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 H I G H L I G H T S Fiscal 2002 a actual_highlights_inside_front.fm Page 1 Wednesday, January 22, 2003 12:04 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 We set high standards for ourselves We at GAO want our work to be federal programs and operations to in the conduct of GAO’s work. Our viewed by the Congress and the ensure accountability to the agency takes a professional, American public as reliable. We American people. GAO’s analysts, objective, fact-based, nonpartisan, produce high-quality reports, auditors, lawyers, economists, nonideological, fair, and balanced testimony, briefings, legal opinions, information technology specialists, approach to all activities. Integrity is and other products and services that investigators, and other the foundation of reputation, and are timely, accurate, useful, clear, multidisciplinary professionals seek the GAO approach to work ensures and candid. to enhance the economy, efficiency, both. effectiveness, and credibility of the federal government both in fact and in the eyes of the American people. Source: NARA and GAO. P&AHighlights.book Page 1 Thursday, January 30, 2003 10:54 AM 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 (GPRA), 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 independent auditors on our financial statements for the 16th consecutive year. I am confident that the financial information and the data measuring GAO’s performance contained in this report are complete and reliable. The year 2002 was marked by certain new and unprecedented challenges for the federal government. In the aftermath of the September 11, 2001, terrorist attacks and the delivery of anthrax spores through the mail, securing the safety of Ameri- cans at home and abroad became the foremost national priority. 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 over- see financial markets. The troubles experienced at Enron and other corporations and the related conduct of auditors and vari- ous other parties had far reaching effects. The threat of terrorism and the damage done to Americans’ eco- nomic 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 demo- graphics, 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 uninsured, the vulnerability of the government’s computer systems to sab- otage, the requirements of the armed forces in the face of new threats to national security—these and other challenges contin- ued to engage the attention of the Congress and therefore helped define the year’s priorities at GAO. GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 1 P&AHighlights.book Page 2 Thursday, January 30, 2003 10:54 AM As a key source of objective information and analysis, GAO played a crucial role in supporting congressional decision mak- ing. 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 cre- ated the Public Company Accounting Oversight Board as well as new rules to strengthen corporate governance and ensure audi- tor 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 pro- gram, reducing the risks associated with agriculture loan pro- grams, 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 finan- cial 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 emer- gency 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 weak- nesses at American seaports, the nature and growing cost of identity theft, weaknesses in export controls over sophisticated weapons technologies, inadequacies in nursing home care, and shortages of children’s vaccines. The more the nation’s leaders 2 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 3 Thursday, January 30, 2003 10:54 AM in the public, nonprofit, and private sectors know about these growing challenges, the sooner they will be able to craft effec- tive 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 con- gressional requests from four Senate Committee Chairs and Sub- committee 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 develop- ment of the President’s proposed National Energy Policy. Start- ing 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, such as the dates, locations, subjects, and attendees involved in the group’s meetings with external par- ties. 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 pro- vided. 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 standing to enforce this agency’s access rights in court. In his ruling, the judge stated that the issues involved and the nature of the con- gressional 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 implica- GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 3 P&AHighlights.book Page 4 Thursday, January 30, 2003 10:54 AM tions. 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. Strategic planning, organizational alignment, performance management, financial management, 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 government. 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 significant progress in improv- ing 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 headquar- ters that commem- orates another quality of the orga- nization and its people: a readiness to contribute in 4 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 5 Thursday, January 30, 2003 10:54 AM whatever way may be needed to support our country, the Con- gress, 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 telecommunications, computer, and other ser- vices 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 important 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 country required and an unwavering resolve to continue their work. Knowing this organization 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 taxpay- ers receive an excellent return on their investment in GAO. David M. Walker Comptroller General of the United States GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 5 P&AHighlights.book Page 6 Thursday, January 30, 2003 10:54 AM 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 P&AHighlights.book Page 7 Thursday, January 30, 2003 10:54 AM and the American people by helping to — ■ Identify security risks at ports, airports, and 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 P&AHighlights.book Page 8 Thursday, January 30, 2003 10:54 AM Introduction The U.S. General Accounting Office is an To accomplish our mission, we rely on a independent, nonpartisan, professional workforce of highly trained professionals services agency in the legislative branch who hold degrees in many academic dis- that is commonly regarded as the audit, ciplines, including accounting, law, engi- evaluation, and investigative arm of the neering, public and business Congress. Created in 1921 as a result of administration, economics, computer the Budget and Accounting Act, GAO’s science, and the social and physical sci- “watchdog” role has evolved over the ences. They are arrayed in 13 research, decades as the Congress expanded our audit, and evaluation teams and one tem- statutory authority and called on us with porary or “virtual” team on national pre- increasing frequency for support in car- paredness. These teams are backed by rying out its legislative and oversight staff offices and mission support units. responsibilities. About three-quarters of our approxi- mately 3,200 employees are based at our Today, we examine the full breadth and headquarters in Washington, D.C.; the scope of federal activities and programs, rest are deployed in 11 field offices. publish thousands of reports and other documents annually, and provide a num- On the pages that follow, we summarize ber of related services intended to aid our performance for fiscal 2002. We also decision makers and the general public present condensed financial statements alike. We also study national and global and the independent auditor’s opinion trends to anticipate their implications for on them. If you would like additional public policy. By making recommenda- information, please see the full-length tions to improve the accountability, version of our performance and account- operations, and services of government ability report at www.gao.gov/sp.html. agencies, GAO contributes not only to Our performance plan for fiscal 2004 the increased effectiveness of federal will be available through that same page spending, but also to the enhancement as soon as the budget process permits. of the taxpayers’ trust and confidence in their government. 8 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 9 Thursday, January 30, 2003 10:54 AM GAO’s Performance Fiscal 2002 was a year of challenges, not We were, for instance, asked to assist just for GAO but also for the Congress with the deliberations over the Depart- and the nation GAO serves. The nation’s ment of Homeland Security’s formation vulnerabilities were exposed in a series by looking into questions involving flexi- of crises—America’s vulnerability to bilities for managing human capital, sophisticated terrorist networks,Amer- information sharing, management, ica’s vulnerability to bioterrorism waged acquisition, budget and program transfer through mechanisms as mundane as the authorities; and lessons available from daily mail, and America’s vulnerability to other reorganizations in the public and corporate misconduct capable of wiping private sectors. Teams with different out jobs, pensions, and investments vir- specialties from across GAO collabo- tually overnight. rated on that effort and also pursued spe- cific aspects of national preparedness. As the Congress’s priorities evolved to For example, building on an extensive meet these crises, GAO’s challenge was body of completed work, we provided to respond quickly and effectively to our important information to the Congress congressional clients’ changing needs. as it drafted the Aviation and Transporta- Under our original strategic plan, pub- tion Security Act, while providing con- lished in spring 2000, we had already tinuing assistance with information on streamlined and realigned GAO’s struc- aviation, port, and transit security. ture and resources to better serve the Congress in its legislative, oversight, and Building on our previous work on the investigative roles. The new human cap- outbreak of West Nile virus and our ital initiatives we had begun, including examination of state and local efforts to recruiting, hiring, and professional meet the challenges all epidemics development, equipped us to operate in pose—those of detection and treat- a constantly changing knowledge envi- ment—we aided the Congress’s decision ronment. The steps that we took to making about how to equip and orga- enhance our information technology nize the Department of Homeland Secu- capabilities served to increase our pro- rity to prepare for and respond to ductivity, consistency, and responsive- bioterrorism. ness. And with work already under way across a spectrum of critical policy and We were also deeply involved in con- performance issues, we had a head start gressional efforts to address terrorism toward meeting the Congress’s needs in insurance issues—raising alternative a year of unexpected and often tumultu- strategies and suggesting guiding princi- ous events. ples based on past efforts to assist indus- tries and firms in times of crisis, such as GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 9 P&AHighlights.book Page 10 Thursday, January 30, 2003 10:54 AM GAO’S PERFORMANCE the savings and loan industry and, more number of systemic issues, including recently, the aviation industry. concerns related to employee pension and savings plans. And we As we gathered information and con- alerted the Congress to weaknesses ducted analyses for the Congress, devel- that may exist in the legal protections oped recommendations for for employee pensions. We improvements, and detailed the poten- highlighted the ways in which tial ramifications of policies to address employers’ stock investment the national problems the Congress was decisions can increase the risks to confronting, we continued work on the which employees’ pension plans are issues that the Congress had faced exposed and recommended before homeland security gripped the improvements to the information nation’s attention. Among these was a employees must receive. We also wide range of issues that also directly issued a guide for Members of affect the lives of Americans: Congress, their staffs, and the public called Answers to Key Questions ■ We, for instance, helped policymakers about Private Pension Plans probe the issues behind the shortages (www.gao.gov/cgi-bin/getrpt?rptno= in the supplies of vaccines for GAO-02-745sp), which explains in childhood illnesses, such as measles, easy-to-understand terms the mumps, rubella, and tetanus, concepts and rules that last year clarifying the variety of contributing became sharply relevant to the future factors and exploring the key economic security of millions of questions, such as how more Americans. manufacturing and competition can ■ Our work on the elections process be encouraged, how adequate contributed to reform legislation oversight can be provided, and how drafted in response to the voting stockpiles can be amassed. problems that came to national ■ Our work also helped policymakers— prominence in the November 2000 and the public—understand private presidential election. A series of our pension issues in the wake of the reports disclosed major challenges Enron bankruptcy and other involving the people, processes, and corporate failures, including the technology used at each stage of the questions they raised for workers election process—registering voters, nationwide. For instance, in early absentee and early voting, preparing 2002, the Comptroller General for and conducting election day convened a forum on corporate activities, and tabulating votes in the governance, transparency, and 10,000 local election jurisdictions accountability that highlighted a nationwide. The legislation passed by 10 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 11 Thursday, January 30, 2003 10:54 AM GAO’S PERFORMANCE 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 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 11 P&AHighlights.book Page 12 Thursday, January 30, 2003 10:54 AM GAO’S PERFORMANCE the Congress addresses federal subsidies for voting machinery, standards for the equipment, improved voter registration rolls, and improved access for voters with disabilities. By year’s end, we had testified 216 times before the Congress, sometimes on as lit- tle as 24 hours’ notice, on a range of issues, including those listed on the next page. We had filled hundreds of urgent requests for information. We had devel- oped 1,950 recommendations for improving the government’s operations, including, for example, those we made to the Secretary of State calling for the development of a governmentwide plan to help other countries combat nuclear smuggling and those we made to the Chairman of the Federal Energy Regula- tory Commission calling for his agency to develop an action plan for overseeing competitive energy markets. We also had continued to track the recommenda- tions we had made in past years, check- ing to see that they had been implemented and, if not, whether we needed to do follow-up work on prob- lem areas. We found, in fact, that 79 per- cent of the recommendations we had made in fiscal 1998 had been imple- mented, a significant step when the work we have done for the Congress becomes a catalyst for creating tangible benefits for the American people. 12 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 13 Thursday, January 30, 2003 10:54 AM ISSUES ON WHICH GAO TESTIFIED 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 ranges Federal budget issues Federal property management Export controls Federal building security reform Food aid Federal financial management Food safety Foreign language needs reform Highway trust fund Gulf War illnesses Federal rulemaking requirements Housing Information security aspects Freedom to Manage Act HUD management reform of homeland security Human capital strategy Identity theft International trade Illegal tax schemes and scams Immigration enforcement Nuclear smuggling Intergovernment aspects of Organizational aspects of homeland security Indian tribal recognition homeland security IRS modernization Intercity passenger rail SEC’s human capital Medicaid financial management Long-term care challenges NASA’s management challenges Medicare payments Strategic seaport protection President’s Management Agenda Nuclear waste storage Terrorism insurance Purchase card controls Nursing homes U.S. overseas presence Securing America’s borders Postal Service challenges Weapons of mass destruction U.S. government’s financial Public health aspects of 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. P&AHighlights.book Page 14 Thursday, January 30, 2003 10:54 AM GAO’S PERFORMANCE In fiscal 2002, we recorded 906 instances in which our work led to Other Benefits improvements in government opera- Number of actions tions or programs. For example, by act- 1000 906 900 ing on GAO’s findings or 788 799 770 800 recommendations, the federal govern- 700 607 600 ment has taken important steps toward 500 enhancing aviation safety, improving 400 300 pediatric drug labeling based on 200 research, better targeting of funds to 100 0 high-poverty school districts, greater 1999 2000 2001 2002 2002 accountability in the federal acquisition Actual Target Actual process, and more effective delivery of Source: GAO. disaster recovery assistance to other In another 115 instances, federal action nations, among other achievements. on GAO’s findings or recommendations produced financial benefits for the American people: a total of $37.7 billion Financial Benefits was achieved by making government Dollars in billions services more efficient, improving the 40 37.7 budgeting and spending of tax dollars, 30 30.0 and strengthening the management of 26.4 23.2 federal resources. Increased funding for 20.1 20 improved safeguards against fraud and abuse helped the Medicare program to 10 better control improper payments of $8.1 billion over 2 years, for instance, 0 1999 2000 2001 2002 2002 and better policies and controls reduced Actual Target Actual losses from farm loan programs by about Source: GAO. $4.8 billion across 5 years. Altogether, Note: Changes GAO made to its methodology GAO’s fiscal 2002 financial benefits for tabulating financial benefits caused the fiscal translate into a financial return on invest- 2002 results to increase about 11 percent. See the full-length version of this report at ment of $88 for every dollar budgeted www.gao.gov/sp.html for details. for GAO. Of our seven agencywide annual perfor- mance targets (see the table), only one was not met: timeliness. While we pro- vided 96 percent of our products to their congressional requesters by the 14 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 15 Thursday, January 30, 2003 10:54 AM GAO’S PERFORMANCE date promised, we did not hit this mea- ify aspects of our interactions with the sure’s target of 98 percent on-time deliv- agencies we evaluate and audit and, ery. The year’s turbulent events played a thus, expedite our work in ways that part in our missing the target, causing us could improve the timeliness of our final to delay work in progress when products. We also believe that our con- higher-priority requests came in from tinuing investments in human capital the Congress. We know we will con- and information technology will tinue to face factors beyond our control improve our timeliness while allowing as we strive to improve our performance us to maintain our high level of produc- in this area. But we believe the agency tivity and performance overall. protocols we are piloting will help clar- 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% aChanges GAO made to its methodology for tabulating financial benefits caused the fiscal 2002 results to increase about 11 percent. See the full-length version of this report at www.gao.gov/sp.html for details. bFour targets published in GAO’s performance plan for fiscal 2003 were subsequently revised based on more current information. Two were raised; two were lowered. The original targets were financial benefits, $35 billion; other benefits, 785; recommendations made, 1,200; and testimonies, 210. N/A = not applicable GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 15 P&AHighlights.book Page 16 Thursday, January 30, 2003 10:54 AM GAO’S PERFORMANCE At the beginning of fiscal 2002, as we only way a knowledge-based, multidisci- prepared an updated draft of our strate- plinary professional services organiza- gic plan for congressional comment— tion such as GAO can be effective is to extending the plan to fiscal 2007 and fac- be flexible and capable of responding toring in developments that had quickly to change. As a result, we have occurred since we first issued it in fiscal sought more cooperative, partnerial 2000—it was clear that the world had approaches that maximize the skills and changed considerably. When the origi- expertise of people working together nal plan was issued, the nation had been toward the same ends. enjoying a period of peace and prosper- ity, with large budget surpluses pro- In later sections of this booklet, we high- jected into the future. When the light our performance under each of our updated plan went onto the Web in strategic goals and the strategies and 2002, the nation was at war against ter- challenges involved in achieving those rorism, both within and outside its bor- goals—including the management chal- ders. The economic outlook had lenges and external factors we face. We become difficult to predict. And the fed- also summarize how we used our eral government faced the return of seri- resources in fiscal 2002, including our ous, long-range budget deficits and the costs by strategic goal. burden they impose on the nation’s future prosperity. The updated plan carried forward the four strategic goals we had already estab- lished as the organizing principles for a body of work that is as wide-ranging as the interests and concerns of the Con- gress itself. While these strategic goals, shown on page 18 with their strategic objectives, help us plan our work and assess our progress in fulfilling our mis- sion to serve the Congress and the nation, they are not separate endeav- ors. We developed them with the inten- tion of moving away from “siloed”—or compartmentalized—approaches to doing business on a matrixed basis. As the challenges facing policymakers grow more complex and interdependent, the 16 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 17 Thursday, January 30, 2003 10:54 AM GAO’S PERFORMANCE Helping the Government Improve Performance and Accountability Every 2 years, with the start of each new Congress, GAO issues an update of the high-risk series, which identifies and reports on federal programs and operations 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 billions of dollars, dramatically improve service to the American public, strengthen public confidence and trust in the performance and accountability of the national government, and ensure the ability of government to deliver on its promises. Since 1990, the Congress’s and federal agencies’ commitment to resolving serious, long-standing high-risk problems has paid off—the root causes of half the 14 high-risk areas on our original list have been addressed. This sustained commitment continues to produce results. In 2001, GAO identi- fied 23 high-risk areas. Since then, demonstrable progress has been made in virtually all of them. GAO has increasingly used the high-risk designation to draw attention to the challenges faced by government programs and operations in need of broad-based transformation. Three of the new high-risk areas on the 2003 list fall into that category, while a fourth new area involves fraud, waste, abuse, and mismanagement, the type of problem GAO continues to identify. To learn more about these new high-risk areas, to review the full list of high-risk areas, or to download the update in full, go to www.gao.gov/pas/2003/. GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 17 P&AHighlights.book Page 18 Thursday, January 30, 2003 10:54 AM 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 Address Current and Emerging Challenges to the Well-Being and Preparedness 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 of serving the public government 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 HIGHLIGHTS 2002 P&AHighlights.book Page 19 Thursday, January 30, 2003 10:54 AM Goal 1 Goal 1’s Cost: 39% of GAO’s Total $178.3 Million 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. P&AHighlights.book Page 20 Thursday, January 30, 2003 10:54 AM Goal 2 Goal 2’s Cost: 24% of GAO’s Total $110.5 Million 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 estimates, $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. P&AHighlights.book Page 21 Thursday, January 30, 2003 10:54 AM Goal 3 Goal 3’s Cost: $141 Million 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. P&AHighlights.book Page 22 Thursday, January 30, 2003 10:54 AM Goal 4 Goal 4’s Cost: $25.3 Million 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. P&AHighlights.book Page 23 Thursday, January 30, 2003 10:54 AM Strategies and Challenges As the audit, evaluation, and investiga- ■ conducting constructive engagements tive arm of the Congress, GAO has a in which we work proactively with unique role to play. Within the legisla- agencies, when appropriate, to tive branch, we are the only agency with provide advice that may assist their staff in the field, conducting perfor- efforts toward positive results; mance analyses and financial account- ■ providing legal opinions that ing among other congressionally determine whether agencies are in requested activities, and reporting our compliance with applicable laws and findings not only to our congressional regulations; clients but also to the American public. While we work with the Inspectors Gen- ■ conducting policy analyses to assess eral at every federal agency, our engage- needed actions and the implications ments differ from theirs in that ours are of proposed actions; and often more strategic and longer-range in ■ providing additional assistance to the nature, governmentwide in scope, and Congress in support of its oversight initiated by requests from the Congress. and decision-making responsibilities. Because achieving our strategic goals Achieving our goals and objectives rests, and objectives also requires strategies for for the most part, on providing profes- coordinating with other organizations sional, fact-based, balanced, nonpartisan with similar or complementary missions, information.We develop and present we this information in a number of ways to support the Congress in carrying out its ■ use advisory panels and other bodies constitutional responsibilities, including to inform GAO’s strategic and annual the following: work planning, and ■ initiate and support collaborative ■ evaluating federal policies and the performance of agencies; national and international audit, technical assistance, and other ■ overseeing government operations knowledge-sharing efforts. through financial and other management audits to determine Those two types of strategic working whether public funds are spent relationships allow us to extend our efficiently, effectively, and in institutional knowledge and experience accordance with applicable laws; and, in turn, to improve our service to the Congress and the American people. ■ investigating whether illegal or Our External Liaison office takes the lead improper activities are occurring; and provides strategic focus for the work ■ analyzing the financing for with crosscutting organizations, while government activities; our research, audit, and evaluation teams GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 23 P&AHighlights.book Page 24 Thursday, January 30, 2003 10:54 AM STRATEGIES AND CHALLENGES lead the work with most of the issue-spe- Joint Financial Management Improve- cific organizations. ment Program, who are actively foster- ing financial management reform Among these efforts is our work with governmentwide. the International Organization of Supreme Audit Institutions (INTOSAI)— Addressing Management the professional organization of the Challenges That Could Affect national audit offices of 184 countries. Our Performance During fiscal 2002, GAO led a 10-nation GAO has three management challenges task force in developing a strategic plan- that may affect our performance.Two of ning framework for the organization that the challenges—human capital and phys- was approved in October 2002. In fiscal ical security—were identified in our pre- 2003, the task force will expand the vious performance and accountability framework into a comprehensive strate- report.We have made progress in gic plan. The Comptroller General also addressing each of these challenges, but leads the Global Working Group, in we still have work to do.The third chal- which the heads of GAO’s counterparts lenge, information security, will replace from 15 countries discuss mutual chal- our previous challenge of information lenges, share experiences, and identify technology.With the establishment of a opportunities for collaboration with one stable and reliable computer network another. GAO also chairs INTOSAI’s and institutionalized standard routine accounting standards committee and is updates of network and desktop operat- an active member of the auditing stan- ing systems and equipment, we will dards, internal control standards, and have completed our work on the origi- public debt committees. nal management challenge. However, independent reviews of our information Domestically, the Comptroller General security program indicate a need for fur- chairs the National Intergovernmental ther improvement. Audit Forum, and through 10 regional intergovernmental audit forums, GAO Given GAO’s role as a key provider of consults regularly with federal inspec- information and analyses to the Con- tors general and state and local audi- gress, maintaining the right mix of tech- tors. In addition, through the Domestic nical knowledge and expertise as well as Working Group, the Comptroller Gen- general analytical skills is vital to achiev- eral and the heads of 18 federal, state, ing our mission.We spend about 80 per- and local audit organizations exchange cent of our resources on our people, but information and seek opportunities to without excellent human capital man- collaborate. The Comptroller General is agement, we could still run the risk of also one of the four principals of the being unable to deliver what the Con- 24 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 25 Thursday, January 30, 2003 10:54 AM STRATEGIES AND CHALLENGES gress and the nation expect from us. In advantage of technology.We will also 1999, after an extended hiring freeze, ensure that our staff have the needed GAO’s workforce was sparse at the entry skills and training to function in this level, and we faced succession planning reengineered environment. In addition, issues as a large number of our senior we are developing a competency-based managers and analysts became eligible performance system for our mission sup- to retire.The development and training port employees. of our senior executives had been cur- tailed for funding reasons.And at the During the 108th Congress, we will same time, more of our staff needed work with our appropriations and over- enhanced technical skills if they were to sight committees to achieve enactment assist the Congress effectively. In all of legislation to support our continuing those respects, GAO was little different efforts to be a leader in federal human from the government as a whole. In the capital management and a world-class years since, we have addressed these organization. To build on the human issues in a variety of ways and are con- capital flexibilities provided by the Con- tinuing to do so. For example, we devel- gress in 2000, we will identify opportu- oped a recruitment program that nities for additional flexibilities that allowed us to hire 430 permanent staff would, among other things, facilitate during fiscal 2002, revamped and mod- GAO’s continuing efforts to develop a ernized the performance appraisal sys- more performance-based compensation tem for analysts and attorneys, and system, realign our workforce, and pro- implemented a succession-planning pro- vide greater opportunities for staff to gram. phase into retirement. Over the next several years, we need to In the aftermath of the September 11 ter- continue to address skill gaps, maximize rorist attacks and subsequent anthrax staff productivity and effectiveness, and incidents, our ability to provide a safe reengineer our human capital processes and secure workplace emerged as a chal- to make them more user-friendly.We lenge for our agency. Protecting our peo- plan to address skill gaps by further ple and our assets is critical to our ability refining our recruitment and hiring strat- to carry out our mission.We devoted egies to target gaps identified through additional resources to this area and our workforce planning efforts, while implemented measures such as reinforc- taking into account the significant per- ing vehicle and pedestrian entry points, centage of our workforce eligible for installing an additional x-ray machine, retirement.We will reengineer our adding more security guards, reinforcing human capital systems and practices to windows, and relocating air sources.We increase their efficiency and to take full are in the process of researching and GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 25 P&AHighlights.book Page 26 Thursday, January 30, 2003 10:54 AM STRATEGIES AND CHALLENGES designing other projects to better con- intruders on all our internal servers, trol building access and security around completing the implementation of a the building.We plan to implement secure user authentication process, and these projects over the next several refining the disaster recovery plan we years. developed last year. Ensuring information systems security At GAO, management challenges are and disaster recovery systems that allow identified by the Comptroller General for continuity of operations is a critical and the agency’s senior executives requirement for the agency, particularly through the agency’s strategic planning, in light of the events of September 11 management, and budgeting processes. and the anthrax incidents.The risk is Our progress in addressing the chal- that our information could be compro- lenges is monitored through our annual mised and that we would be unable to performance and accountability process. respond to the needs of the Congress in Under strategic goal 4, we establish per- an emergency. In light of this risk, and in formance goals focused on each of our keeping with our goal of being a model management challenges and track our federal agency, we are implementing an progress in completing the key efforts information security program consistent for those performance goals quarterly. with the requirements in the Govern- The performance goals are assessed and ment Information Security Reform provi- updated each year. sions (commonly referred to as “GISRA”) enacted in the Floyd D. Spence National GAO’s Inspector General reviews man- Defense Authorization Act for Fiscal Year agement’s assessment of the challenges 2001.We have made progress through and the agency’s progress in addressing our efforts to, among other things, them. The memorandum on the Inspec- implement a risk-based, agencywide tor General’s findings is reprinted at the security program; provide security train- end of this report. ing and awareness; and develop and implement an enterprise disaster recov- Mitigating External Factors ery solution. That Could Affect Our Performance However, we need to complete certain Several external factors could affect the key actions to be better able to detect achievement of our performance goals, intruders in our systems, identify our including national and international users, and recover in the event of a disas- developments and the resources we ter.Among our current efforts and plans receive. Limitations imposed on our for these areas are completing the instal- work by other organizations or limita- lation of software that helps us detect tions on the ability of other federal agen- 26 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 27 Thursday, January 30, 2003 10:54 AM STRATEGIES AND CHALLENGES cies to make the improvements we way to meet our 2-year performance recommend are other factors that could goals are contingent on receiving the affect the achievement of our goals. resources we are requesting from the Congress. Once actual funding is As the Congress focuses on unpredict- known, we may adjust our targets and able events—such as the global threat performance goals to ensure that key posed by sophisticated terrorist net- congressional priorities are met. works, international financial crises, or natural disasters—the mix of work we A final external factor is the extent to are asked to undertake may change, which GAO can obtain access to certain diverting our resources from some of types of information. Most notably, our strategic objectives and perfor- recent developments have raised con- mance goals.We can and do mitigate the cerns about whether records access impact of these events on the achieve- challenges are likely to increase in the ment of our goals in various ways: future. First, in December 2002, a dis- trict court dismissed a lawsuit GAO filed ■ We are alert to possibilities that could to obtain information about meetings shift the Congress’s and, therefore, held with private-sector individuals by our priorities. the Vice President, in his capacity as ■ We continue to identify in our chairman of the National Energy Policy products and meetings with the Development Group, and the group’s Congress conditions that could trigger members and staff. The court did not new priorities. address the merits of the case, but rather stated that the Comptroller General ■ We quickly redirect our resources, lacked standing in the matter. Second, when appropriate, so that we can the current administration has shown a deal with major changes that do tendency to not readily share certain occur. information with GAO and the Congress ■ We maintain broad-based staff that both have received in the past. expertise so that we can readily address emerging needs. In addition, with concerns about opera- As this report goes to press, the uncer- tional security being unusually high at tainty about our fiscal 2003 funding lev- home and abroad, GAO may have more els was affecting when we will difficulty obtaining information and complete—and, in some cases, begin— reporting on sensitive issues. Histori- initiatives to address our management cally, our auditing and information gath- challenges and other issues. Meeting the ering has been limited whenever the fiscal 2003 performance targets in this intelligence community is involved. Nor report and completing the work under have we had the authority to access or GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 27 P&AHighlights.book Page 28 Thursday, January 30, 2003 10:54 AM STRATEGIES AND CHALLENGES inspect records or other materials held by other countries or, generally, by the multinational institutions that the United States works with to protect its interests. Consequently, our ability to fully assess the progress being made in addressing homeland security issues may be ham- pered, and because some of our reports may be subjected to greater classification reviews than in the past, their public dis- semination may be limited. We will work with the Congress to identify both legislative and nonlegislative opportuni- ties for strengthening GAO’s access authority as necessary and appropriate. 28 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 29 Thursday, January 30, 2003 10:54 AM Managing Our Resources GAO’s financial statements for fiscal tively simple picture of a small agency in 2002 received an unqualified opinion the legislative branch that has most of its from an independent auditor. No mate- financial activity focused on the execu- rial weaknesses in internal control were tion of its congressionally approved bud- identified, and the auditor reported sub- get and most of its resources devoted to stantial compliance with the require- the human capital needed for its mission ments in the Federal Financial of supporting the Congress with infor- Management Improvement Act of 1996 mation and analysis. (the Improvement Act) for financial sys- tems. The auditor found no instances of GAO’s budget consists of an annual noncompliance with the laws or regula- appropriation covering salaries and tions in the areas they tested. The state- expenses and revenue from reimburs- ments and their accompanying notes, able audit work and rental income. For along with the auditor’s report, appear fiscal 2002, GAO’s total budgetary later in this report. The table below sum- resources increased by $49.7 million marizes key data. from fiscal 2001. This increase consists primarily of additional current year Compared with the statements of large appropriations to meet continuing pro- and complex agencies in the executive gram requirements and $7.6 million in branch, GAO’s statements present a rela- transfers of budget authority to conduct GAO’s Financial Highlights: Resource Information Dollars in millions Fiscal 2001 Fiscal 2002 Total budgetary resources $392.9 $442.6 Total outlays $387.2 $427.8 Net cost of operations Goal 1: Well-being and financial security of the American people $161.1 $178.3 Goal 2: Changing security threats and challenges of globalization 93.4 110.5 Goal 3: Transforming the federal government’s role 139.5 141.0 Goal 4: Maximizing the value of GAO 20.7 25.3 Less reimbursable services not attributable to goals (1.6) (2.1) Total net cost of operations $413.1 $453.0 Actual full-time equivalents 3,110 3,210 Note: The net cost of operations figures include nonbudgetary items, such as imputed pension and depreciation costs, which are not included in the figures for total budgetary resources or total outlays. GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 29 P&AHighlights.book Page 30 Thursday, January 30, 2003 10:54 AM MANAGING OUR RESOURCES safety and security efforts to respond to the events of September 11. GAO’s total Net Cost of Operations assets were $126.8 million, consisting FY 2002 total $453 million mostly of property and equipment Goal 4 (including the headquarters building, 6% land, and improvements and computer Goal 1 equipment and software) and funds with 39% Goal 3 the Treasury. Our total liabilities of 31% roughly $91.7 million were composed Goal 2 largely of employees’ accrued annual 24% leave, amounts owed to other govern- ment agencies, accounts payable, and Source: GAO. workers’ compensation liability. For fiscal 2003, GAO has requested a budget of $457.8 million to maintain cur- GAO reports net costs by strategic goal rent operations to support the Congress to align our net costs with our strategic as outlined in our strategic plan. This plan. As the figure indicates, our first funding level—which is 6 percent above goal, under which we organize our work our 2002 funding level—would allow us on challenges to the well-being and to support our authorized level of 3,269 financial security of the American peo- full-time-equivalent personnel and ple, accounted for the largest share of includes $4 million to meet nonrecur- the costs. We expect this goal to con- ring requirements to enhance the safety tinue to represent the largest share of and security of GAO’s staff. our costs. The following table provides an over- view of how our budgetary and human capital resources will be allocated among GAO’s four strategic goals. GAO’s Revised Fiscal 2003 Budget Dollars in Full-time Strategic Goal millions equivalent staff Goal 1: Well-being and financial security of the American people $177.6 1,275 Goal 2; Changing security threats and challenges of globalization 119.5 854 Goal 3: Transforming the federal government’s role 141.0 985 Goal 4: Maximizing the value of GAO 19.7 1555 Total $457.8 3,269 30 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 31 Thursday, January 30, 2003 10:54 AM MANAGING OUR RESOURCES Almost 80 percent of GAO’s fiscal 2003 budget will provide for employee com- pensation and benefits.The next largest portion of our budget—about $55 mil- lion—is for contract services supporting both GAO’s mission work and adminis- trative operations, including informa- tion technology, training, security, and building maintenance and operations services. During fiscal 2003, we plan to increase our investments in human capi- tal, information technology and security, and the safety and security of GAO’s peo- ple, facilities, and other assets. GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 31 P&AHighlights.book Page 32 Thursday, January 30, 2003 10:54 AM Overview of Financial Statements GAO recognizes the importance of reporting and compliance with laws and strong financial systems and internal regulations. Consistent with GAO’s eval- controls to ensure our accountability, uation, the auditor found no material integrity, and reliability.To achieve a high internal control weaknesses. level of quality, management maintains a quality control program and seeks GAO’s Audit Advisory Committee assists advice and evaluation from both internal the Comptroller General in overseeing and external sources. the effectiveness of our financial report- ing and audit processes, internal con- GAO is committed to fulfilling the inter- trols over financial operations, and nal control objectives of 31 U.S.C. 3512, processes to ensure compliance with formerly the Federal Managers’ Finan- laws and regulations relevant to GAO’s cial Integrity Act (the Integrity Act) and financial operations.As of September 30, the Federal Financial Management 2002, the committee consisted of Improvement Act of 1996 (the Improve- ment Act). Although GAO is not subject ■ Sheldon S. Cohen (Chairman), a to the acts, we comply voluntarily with certified public accountant and the acts’ requirements. GAO’s manage- practicing attorney in Washington, ment assesses compliance with these D.C., former Commissioner and Chief controls through a series of comprehen- Counsel of the Internal Revenue sive internal reviews, applying the evalu- Service, and Senior Fellow of the ation criteria in the Office of National Academy of Public Management and Budget’s guidance for Administration; implementing the Integrity Act.The ■ Alan B. Levenson, a practicing results of these reviews are discussed attorney in Washington, D.C., and a with GAO’s Audit Advisory Committee, former senior official at the Securities and action is taken to correct deficien- and Exchange Commission; and cies as they are identified. ■ Katherine D. Ortega, a certified public GAO has assessed our internal controls accountant, former Treasurer of the as of September 30, 2002, based on the United States, former Commissioner criteria mentioned above for effective of the Copyright Royalty Tribunal, and internal controls in the federal govern- a former member of the President’s ment. On the basis of this assessment, Advisory Committee on Small and we believe that we have effective inter- Minority Business. nal controls in place, as of September Condensed financial statements for GAO 30, 2002.Additionally, an independent follow. Our detailed statements with auditor found that GAO maintained their accompanying notes appear in the effective internal controls over financial full-length version of this report. Our 32 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 33 Thursday, January 30, 2003 10:54 AM FINANCIAL STATEMENTS financial statements for the fiscal year ended September 30, 2002, were audited by an independent auditor, Cot- ton & Co., LLP, which rendered unquali- fied opinions on our statements and on the effectiveness of our internal controls over financial reporting and compliance with laws and regulations. The auditor also reported that we had substantially complied with the applicable require- ments of the Improvement Act and found no reportable instances of non- compliance with selected provisions of laws and regulations. In the opinion of the auditor, the financial statements are presented fairly in all material respects and are in conformity with generally accepted accounting principles. GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 33 P&AHighlights.book Page 34 Thursday, January 30, 2003 10:54 AM FINANCIAL STATEMENTS U.S. General Accounting Office Condensed Balance Sheet As of September 30, 2002 and 2001 (Dollars in thousands) 2002 2001 Assets Intragovernmental assets including funds with the U.S. Treasury $62,442 $56,736 Property and equipment, net 63,888 66,318 Other 486 401 $126,816 $123,455 Total Assets Liabilities Intragovernmental liabilities $16,845 $17,062 Accounts payable and salaries and benefits 23,227 28,636 Accrued annual leave and other 29,357 27,836 Workers' compensation 12,331 7,954 Capital leases 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 $126,816 $123,455 Total Liabilities and Net Position 34 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 35 Thursday, January 30, 2003 10:54 AM FINANCIAL STATEMENTS U.S. General Accounting Office Condensed 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 $178,381 $161,112 Goal 2: Changing security threats/challenges of global Interdependence 110,537 93,440 Goal 3: Transforming the federal government's role 140,967 139,459 Goal 4: Maximize the value of GAO 25,278 20,695 Less: reimbursable services not attributable to goals (2,128) (1,652) $453,035 $413,054 Net Cost of Operations GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 35 P&AHighlights.book Page 36 Thursday, January 30, 2003 10:54 AM FINANCIAL STATEMENTS U.S. General Accounting Office Condensed 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 Appropriations used 419,046 (419,046) 387,148 (387,148) Other - 5,869 - 871 Other Financing Sources Employee benefit costs imputed to GAO 21,007 - 19,681 - Other 2,796 - 2,813 - Total Financing Sources 442,849 8,667 409,642 (2,257) Net Cost of Operations (453,035) - (413,054) - Balances, End of Fiscal $5,163 $29,925 $15,349 $21,258 Year 36 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 37 Thursday, January 30, 2003 10:54 AM FINANCIAL STATEMENTS U.S. General Accounting Office Condensed Statement of Budgetary Resources For Fiscal Years Ended September 30, 2002 and 2001 (Dollars in thousands) Budgetary Resources 2002 2001 Current year appropriations $421,844 $384,020 Transfers of budget authority 7,600 983 Unobligated appropriations, beginning of fiscal year 7,512 4,264 Reimbursements 5,687 3,676 $442,643 $392,943 Total Budgetary Resources 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 $442,643 $392,943 Total Status of Budgetary Resources 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) $427,828 $387,200 Total Outlays Outlays Disbursements $427,828 $387,200 Collections (5,687) (3,676) $422,141 $383,524 Net Outlays GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 37 P&AHighlights.book Page 38 Thursday, January 30, 2003 10:54 AM FINANCIAL STATEMENTS U.S. General Accounting Office Condensed Statement of Financing For Fiscal Years Ended September 30, 2002 and 2001 (Dollars in thousands) Resources Used to Finance Activities 2002 2001 Budgetary Resources Obligated Obligations incurred $426,714 $385,319 Less: Reimbursements (5,687) (3,676) Net Obligations 421,027 381,643 Other Resources Employee benefit costs imputed to GAO 21,007 19,681 Other 2,796 2,813 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 6,213 298 Costs That Do Not Require Resources Depreciation 17,152 17,097 $453,035 $413,054 Net Cost of Operations 38 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 39 Thursday, January 30, 2003 10:54 AM 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 We 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. In our report dated December 11, 2002, we stated that we found: • The 2002 and 2001 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 as of September 30, 2002, • 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 tested. In our opinion, the information set forth in the accompanying condensed financial statements is fairly presented, in all material respects, in relation to the financial statements from which it has been derived. We performed our audit and examinations in accordance with Government Auditing Standards, U.S. generally accepted auditing standards, the American Institute of Certified Public Accountants’ attestation standards, and Office of Management and Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal Financial Statements. With respect to our opinion on internal control, misstatements, losses, or noncompliance may nevertheless occur and not be detected because of inherent limitations in internal control. 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. With respect to our opinion on GAO’s financial management systems’ compliance with FFMIA, 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. Our conclusion on compliance with laws and regulations 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. COTTON & COMPANY LLP Charles Hayward, CPA Alexandria, Virginia December 11, 2002 established 1981 333 NORTH FAIRFAX STREET ♦ SUITE 401♦ ALEXANDRIA, VIRGINIA 22314 703/836/6701♦ FAX 703/836/0941♦ WWW.COTTONCPA.COM ♦ DCOTTON@COTTONCPA.COM GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 39 P&AHighlights.book Page 40 Thursday, January 30, 2003 10:54 AM 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. 40 GAO PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS 2002 P&AHighlights.book Page 41 Thursday, January 30, 2003 10:54 AM 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 Con- gress’s Historic American Engineering Record by Jet Lowe (Statue of Liberty). Inside front cover: U.S. National Archives and Records Adminis- tration (Bill of Rights, Constitution, Declaration of Independence documents); GAO (Capitol, flag). Pages 6 & 7 (background images): GAO (flag, Capitol); © 1999 Corel Corp. 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GAO Performance and Accountability Highlights: Fiscal 2002
Published by the Government Accountability Office on 2003-01-01.
Below is a raw (and likely hideous) rendition of the original report. (PDF)