debt management tools used in vital to creating a unified, focused organization from other countries that may hold promise for the its many parts. In the near term, GAO reported, it United States. Our work also helped inform inter- will be important to articulate a clear overarching national efforts to improve government debt man- mission and core values, establish initial priorities, agement. In an authoritative resource guide used and develop an overall implementation plan for the by government debt managers worldwide, the new national strategy and related reorganization. Organization for Economic Cooperation and Devel- opment republished segments of GAO’s analysis of Analyze the Government’s Fiscal Position and benchmark securities; terms to maturity; and use of Approaches for Financing the Government 15 debt management tools across the United States, Auditing the U.S. Government’s Financial State- Australia, New Zealand, Norway, Sweden, and ments: As in the 4 previous fiscal years, GAO has United Kingdom. been unable to express an opinion on the U.S. gov- ernment’s consolidated financial statements for fis- Extending Budget Controls: Over several years, in cal 2001 because of continuing material weaknesses reports and testimony for the House Budget Com- in internal control and accounting and reporting mittee, GAO has emphasized the need to extend issues. However, GAO’s efforts are paying divi- the budget controls embodied in the expired Bud- dends in the form of significant improvements in get Enforcement Act and provided suggestions for estimating the cost of the government’s lending pro- improving these controls. Our continued focus on grams and the net loan amounts expected to be col- the critical need for congressional action helped lected, identifying errors or inaccuracies in reported keep the issue in the forefront. Congressional lead- amounts, and suggesting clarifications to financial ers have acknowledged the need for action. On statement disclosures. For example, our review of September 30, 2002, the Congress introduced legis- social insurance program information found numer- lation to extend some controls and stated that other controls should be established through 2007. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 141 APPENDIX 1 Ensuring That Qualified Persons Claim the Earned better correlating the demand for service and hours Income Credit: Administering the earned income of service and (2) develop information to increase credit—a refundable tax credit available to low- electronic filing by surveying taxpayers who had income, working taxpayers—is not easy. While it is prepared their tax returns electronically but submit- important for the Internal Revenue Service (IRS) to ted them to IRS on paper. help ensure that all qualified persons claim the credit, it is equally important that the agency guard Improving IRS’s Taxpayer Compliance Programs: against fraud and other forms of erroneous claims. Responding to congressional concerns, GAO evalu- GAO estimated that of 17.2 million households that ated IRS’s tax compliance and collection programs were eligible for the credit in 1999, about 12.9 mil- to determine the effect on taxpayers of recent lion claimed it, for an overall participation rate of declines in these programs’ activities and outcomes. about 75 percent. In addition, we found that IRS’s We reported large and pervasive declines for fiscal process for recertifying the eligibility of taxpayers 1996 through 2001 in such areas as audit coverage whose claims had been disallowed by an audit and delinquent tax collections. Our analysis pro- could be unnecessarily burdensome for those tax- vided IRS with a basis for reexamining the extent to payers. Specifically, the taxpayers were asked to which some quantitative information on the impact submit certain information that could be difficult for of proposed program changes should be included them to obtain or was inconsistent with what many in strategic assessments. In addition, IRS plans to IRS examiners considered acceptable for making take actions that we recommended to improve its recertification decisions. On the basis of our recom- Offer in Compromise program—an effort designed mendations, IRS revised its earned income credit to settle the obligations of taxpayers who cannot forms and clarified its guidance on the documenta- afford to pay their full tax liability. For example, tion needed to support a claim to help ensure that IRS plans to evaluate the effectiveness of initiatives qualified persons receive the credit. designed to reduce the program’s inventory of unre- solved offers and to reexamine its basis for setting Targeting Tax Credits: Several GAO studies in the goals for case-processing times. early and mid-1990s evaluated aspects of the design of the possessions tax credit and the earned income Collecting Delinquent Taxes Owed by Federal Ven- tax credit. As a result of these studies, the Congress dors: Federal agencies pay billions of dollars each modified the tax code, replacing the possessions tax year to thousands of vendors that owe delinquent credit with a less generous credit that will be elimi- federal taxes. The Department of the Treasury’s nated in 2006 and tightening the eligibility require- Financial Management Service (FMS) makes pay- ments for the earned income tax credit. More ments on behalf of most of these agencies, but a current information on the 5-year impact of these few agencies disburse their own payments. FMS’s changes points to $564 million in revenue savings payments are subject to a tax levy through the Con- that GAO has not claimed previously. tinuous Federal Tax Levy program, which the IRS operates in conjunction with FMS. This levy Supporting Congressional Oversight of IRS: GAO enables IRS to recover delinquent federal taxes continued to support congressional oversight of owed by federal vendors. However, the payments IRS’s operations, including IRS’s implementation of made by the other agencies are not subject to the the IRS Restructuring and Reform Act of 1998, bud- levy. To increase the potential for collecting delin- get requests, and administration of various tax func- quent federal taxes, GAO recommended that IRS tions. For example, our work on the scope of and FMS work with the other agencies to develop abusive tax schemes and on IRS’s efforts to combat plans for including their vendor payments in the them, despite declines in its compliance, enforce- continuous levy program. We estimated that IRS ment, and collection activities, assisted the Congress could recover at least $270 million annually in in overseeing the adequacy of IRS’s efforts to delinquent federal taxes if the other agencies’ pay- achieve appropriate levels of taxpayer compliance. ments were included in this program. IRS and FMS In addition, our reviews of IRS’s performance dur- agreed to discuss ways to include the other agen- ing the 2001 tax filing season led IRS to (1) improve cies’ vendor payments in the levy program. the quality of its telephone service to taxpayers by 142 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 Strategic Goal 4 Maximize the Value of GAO by Being a Model Federal Agency and a World-Class Professional Services Organization Sharpen GAO’s Focus on Clients’ and Customers’ Requirements Providing Emergency Relocation Support: Follow- ing last October’s anthrax incident, when three House of Representatives office buildings were closed, GAO provided office space and critical sup- port services for Members and committees until the office buildings reopened. GAO’s leadership and clients’ views on our performance during an members of GAO’s staff offices were instrumental in engagement, including the timeliness of the prod- providing emergency planning and support for the uct, the frequency of communications during the House move. Efforts included identifying adequate engagement, and the professionalism of GAO staff space; readying the space for occupation; providing during the engagement review. We plan to expand equipment, supplies, and information technology this system across the Congress in fiscal 2003. We connectivity; determining and providing additional also launched the Congressional Hearing System, a security requirements; and providing logistical sup- database that facilitates our preparation of a consol- port to House staff while they were in residence, all idated hearing list, hearing notices, and testimony within a very short time. Within 48 hours, we statistics. Finally, we updated a brochure for the moved 1,200 GAO staff to alternative work sites and Congress describing our services and how to obtain provided them with notebook computers and them. We plan to distribute this brochure, called remote access so that they could continue to per- Serving the Congress, to the new Congress. form their jobs, completely reconnected two floors of the GAO headquarters building to new tele- Developing Agency and International Protocols: phone and computer networks, and enabled House Paralleling our purpose and approach in imple- Members and staff, a total of 1,800 people, to move menting the Congressional Protocols, we developed into their temporary quarters. We later reversed that draft Agency Protocols to provide clearly defined, process, bought our staff back in, and resumed nor- consistently applied, well-documented, and trans- mal operations in fewer than 5 days. Through it all, parent polices for our work with federal agencies. we continued to issue reports and testify on issues We solicited and incorporated comments on the important to the Congress and the American draft from 28 departments, agencies, and entities, as people. well as the President’s Council on Integrity and Effi- ciency, and prepared a revised version of the proto- Increasing Outreach and Service to GAO’s Congres- cols, which we began to pilot test in December sional Clients: To enhance our understanding of 2002. To facilitate this pilot, we developed an e- our congressional clients’ needs, we pursued two learning (electronic Web-based) tool accessible to feedback initiatives this year. First, senior execu- GAO staff through their desktops. The tool’s ques- tives continued their outreach to congressional cli- tions and answers, organized by engagement man- ents to determine their views of GAO’s work. agement gate, provide analysts with quick, just-in- These efforts indicated that client satisfaction has time information on what is expected of them and increased over the past year. Second, we com- what is expected of the agency during each seg- pleted a 7-month pilot test of a system for obtaining ment of an engagement. We also developed an GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 143 APPENDIX 1 exposure draft of protocols for our work with inter- ning process that establishes a more participatory national audit agencies and sent this draft to the Hill and systematic approach for managers to identify for comment. the resources needed to meet our goals and objec- tives. The process addresses not only the appropri- Making GAO’s Work Accessible to the American Peo- ate size and deployment of our workforce, but also ple: GAO continued its policy of proactive outreach its profile—focusing on ensuring that the workforce to the press, our congressional clients, and the pub- has the knowledge, skills, and abilities needed to lic to enhance the visibility of GAO products. In pursue our strategic goals, both now and in the two nationwide mailings to the press, including 620 future. The strategic plan and workforce planning reporters and editors, we distributed A Reporter’s results serve as the foundation for our fiscal 2003 Guide to GAO and highlighted our work on home- operating plan and fiscal 2004 budget request. land security, human capital, and corporate gover- nance. We also wrote and produced an award- Maintaining Integrity in Financial Management: winning video on GAO, “Impact 2000,” and created As part of our effort to be a model agency, in fiscal a link for the press on GAO’s external Web site, 2002 we retained the independent audit firm, Cot- which receives almost 1,500 hits monthly. To inform ton & Co., LLP, to audit our financial statements. news editors and editorial page writers of the value The auditors issued an unqualified opinion. More- of GAO as a news source, we met with the editorial over, we conducted internal reviews of our compli- boards of major media outlets, including The Wall ance with requirements set forth in the Financial Street Journal, The New York Times, The Washington Integrity Act and Office of Management and Budget Post, and USA Today, and visited three mid-Atlantic Circular A-127. The first review covered our Finan- media outlets, The Baltimore Sun, The Philadelphia cial Management System, including its internal con- Inquirer, and the Bergen Country Record. We also trols and training and reporting requirements, the continued our outreach efforts on the Hill, regularly adequacy of its integration with other GAO systems, attending congressional hearings and meeting with and the maintenance of its general ledger and the reporters and press secretaries. consistency of the general ledger with the Standard General Ledger. The second review covered sev- Enhance Leadership and Promote eral of our internal operations—disbursements, Management Excellence travel reimbursements, and credit card charges; pay- Improving Strategic Management: GAO issued its roll and personnel operations; time and attendance; strategic plan for serving the Congress from fiscal external training costs; blanket purchase agree- 2002 through fiscal 2007. The new plan reflects the ments with vendors; and service agreements with changes in the national agenda brought about by other agencies. These reviews uncovered no prob- the war against terrorism, the uncertain economic lems and showed that we have the proper controls outlook, and the return of budget deficits. We also in place and that they are being followed. issued our 2001 performance and accountability report, which combines information on our past Continuing to Provide Leadership in Strategic year’s accomplishments and progress in meeting Human Capital Management Planning and Execu- our strategic goals with our plans for achieving our tion: During fiscal 2002, GAO strengthened its fiscal 2003 performance goals. In addition, the efforts to become a model in human capital opera- report includes our fiscal 2001 financial statements tions. GAO’s Human Capital Office led a multi-unit and the unqualified audit opinion rendered by an effort to review its roles and responsibilities, independent auditor. The report earned a Certifi- develop a vision for the future, and design initia- cate of Excellence in Accountability Reporting from tives to achieve this vision. These initiatives will be the Association of Government Accountants. implemented in fiscal 2003. In addition, we devel- oped a draft agencywide human capital strategic Better Aligning Our Organization and Its Resources: plan to be finalized and implemented in fiscal 2003. GAO made significant progress in linking its strate- gic plan, performance and accountability efforts, Improved Human Capital Manager Network: Fol- and budget process. During fiscal 2002, we lowing GAO’s mission support realignment, our improved the linkage between our strategic plan Human Capital Office established a Human Capital and our budget by implementing a workforce plan- Managers network to support managing directors 144 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 and teams. To improve this network and its service for the federal government, including strategies, to clients, human capital managers documented and best practices, operations, and emerging issues and streamlined procedures, identified users’ and unit trends related to the recruitment, hiring, develop- heads’ needs, and clarified their roles. As a result, ment, and retention of a diverse, talented, dedi- the human capital manager team improved support cated, and results-oriented workforce. to customers, developed a smooth hiring process, and participated in the development and implemen- To promote the retention of staff with critical skills tation of numerous human capital policies and and 1 to 3 years of GAO experience, we imple- programs. mented recent legislation (5 U.S.C. 5379) authoriz- ing federal agencies to offer student loan Aligning GAO’s Workforce and Mission Needs: To repayments in exchange for commitments to federal build a diverse workforce with the knowledge, service. Following the Office of Personnel Manage- skills, and abilities to meet the new century’s chal- ment’s 2001 implementing regulations, we dis- lenges, GAO took several actions in fiscal 2002 to bursed repayments of between $3,400 and $6,000 expand and support its recruiting efforts. Overall, directly to lending institutions for 169 employees, in fiscal 2002, we hired more new staff than in any each of whom signed a 3-year agreement to con- recent year—nearly 430 permanent staff and 140 tinue working at GAO. interns. Most of those hired were entry-level pro- fessionals with advanced degrees needed to sup- To address budgetary constraints or mission needs, port our strategic initiatives and meet our correct skill imbalances, or reduce expenditures for succession-planning needs as more senior staff high-grade managerial or supervisory positions retire. In addition, we recruited students in specific while meeting the desires of selected GAO person- degree programs to acquire expertise in certain spe- nel, we exercised our new Voluntary Early Retire- cialties that GAO needs to carry out its strategic ment Authority. This authority, established in our goals. October 2000 human capital legislation, allowed us to grant early retirement to 52 employees in fiscal Recognizing the need to place more emphasis on 2002. diversity in college recruiting, we developed and implemented a strategy for recruiting a broad spec- Acquiring and Applying Information Technology to trum of candidates for professional positions at Support GAO’s Strategic Objectives and Business GAO. This strategy is designed to ensure that GAO Plans: As the Clinger-Cohen Act requires, GAO is recruits candidates at schools that matriculate signif- developing an enterprise architecture program to icant numbers of women and racial minorities, guide its information technology (IT) planning and trains its recruiters in best practices for recruiting a decision making. In designing and developing sys- broad spectrum of candidates, ensures that its own tems, as well as in acquiring technology tools and diversity is reflected in its recruiters and recruiting services, we have applied enterprise architecture materials, and collects and analyzes data on the principles and concepts to ensure sound IT invest- effectiveness of its recruiting efforts, including the ments and the interoperability of systems. extent to which best practices are used. This year, we enlisted key minority executives as recruiters During the past year, we acquired new hardware and added outreach efforts at 23 schools. As a and software and developed user-friendly systems result, we attracted a talented and diverse pool of that enhance our ability to be productive and applicants. responsive to the Congress. For example, we replaced aging desktop workstations with light- The Comptroller General’s Educators’ Advisory weight notebook computers that provide greater Panel held its second annual meeting. The Panel’s computing power, speed, and mobility. In addition, purpose is to establish long-term, multidimensional, we upgraded key desktop applications, the Win- and mutually beneficial working relationships dows desktop operating system, and our telecom- between GAO and leading deans, professors, and munications systems to ensure that GAO staff have others in academia. The Panel also advises the modern technology tools to assist them in carrying Comptroller General on human capital practices out their work. We also developed new, integrated, that can support GAO’s efforts to become a model user-friendly Web-based systems that eliminate GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 145 APPENDIX 1 duplicate data entry while ensuring the reusability awareness of this threat, maintain vigilance, and of existing data. These new systems improve our develop practices that protect its IT infrastructures. ability to obtain feedback from our congressional Fiscal 2002 accomplishments in this area include clients, facilitate access to GAO information for the external customer, and enhance productivity for the ■ installing software that monitors network users’ internal customer. Among the new Web-based sys- compliance with GAO’s security standards and tems are indicates corrective actions when necessary; ■ installing software that monitors unauthorized ■ a system for obtaining clients’ views on our access to GAO’s servers and alerts operations staff performance during an engagement, when immediate action may be needed to protect ■ desktop IPTV (streaming video) for live and information assets; prerecorded programs (e.g., CG chats, C-SPAN, ■ implementing a tool—the two-factor user CNN), authentication (SecurID)—that increases network ■ an applicant-handling system to support security by requiring a PIN and a constantly recruiting and hiring efforts, changing number generated on a token to gain access to the GAO network, thereby eliminating ■ a docket database for the Office of General the network’s vulnerability to penetration Counsel, because of weak passwords; ■ an e-learning tool on the new Agency Protocols ■ developing a baseline disaster recovery strategy for analysts, and plan that provide for the temporary ■ a system for reporting the accomplishments—that operation of our essential computer systems; and is, the financial and other benefits—attributable ■ completing security control reviews and risk to our engagements, assessments for two critical information ■ a competency-based performance management systems—the Mission Assignment and Tracking system, System and the Financial Management System— ■ an employee locator system, that identified improvements necessary to maintain full compliance with federal IT security ■ a videoconferencing reservation system, guidelines. ■ a system that allows employees to register Providing a Safe and Secure Workplace: In fiscal themselves for internal training and obtain 2002, GAO assessed the vulnerability of its building information on courses and classes, and and grounds to security risks and identified mea- ■ a system that tracks employees’ training sures that it could take to reduce the risk of poten- requirements and training records. tial incidents; enhance security processes, procedures, and equipment; and provide for the In addition, we developed and implemented vari- continuity of operations. This year, we put several ous Web sites to enhance knowledge-sharing, low-cost or relatively simple measures in place. For including a site for the Financial Accounting Stan- example, we installed an x-ray machine at a pri- dards Advisory Board, a site for employees with mary loading dock, upgraded the air filter system, information on travel and subsequent reimburse- and upgraded the fire alarm and public address sys- ment, and a site with guidance for nominating tems. We also recommended procedures and iden- employees for external awards sponsored by fed- tified sites for continuing GAO’s work in alternative eral and nonfederal organizations and schedules on locations. Finally, we began conducting back- the categories, criteria, and deadlines for awards to ground investigations on all contractors who work support timely nominations. in the headquarters building. The investigations are comparable to those conducted for GAO employees Increasing Information Security: GAO has recog- and help ensure the safety of staff and property by nized the increased threat to its shared information holding contractors to the same standards as GAO technology (IT) assets and is working to heighten employees. 146 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 Leverage GAO’s Institutional Knowledge and and guidance for retiring files and preparing docu- Experience ments for secure destruction. As a result, 800 feet of Increasing Capacity through Knowledge-Sharing files were retired and approximately 1,178 feet of and Collaboration: GAO’s application and use of records were identified for destruction, freeing stor- tools for exchanging information strengthened the age space and equipment. Finally, to support capacity of GAO audit teams and other state and GAO’s leadership in the area of creating and man- national audit entities to help improve the perfor- aging key documentary source material, our Knowl- mance and accountability of governments world- edge Services and Quality and Risk Management wide. For example, through an ongoing offices cosponsored a Workpaper Task Force to relationship with the Private Sector Council, we reassess GAO’s policies for workpaper management obtained information on best practices in the design and identify opportunities to improve the effective- and manufacture of products that we used to ness and efficiency of GAO’s workpaper practices develop recommendations for improving the using new information technologies. Department of Defense’s acquisition of major weapon systems. We also used a Web-based tool, Piloting Knowledge-Sharing among GAO Teams: AGNet, to glean applicable knowledge and experi- Formed in the fall of fiscal 2002, the National Pre- ence from 11 other countries to support our review paredness Web Support Group fosters information- of efforts to prevent the spread of mad cow disease sharing to support collaboration on national pre- in the United States. In addition, we managed a 4- paredness issues across GAO. The Web Support month international fellowship program for 14 fel- Group created and implemented a National Pre- lows, provided technical training on performance paredness Web portal in July 2002, which served as audits to more than 150 auditors from 10 European a critical tool in coordinating activities of the countries, and entered into an agreement with the National Preparedness virtual team (staff throughout Inter-American Development Bank, the Interna- GAO who work on national preparedness issues tional Organization of Supreme Audit Institutions and rely on the Web to obtain current information International Development Initiative, and the Orga- about these issues). nization of Latin American and Caribbean Supreme Audit Institutions to provide technical assistance to Continuously Improve GAO’s Business and strengthen training for auditors in 21 countries. Management Processes Moreover, we participated in a joint audit of student Enhancing GAO’s Guidance and Tools: To improve assessment systems with the Department of Educa- the engagement process, GAO clarified and tion’s Office of Inspector General, the Texas and enhanced its guidance for project plans and mes- Pennsylvania state auditors, and the Philadelphia sage agreements—efforts that should lead to pro- Office of the Comptroller that resulted in seven viding better products for our clients. A GAO team reports recommending improvements to manage- also developed an electronic workpaper set to help ment controls and data quality. Finally, to enhance analysts determine the documentation requirements staff’s ability to utilize Web-based knowledge ser- for engagements of various lengths. Additionally, vices, GAO offered training in Lexis-Nexis, we enhanced our desktop policy guidance tool, CourtLink, Leadership Directory, and Internet known as the EAGLE (Electronic Assistance Guide Explorer during fiscal 2002. for Leading Assignments), by adding individual teams’ guidance, thereby making it easier for staff to Improving the Management of Agency Records: In find and follow GAO and team policies and fiscal 2002, GAO introduced several initiatives to procedures. enhance records management. To reduce the time required to obtain GAO records stored at the Wash- Improving GAO’s Products and Business Processes: ington National Records Center, we negotiated a In fiscal 2002, GAO streamlined the graphics and contract with the center’s courier service. The cou- report production processes for Highlights, a one- rier service guarantees a 4-hour turnaround for page summary that presents the key findings and emergency requests, and the couriers have a clear- recommendations of a GAO report or testimony, ance to deliver files directly to the requesting office and implemented this new reporting format first and back to the records center. We also started a piloted in fiscal 2001. Feedback from congressional cleanup of files across GAO, providing direction clients, federal agencies, the media, accountability GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 147 APPENDIX 1 organizations, and universities has been over- Washington, D.C., metropolitan area and in the met- whelmingly positive. In addition, Highlights was ropolitan areas of the field offices, as allowed under showcased at the annual conference of the Federal Executive Order 12999, Computers for Education. Audit Executive Council and has been adopted as a This effort not only enabled us to dispose of our new product by the Postal Service Inspector surplus equipment but also ensured that taxpayer General. dollars would continue to be put to good use in local communities. GAO’s successful implementation of the risk man- agement approach introduced in fiscal 2000 Our contract for electrical services and programs improved the engagement management process. An has also enabled us to cut costs. We negotiated a 4 assessment of critical aspects of this approach percent discount on our electrical rates under a new showed there has been an increase in the number contract with PEPCO Energy Services, which of draft reports meeting all quality standards the first enabled us to save over $52,000 in fiscal 2002. We time they are submitted for official review outside also participated in PEPCO’s electrical load curtail- the originating team. ment program by reducing our demand for electric- ity in the GAO building during periods of high In fiscal 2002, we centralized our process for notify- regional electrical consumption. Our efforts helped ing other federal agencies and private parties of vis- the electrical utilities avoid brownouts or blackouts its by GAO staff. As a result, we are able to send and gave us a credit on our monthly utility bill. clearance information more quickly and accurately, and GAO employees are more aware of the pre- GAO continued the digital conversion of prior GAO visit requirements and the information needed to products, resulting in a decline in the number of arrange their visits. hard copy requests and a corresponding decrease in paper costs. In fiscal 2002, we added 10,200 files of To increase the efficiency of the report production GAO products from 1978-1985 to the database. The process and improve communication between audit number of hard copy requests has decreased from teams and the product assistance groups, we imple- over 800,000 to 137,000 per year since the project mented a tracking system to obtain real- or nearly began in fiscal 1997, for a total annual average real-time information on the status of GAO publica- paper cost avoidance of $24,400, or $48,800 total for tions during the production process, including edit- the past 2 fiscal years. ing, graphics preparation, composition, printing, and distribution. The system tracks the report pack- In fiscal 2001, a Web-based Meeting Room Booking age throughout the process, simultaneously gener- System was developed to provide information on ating metrics on the process and providing users the location, capacity, and availability of audio- with easier and faster access to information on the visual or video-conferencing equipment of meeting report’s status, the estimated completion date, and rooms in the headquarters building. The system the date of release for distribution. also allows anyone in GAO to schedule the rooms, a feature that has decreased the time necessary to Realizing Efficiencies and Savings: GAO continues reserve a meeting room from an average of 10 to 15 to negotiate innovative contracts and obtain com- minutes to an average of 1 to 2 minutes. This trans- petitive lease rates for its IT equipment, end-user lates to an average monthly savings of $8,552. Net products such as workstations, and infrastructure savings for fiscal 2001 after development and imple- such as servers and software. By taking advantage mentation costs were approximately $64,000. Net of multiyear funding flexibility and by treating the savings for fiscal 2002 and beyond are over IT leases as services, we are able to amortize the $100,000 annually. costs of acquisitions over multiple years. As a result, we were able to acquire new notebook com- Finally, instead of making each team responsible for puters and flat panel monitors for most GAO staff. obtaining, maintaining, storing, and distributing Furthermore, after replacing our computer hard- office supplies and equipment, we streamlined the ware, we donated over 2,300 computers and other process for requesting and delivering supplies by computer-related equipment to schools in the establishing Shared Service Centers on each floor. 148 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 1 Now, fewer staff are required to manage supplies To provide some training while we are completing and equipment, and customers receive the materials our curriculum development, GAO’s Center for Per- and services they need more quickly. formance and Learning contracted for the delivery of more than 100 commercially available training Become the Professional Services Employer of classes to GAO staff in topics related to the new Choice competencies. The center’s staff monitored and Leading the Way in Performance Management: In evaluated the extent to which courses addressed the fiscal 2002, GAO implemented a new performance new competencies and provided immediate feed- appraisal system for analysts and specialists, back to the contractors on ways to make the course adapted the system for attorneys, and began modi- materials more relevant to GAO staff. To increase fying the system for Administrative Professional and the availability of courses, particularly in the field Support Staff. This system is part of a broader com- offices, we began a project to create a virtual class- petency-based performance management system room. An application implemented in December that is designed to align employees’ performance 2001 provides Web-based distance learning for with the agency’s core values and strategic plan. GAO staff and employs both individual and collabo- Performance management includes performance rative activities. Students can communicate with the planning, coaching, and feedback activities, as well instructor and other course participants both as appraisal, recognition, reward, and pay and pro- directly and through chat sessions and e-mail. It is motion processes. GAO views the system as a anticipated that as this type of program expands framework for all of its human capital programs, and becomes more universally available, the timing including recruitment, training and development, and quality of training will improve, while the and recognition and rewards. amount of downtime and expense associated with other types of traditional training will be reduced. Linking Compensation and Awards to Performance: Under its new performance management system, To enhance the competencies of selected managers GAO is restructuring its compensation and award and executives, the center reinstituted a centrally programs to better link pay and recognition to funded external training program during fiscal 2002. efforts that support its core values and strategic Under the program, approximately 60 managers goals. We revised our performance-based compen- and executives received specialized training in lead- sation system for analysts and specialists to reward ership and management. significant contributions that generate returns for taxpayers, serve clients, further institutional values, Providing Career Transition Services: To assist and support various GAO-wide efforts. Finally, we employees seeking career alternatives, GAO estab- took a first step toward tying our compensation sys- lished an on-site Career Transition Center, staffed tem for Administrative Professional and Support with a full-time career counselor, to provide confi- Staff to performance by reinstituting quality step dential career-transition services. The center assists increases, which allow us to raise General Schedule employees with career assessments and planning, salary levels for high-quality contributions. The job searches, resume and cover-letter writing, and costs of this change were minimal, but the impact interviewing techniques. It also includes a resource on staff morale was great. center with related books, periodicals, and videos. During fiscal 2002, the Career Transition Center pro- Training Staff to Meet the New Competencies: To vided services to more than 100 GAO employees. support GAO’s transition to the new competency- based performance management system and help Modernizing the GAO Headquarters Building: At staff meet the new competencies, GAO and its con- the GAO headquarters building, several moderniza- tractors completed training and learning needs tion projects completed or initiated during the year assessments, “promising practices” research, and a provided more office space and new facilities to draft curriculum for analysts that focuses on the support GAO’s mission. For example, the construc- competencies and the work that analysts perform at tion of a new printing facility in the basement freed each band level. valuable first floor space for conversion into usable office space and, in turn, allowed sixth floor office space to be cleared for modernization. In addition, GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 149 APPENDIX 1 the construction of new, permanent storage space Transit Benefit Program Implementation: GAO’s in the basement created a home for the GAO His- Financial Management Policy staff matrixed with torical Archives, and the use of existing air-handling staff in the Controller and Administrative Services equipment provided proper environmental condi- Office, the Human Capital Office, and the Office of tions for preserving irreplaceable GAO documents. the General Counsel to develop and document tran- The space formerly occupied by the archives was sit benefit policy and coordinate legal clearances, converted to offices. Furthermore, an old design for coordinate administration and distribution of bene- modernizing the sixth floor was thoroughly updated fits with the Department of Transportation, and to reflect lessons learned, the changing demograph- develop internal marketing strategies to announce ics of GAO’s workforce, and an emerging need for a the program rollout. As an indicator of the pro- new e-security computer lab. While the updating gram’s success, almost one-half of all GAO employ- took some time, GAO’s overall modernization ees receive transit benefits. project remained on schedule, new ideas were incorporated, and a disruptive retrofit of the existing computer lab was avoided. 150 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 2. Inspector General’s Report Memorandum Date: November 27, 2002 To: Comptroller General From: Inspector General – Frances Garcia Subject: Management Challenges We have reviewed management’s assessment of the management challenges. Based on our work and institutional knowledge, we agree that human capital, physical security, and information security are the management challenges that may affect our performance. We are in agreement with management’s assessment of progress made in addressing these challenges. In addition, we reviewed all fiscal 2002 accomplishment reports claiming financial benefits of $1 billion or more and found that GAO has a reasonable basis for claiming these benefits. We plan to review the internal controls for several key performance measures in fiscal 2003. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 151 3. Report on the Implementation of Public Law 106-303 As required by section 6 of Public Law 106-303 (sometimes referred to as the GAO Personnel Flexi- Section 3. Reduction in Force bility Act of 2000) enacted on October 13, 2000, we Section 3 authorizes the Comptroller General to are providing a review of the actions taken by GAO issue revised regulations for the separation of under sections 1 through 3 of the act. employees during a reduction or other adjustment in force. The Comptroller General may conduct a reduction or adjustment in force because of budget- Section 1. Voluntary Early ary constraints or when necessary to realign GAO’s Retirement workforce; to correct skill imbalances; and to reduce high-grade, supervisory, and managerial The Comptroller General is authorized by the act to positions. Retention during a reduction or other offer voluntary early retirement to agency employ- adjustment in force will be based on the following ees when necessary and appropriate to realign factors in descending order of priority: tenure, vet- GAO’s workforce to meet budgetary constraints or erans’ and military preference, performance, length mission needs; correct skill imbalances; or reduce of service, and other objective factors, such as skill high-grade, managerial, or supervisory positions. and knowledge. After providing an opportunity for all employees to comment, we issued final agency regulations for the GAO has developed draft regulations to implement use of this authority on April 27, 2001. this provision and made them available to all of the agency’s employees for comment on September 26, In fiscal 2002, 52 individual separated from the 2002. As required by the act, GAO’s regulations agency under the voluntary early retirement author- must be consistent with the reduction in force regu- ity. In fiscal 2003, we again exercised our voluntary lations issued by the Office of Personnel Manage- early retirement authority for individuals wishing to ment (OPM). Because of differences in GAO’s retire by March 14, 2003. organizational structure and personnel system, how- ever, the Congress recognized that GAO’s proce- dures might vary from OPM’s approach in certain Section 2. Voluntary areas. Moreover, the act itself mandates some dif- ferences. GAO must consider performance before Separation Incentive Payments length of service when ranking employees for Section 2 of the act authorizes the Comptroller Gen- release during a workforce restructuring. GAO’s eral to offer voluntary separation incentive pay- draft regulations provide that after employees’ ten- ments. The agency contribution to the retirement ure and eligibility for preferences are considered, fund required by the act is too high to permit the they be ranked on the basis of their “retention use of this authority. Therefore, we have no imme- scores.” This score is determined by an employee’s diate plans to exercise this authority, which is in performance appraisal average for the prior 3 years effect only until December 31, 2003, and have no and the number of years of federal service. The plans to issue agency regulations. comment period closed on October 28, 2002, and we are in the process of reviewing and analyzing the comments submitted by employees. We antici- pate issuing final regulations early in calendar year 2003. 152 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 3 GAO is required to report actions taken under the reduction in force, it is both prudent and appropri- reduction in force procedures and to assess the ate to finalize these regulations so that we may deal impact on veterans eligible for preferences. No with any future budget or restructuring issues. In such actions were taken in fiscal 2002. Conse- our view, the draft regulations, based on the provi- quently, there was no impact on the agency’s sions of the act, are a significant improvement over veterans. current rules for selecting employees for separation in the event of a downsizing or realignment. Overall Assessment During the 108th Congress, we will work with our appropriations and oversight committees to achieve The three flexibilities discussed in this report have enactment of legislation to support our continuing the potential to help address the human capital efforts to be a leader in federal human capital man- challenges facing GAO. The vacancies created by agement and a world-class organization. To build the separation of employees taking voluntary early on the human capital flexibilities provided by the retirement will assist us in realigning staff to meet Congress in 2000, we will identify opportunities for more critical needs. As noted in section 2 above, additional flexibilities that would, among other the utility of the voluntary separation incentive pro- things, facilitate GAO’s continuing efforts to develop vision in realigning the agency’s workforce is ques- a more performance-based compensation system, tionable because of the high cost of the retirement realign our workforce, and provide greater opportu- contribution. Lastly, we are in the process of final- nities for staff to phase into retirement. izing revised reduction in force regulations. While GAO does not have any current plans to conduct a GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 153 4. Government Information Security Reform GAO is implementing an information security pro- ■ ensure the security of services provided by a gram that is consistent with requirements in the contractor or another agency; and Government Information Security Reform provi- ■ develop and implement an enterprise disaster sions (commonly referred to as “GISRA”) enacted in recovery solution. the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001. Although GAO is not obli- In addition, GAO continues to provide separate gated by law to comply with GISRA, we have funding for IT security initiatives and training to sought to implement its requirements to help upgrade the skills of our IT security staff. GAO aug- ensure that GAO establishes an effective informa- ments its security staff through contractor support, tion security program and to help fulfill our goal of as necessary. being a model federal agency. Along with indicating our progress, the reviews and To assess the status of GAO’s information security evaluations also identified areas needing improve- program, we considered the results of internal ment. GAO is taking corrective action for these reviews by program offices and security staff, inde- areas and, in particular, has undertaken several pendent evaluations of our major financial applica- projects that will significantly improve our informa- tions by a public accounting firm, and testing of tion security program during fiscal 2003. Among information technology (IT) controls for our general these projects are the following: support system by GAO’s IT auditors, who are inde- pendent of GAO’s IT support function. These ■ Host-based intrusion detection—Having reviews and evaluations identified no material completed the process of applying host-based weaknesses in GAO’s financial applications or gen- intrusion detection software to GAO’s external eral support system. They also showed that GAO is servers, we have begun to apply this software to making substantial progress in implementing infor- our internal servers and plan to expand this effort mation security requirements consistent with GISRA during fiscal 2003 to add complementary tools. through its efforts to These tools will facilitate the early detection of and response to any suspicious activity and ■ implement a risk-based, agencywide security identify trends that can help us to enhance our program; security architecture. ■ develop essential policies and reporting ■ Strong user authentication—We have delivered a mechanisms to ensure that GAO’s program strong (two-factor) authentication system to most managers, the Chief Information Officer, and the of our staff. The system requires staff accessing Comptroller General implement and maintain GAO’s general support system to combine a security requirements; personal identification number they select with a six-digit pass code generated randomly every 60 ■ provide security training and awareness; seconds by each person’s unique authentication ■ enhance the agency’s capability to respond to device. This process provides a high degree of computer security incidents; certainty that each user accessing GAO’s general support system is legitimate. During fiscal 2003, ■ integrate security into GAO’s capital investment we will complete the project’s implementation, control process; including extending the authentication system to ■ identify GAO’s critical assets within our enterprise all of GAO’s remote access and internal wireless architecture; links. We are also studying the feasibility of using a password management device to more securely 154 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 4 store and transmit users’ credentials on mission- strategically position critical backup computing critical systems and applications under the control assets and set up essential telecommunications of GAO’s administrative staff. links for GAO’s client-server-based systems. In addition, we are implementing a new network ■ IT disaster recovery—We are refining the disaster storage technology that we expect to integrate recovery plan we developed last year and have into our disaster recovery infrastructure during begun to conduct limited testing exercises to fiscal 2003. ensure the viability of the plan. We are working with the vendor of GAO’s disaster recovery site to GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 155 5. Acronyms AICPA American Institute of Certified Public FMFIA Federal Managers’ Financial Integrity Act Accountants (Integrity Act; now 31 U.S.C. 3512) APSS Administrative Professional and Support FMS Financial Management Service Staff FTAA Free Trade Area of the Americas COE Corps of Engineers (U.S. Army) GAAP generally accepted accounting principles CLF Central Liquidity Facility GAO General Accounting Office CMS Centers for Medicare and Medicaid GISRA Government Information Security Reform Services Act CPA certified public accountant GSA General Services Administration CSRS Civil Service Retirement System HHS Department of Health and Human DI Disability Insurance Services DOD Department of Defense HUD Department of Housing and Urban Development DOE Department of Energy IG Inspector General DOL Department of Labor INTOSAI International Organization of Supreme EAGLE Electronic Assistance Guide for Leading Audit Institutions Engagements IRS Internal Revenue Service FAA Federal Aviation Administration IT information technology FASAB Federal Accounting Standards Advisory Board JFMIP Joint Financial Management Improvement Program FBI Federal Bureau of Investigation NASA National Aeronautics and Space FDA Food and Drug Administration Administration FECA Federal Employees’ Compensation Act NATO North Atlantic Treaty Organization FEGLIP Federal Employees Group Life Insurance NED New Engagement Database FEHPB Federal Employees Health Benefit NIH National Institutes of Health Program OMB Office of Management and Budget FEMA Federal Emergency Management Agency OPM Office of Personnel Management FERS Federal Employees Retirement System PCIE President’s Council on Integrity and Effi- FFMIA Federal Financial Management Improve- ciency ment Act (Improvement Act) PWBA Pension and Welfare Benefits FHA Federal Housing Administration Administration FICA Federal Insurance Contributions Act QRM Quality and Risk Management 156 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 APPENDIX 5 R&D research and development USAID United States Agency for International Development SBA Small Business Administration U.S.C. United States Code SEC Securities and Exchange Commission USEC U.S. Enrichment Corporation SFFAS Statement of Federal Financial Accounting Standards VA Department of Veterans Affairs SGA substantial gainful activity VERA Veterans Equitable Resource Allocation SSA Social Security Administration Y2K Year 2000 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 157 Image Sources This section contains credit and copyright information for images and graphics in this product, as appropriate, when that information was not listed adjacent to the image or graphic where presented. Front cover: GAO (flag), Digital Stock (Capitol), Library of Congress’s Historic Ameri- can Engineering Record by Jet Lowe (Statue of Liberty). Inside front cover: U.S. National Archives and Records Administration (Bill of Rights, Constitution, and Declaration of Independence documents), GAO (Capitol, flag). Pages vi & vii (left to right): © 1996 Stock Photography Online (classroom); GAO (password screen); © 1999 Getty Images, Inc. (vaccination); GAO (security scan); Amtrak (Acela train); GAO (security gate, nest egg); © 1999 Getty Images, Inc. (vot- ers); © 1999 PhotoDisc, Inc. (powerlines); Dept. of Defense (missile, soldier). Pages vi & vii (background images): GAO (flag, Capitol); © 1999 Corel Corp. All rights reserved. (Statue of Liberty). Page 1: GAO. Pages 19, 51, & 109: DOD (border patrol); HUD (housing development); Amtrak (Acela train); USDA (food inspection); SSA (senior citizens); SSA (man in wheelchair); © 1999 Getty Images, Inc. (vaccination); GAO (collage layout). Pages 22, 57, & 123: DOD (computer operator, gasmask, fighter plane); Nova Devel- opment Corp. (globe); DOD (firing range); Nova Development Corp. (biometrics); DOD (satellite, missile); GAO (collage layout). Pages 25, 63 & 133: Library of Congress (Statue of Liberty); GAO (currency, columns, Capitol). Pages 28, 69 & 143: GAO (GAO headquarters, flag, Capitol, eagle). Pages 10, 16, 30, 33, 42, 46, 73, 85, 86, 86, & 93: Library of Congress (Statue of Lib- erty); GAO (flag, Capitol). Inside back cover: GAO (Capitol; flag). 158 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2002 ActualInsideBack.fm Page 1 Tuesday, January 21, 2003 3:08 PM www.gao.gov This report and a compact highlights version of it are available through our Web site at www.gao.gov/sp.html. Also linked to that page are our strategic plan and our past performance and accountability publications. Other Web pages of possible interest Reports and testimonies: Download GAO’s most www.gao.gov/audit.htm recent products or search extensive archive of past products to download those of interest Legal products: Download legal decisions and www.gao.gov/legal.htm opinions about appropriations, bid protests, and major federal agency rules E-mail alerts: Get automatic updates on new www.gao.gov/subtest/subscribe.html GAO products For the Press: Check out the Reporter’s Guide to www.gao.gov/pressmain.html GAO and other resources for the media Careers at GAO: Review current job openings, www.gao.gov/jobopp.htm apply on line, learn about GAO’s teams and offices FraudNet: Report allegations of fraud, waste, www.gao.gov/fraudnet.htm abuse, or mismanagement of federal funds ACCOUNTABILITY INTEGRITY RELIABILITY Source: GAO. www.gao.gov/cgi-bin/g etrpt?rptno=GAO-03-305sp a
GAO Performance and Accountability Report, 2002
Published by the Government Accountability Office on 2003-01-31.
Below is a raw (and likely hideous) rendition of the original report. (PDF)