oversight

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)

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
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          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
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                                                                                                                                        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
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          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.

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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

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                                                                                                   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
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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.




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                                                                                                   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

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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
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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
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www.gao.gov/cgi-bin/g etrpt?rptno=GAO-03-305sp




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