GAO Performance and Accountability Report, 2003

Published by the Government Accountability Office on 2003-11-14.

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


                       Performance and
                       REPORT        Fiscal 2003

                         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          We at GAO want our work to
          federal programs and               ourselves in the conduct of        be viewed by the Congress
          operations to ensure               GAO’s work. Our agency takes       and the American public as
          accountability to the American     a professional, objective, fact-   reliable. We produce high-
          people. GAO’s analysts,            based, nonpartisan,                quality reports, testimonies,
          auditors, lawyers, economists,     nonideological, fair, and          briefings, legal opinions, and
          information technology             balanced approach to all           other products and services
          specialists, investigators, and    activities. Integrity is the       that are timely, accurate,
          other multidisciplinary            foundation of reputation, and      useful, clear, and candid.
          professionals seek to enhance      GAO’s approach is designed to
          the economy, efficiency,           ensure both.
          effectiveness, and credibility
          of the federal government both
          in fact and in the eyes of the
          American people.

Source: See Image Sources.
  From the Comptroller General

                       November 14, 2003

                       Having just ended my fifth year as Comptroller General of the United States and head
                       of the U.S. General Accounting Office (GAO), it is a pleasure to present our fiscal
                       2003 performance and accountability report. With this report, we attempt to convey
                       the outstanding achievements of all GAO employees as they work to serve the Con-
                       gress and the American people. GAO is in the performance and accountability busi-
                                                          ness; our work covers every area the federal
                                                          government is involved in, or is thinking about
                                                          getting involved in, anywhere in the world. Simply
                                                          put, we try to help the federal government work
                                                          better and for the benefit of all our nation’s citi-
                                                          zens. I believe that this report demonstrates our
                                                          many contributions to that objective in fiscal 2003,
                                                          and I am confident that the performance data and
                                                          financial information in this report are complete
                                                          and reliable, as noted in my statement of assur-
                                                          ance that appears on page iv of this report. Impor-
                                                          tantly, we met or exceeded all but one of our
                                                          seven key performance measures, and we
                                                          received a clean opinion from independent audi-
                                                          tors on our financial statements. While the value
                                                          of many of our accomplishments this past year
                                                          could not be measured in dollars, many could. In
                                                          that regard, we helped the Congress and govern-
                                                          ment leaders achieve a total of $35.4 billion in
                                                          financial benefits—a $78 return on every dollar
                                                          that we spent.

                       Looking over the past year, our work addressed many of the difficult issues that con-
                       front the nation, including diverse and diffuse security threats, changing demographic
                       trends, increasing interdependency, rapidly evolving science and technology
                       changes, a variety of quality-of-life issues, as well as government transformation chal-
                       lenges, and increasing federal budgetary constraints. Perhaps the foremost challenge
                       government decisionmakers faced this year was to ensure the security of the Ameri-
                       can people. By providing professional, objective, nonpartisan information and

  GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                  i
     analyses, we helped inform the Congress and executive branch agencies on key
     issues such as the challenges involved in creating the Department of Homeland Secu-
     rity, including its mission, make-up, structure, cost, and implementation; and the
     nature and scope of threats confronting the nation’s nuclear weapons facilities, its
     information systems, and all areas of its transportation infrastructure—air, surface,
     and maritime. Among the programs that required additional focus due to changing
     demographic trends were the quality of care in the nation’s nursing homes and the
     risks to the government’s single-employer pension insurance program. We also were
     actively engaged in various efforts to transform selected government entities (e.g., the
     United States Postal Service and the Federal Bureau of Investigation) and functions
     (e.g., strategic human capital and real property management). Our work in these and
     other areas covered programs that touch millions of lives and involve billions of

     Finally, the delayed budget deliberations for fiscal 2003 were symptoms of the diffi-
     cult decisions facing the Congress as the nation confronts what appears to be a
     period of recurring budget deficits and long-term fiscal challenges. In January 2003,
     as the new Congress began its session, we issued our latest series of reports that
     identified management challenges and program risks at 23 federal agencies and high-
     lighted actions needed to address these serious problems. Like the previous editions,
     the 2003 reports made clear how vital it is that federal agencies take a strategic
     approach to their missions and ways of doing business. At the same time, we
     updated our reports that identify areas at high risk due to their greater vulnerabilities
     to waste, fraud, abuse, and mismanagement; major challenges associated with their
     economy, efficiency, or effectiveness; or the need for broad-based transformations.

     In these and other areas of our work—some of which are highlighted on page vii—
     the American people benefited this year as federal agencies took a wide range of
     actions based on our analyses and recommendations and as our efforts heightened
     the visibility of issues needing attention. It is important for our nation and its citizens
     not only that these issues are made visible, but also that the nation’s leaders attend to
     them. I feel fortunate and honored that, more often than not, our clients, executive
     branch officials, and others listen to what we have to say and act on our recommen-
     dations. Furthermore, our reports are typically published and available on our Web
     site (www.gao.gov), which keeps us accountable to our clients, the American people,
     and the world at large.

     In addition to having an impact on important national issues, we have taken major
     steps internally to be a model federal agency and world-class professional services
     organization. Of our three management challenges—human capital, physical security,
     and information security—no area is more important to our ability to fulfill our mis-
     sion than how we manage our human capital—our people. In recent years, we have

ii                                          GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                     taken a variety of steps to attract, retain, motivate, and reward a quality and high-per-
                     forming workforce—steps that included revamping our recruiting and hiring pro-
                     grams and creating a state-of-the-art, competency-based performance management
                     system. As this is written, the Congress is poised to grant us further human capital
                     flexibilities that will allow us, among other things, to move to an even more perfor-
                     mance-based compensation system. Our people are truly our most valuable asset.
                     How prudently we manage and invest in them will determine, to a large extent, how
                     well-equipped we will be to serve the Congress and the American people in the
                     years to come.

                     In summary, fiscal 2003 was another successful year for us. I believe that those who
                     read this report will agree that the taxpayers received an excellent return on their
                     investment from GAO.

                     David M. Walker
                     Comptroller General
                     of the United States

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                   iii
The Comptroller General’s Integrity Act Assurance
Statement for Fiscal 2003

          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 U.S. 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 (1) 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 (2) 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 31 U.S.C. 3512 (commonly referred to
          as the Federal Managers’ Financial Integrity Act). This is an accomplishment we set
          for ourselves even though, as part of the legislative branch of the federal govern-
          ment, we are not technically required to do so.

          David M. Walker
          Comptroller General
          of the United States

iv                                              GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
      In fiscal 2003, GAO served the Congress
                and the American people by helping to –

         Identify steps to reduce improper payments and credit card fraud in
          government programs.
         Make sound decisions on funding national defense.
         Restructure government and improve its processes and systems to maximize
          homeland security.
         Assess the risks of major weapon systems acquisitions.
         Prepare the financial markets to continue operations if terrorism recurs.
         Tighten security at nuclear weapons facilities.
         Oversee the multibillion dollar restoration of the Everglades.
         Update and strengthen government auditing standards.
         Estimate the exposure of U.S. troops to chemical plume during the 1991
          Gulf War.
         Enhance the quality of nursing home care.
         Improve the administration of Medicare as it undergoes reform.
         Strengthen the U.S. visa process as an antiterrorism tool.
         Improve transportation security in the wake of September 11.
         Encourage and help guide federal agency transformations.
         Contribute to congressional oversight of the federal income tax system.
         Identify human capital reforms needed at the Department of Defense, the
          Department of Homeland Security, and other federal agencies.
         Raise the visibility of long-term financial commitments and imbalances in
          the federal budget.
         Serve as a model for other federal agencies by modernizing our approaches
          to managing and compensating our people.
         Reduce security risks to information systems supporting the nation’s critical
         Improve the Department of Defense’s business operations, software
          development, and information technology acquisition processes.
         Ensure effective implementation of the No Child Left Behind Act.
         Oversee programs to protect the health and safety of today’s workers.
         Ensure the accountability of federal agencies through audits and
vii       performance evaluations.             GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003

                                                                                    Source: See Image Sources.

                     Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
                          From the Comptroller General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
                          The Comptroller General’s Integrity Act Assurance
                             Statement for Fiscal 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
                          GAO at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
                          How to Use This Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

                     Part I: Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . .9
                          Supporting the Congress and Benefiting the
                             American People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
                             Agencywide Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
                             A Balanced Scorecard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
                             GAO’s High-Risk Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
                             Managing Our Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
                             Strategies and Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

                     Part II: Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
                          How We Assess Our Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
                            Our Strategic Management Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
                            Our Annual Performance Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
                          Goal 1 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
                             Financial Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
                             Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
                             Additional Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
                             Two-year Performance Goals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
                          Goal 2 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
                             Financial Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
                             Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
                             Additional Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
                             Two-year Performance Goals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
                          Goal 3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
                             Financial Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
                             Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
                             Additional Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
                             Two-year Performance Goals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
                          Goal 4 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                                ix
         Data Quality and Program Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
            Completeness and Reliability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
            Procedures to Ensure Data Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
            Program Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69

    Part III: Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
         From the Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74
         Overview of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
            Financial Systems and Internal Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
            Limitations on Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
            Purpose of Each Financial Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
         Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
         Statement of Net Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
         Statement of Changes in Net Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80
         Statement of Budgetary Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81
         Statement of Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82
         Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
         Audit Advisory Committee’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91
         Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92

    Part IV: Appendixes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97
         1. Accomplishments and Other Contributions . . . . . . . . . . . . . . . . . . . . .98
         2. From the Inspector General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .138
         3. GAO’s Report on Personnel Flexibilities (Pub. L. No. 106-303) . . . .139
         4. GAO’s Federal Information Security Management Act Efforts . . . . .142
         5. Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .144
         Image Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .146
         Obtaining Copies of GAO Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .147

                On 11/21/03 we corrected an error in the note on page 2 to reflect a recent merger of
                two GAO teams and an error on page 12 regarding our agencywide fiscal 2004
                performance target for timeliness. On 12/18/03 we corrected the labels on the financial
                benefits pie chart shown on page 13, and we corrected the Web link to the Financial
                Audit Manual on page 30.

                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. However, because this work may contain copyrighted images
                or other material, permission from the copyright holder may be necessary if you wish
                to reproduce this material separately.

x                                                       GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
GAO at a Glance

The U.S. General Accounting Office is an indepen-
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, our “watchdog” role has
evolved over the decades as the Congress
expanded our statutory authority and called on us
with increasing frequency for support in carrying
out its legislative and oversight responsibilities.

Today, we examine the full breadth and scope of
federal activities and programs, publish thousands
of reports and other documents annually, testify          Our Locations
before the Congress over 200 times a year on aver-
age, and provide a number of related services
intended to aid decision makers and the general
public alike. We also study national and global
trends to anticipate their implications for public pol-
icy. By making recommendations to improve the                                                                               Boston

accountability, operations, and services of govern-          San                               Chicago     Dayton
                                                          Francisco                                                       Washington, D.C.
ment agencies, we contribute not only to the                                       Denver
increased effectiveness of federal spending, but also
to the enhancement of the taxpayers’ trust and con-                 Los                              Huntsville Atlanta
                                                                  Angeles                   Dallas
fidence in their government.

To accomplish our mission, we rely on a workforce         Source: GAO.

of highly trained professionals who hold degrees in
                                                          Our chief executive officer is the Comptroller Gen-
many academic disciplines, including accounting,
                                                          eral of the United States, who is appointed to a 15-
law, engineering, public and business administra-
                                                          year term. The Comptroller General is nominated
tion, economics, computer science, and the social
                                                          by the President from a list of candidates submitted
and physical sciences. They are arrayed in 13
                                                          by a bipartisan commission of Senate and House
research, audit, and evaluation teams. These teams
                                                          leaders and must be confirmed by the Senate. The
are backed by staff offices and mission support
                                                          current Comptroller General is David M. Walker,
units. About three-quarters of our more than 3,250
                                                          who began his term in November 1998. He is
employees are based at our headquarters in Wash-
                                                          assisted by an executive committee consisting of
ington, D.C.; the rest are deployed in 11 field
                                                          Chief Operating Officer Gene L. Dodaro, General
                                                          Counsel Anthony Gamboa, and Chief Mission Sup-
                                                          port Officer/Chief Financial Officer Sallyanne
                                                          Harper. Members of the Senior Executive Service
                                                          lead the agency’s research, audit, and evaluation
                                                          teams and the various staff and mission support

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                           1
Our Structure

                                                                   Comptroller General

                                                                  Chief Operating Officer

           Public Affairs      Strategic Planning      Congressional                     Opportunity and        Inspector General
                              and External Liaison       Relations                        Inclusiveness

               General           Office of            Quality and         Teams             Field Offices   Chief Mission Support and
               Counsel           Special              Continuous                                              Chief Financial Officer
                              Investigations         Improvement

                                                                                                                     Goal 4




       Goal            Goal                                                          ASM                          PDP      CASO
        1               2                                                            DCM
                                                                  NRE                                           KS             HCO
                Goal                                                                                                    ISTS
                 3                                                         ARM

                                                                          G o al 3
Source: GAO.

Note: Several teams perform work in support of multiple strategic goals. These teams include Acquisition and Sourcing
Management (ASM); Applied Research and Methods (ARM); Defense Capabilities and Management (DCM); Education,
Workforce, and Income Security (EWIS); Financial Management and Assurance (FMA); Financial Markets and Community
Investment (FMCI); Health Care (HC); Homeland Security and Justice (HSJ); Information Technology (IT); International Affairs
and Trade (IAT); Natural Resources and Environment (NRE); Physical Infrastructure (PI); and Strategic Issues (SI). Units
supporting strategic goal 4 include Controller/Administrative Services Office (CASO); Human Capital Office (HCO); Information
Systems and Technology Services (ISTS); Knowledge Services (KS); and Professional Development Program (PDP).

To ensure that we are well positioned to meet the                               changes in annual performance plans and revised
Congress’s future needs, we update our 6-year stra-                             performance plans, all of which are posted—like
tegic plan every 2 years, consulting extensively dur-                           our strategic plan updates—on the Web for public
ing the update with our clients in the Congress and                             inspection (www.gao.gov/sp.html). Each year, we
with other experts (see our strategic plan frame-                               hold ourselves accountable to the Congress and to
work on page 3). Using the plan as a blueprint, we                              the American people for our performance, primarily
lay out the areas in which we expect to conduct                                 through our annual performance and accountability
research, audits, analyses, and evaluations to meet                             report that you are reading. Last year, the Associa-
our clients’ needs, and we allocate the resources we                            tion of Government Accountants (AGA) awarded us
receive from the Congress accordingly. Given the                                for the second consecutive year its Certificate of
increasingly fast pace with which crucial issues                                Excellence in Accountability Reporting for our per-
emerge and evolve, we design a certain amount of                                formance and accountability report (see page 5).
flexibility into our plans and staffing structure so                            According to AGA, this certificate means that we
that we can respond readily to the Congress’s                                   produced an interesting and informative report that
changing priorities. When we revise our plans or                                achieved the goal of complete and fair reporting.
our allocation of resources, we disclose those

2                                                                                     GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                            SERVING THE CONGRESS
                        GAO’S STRATEGIC PLAN FRAMEWORK
                        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 . . .
        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
                                     Education and protection of children     
                                                                               Viable communities
                                     Work opportunities and worker            
                                                                               Natural resources use and
                                     protection                                environmental protection
                                     Retirement income security               
                                                                               Physical infrastructure
                                    Respond to Changing Security Threats and the Challenges of
                                    Global Interdependence involving . . .
                                     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 . . .

                                     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
                                     serving the public                        government
                                 Maximize the Value of GAO by Being a Model Federal Agency and
                                 a World-Class Professional Services Organization in the areas of . . .

                                     Client and customer service              
                                                                               Process improvement
                                     Leadership and management focus          
                                                                               Employer of choice
                                     Institutional knowledge and experience

                                                 CORE VALUES
       Accountability                                     Integrity                                     Reliability
                                                                                                       Fiscal 2003-2007
     Source: GAO.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                            3
We conduct specific engagements as a result of                including 31 U.S.C. 3512 (commonly referred to as
requests from congressional committees and man-               the Federal Managers’ Financial Integrity Act), the
dates written into legislation, resolutions, and com-         Government Performance and Results Act of 1993,
mittee reports. In fiscal 2003, 92 percent of our             and the Federal Financial Management Improve-
engagement work was requested or mandated by                  ment Act of 1996.2 Accordingly, this performance
the Congress. We initiated the remaining 8 percent            and accountability report for fiscal 2003 supplies
of the engagement work as authorized by our                   what we consider to be information that is the
enabling legislation.1 Senior executives in charge of         equivalent of that supplied by executive branch
the teams that support our strategic goals manage             agencies in their annual performance and account-
this mix of engagements and ensure that the Con-              ability reports.
gress’s need for information on quickly emerging
issues is met along with our longer-term work                 On the pages that follow, we assess our perfor-
efforts that flow from our strategic plan. To effec-          mance for fiscal 2003 against our established perfor-
tively serve the Congress within our resources,               mance goals and past performance. We also present
senior managers, in consultation with our congres-            our financial statements, the independent auditor’s
sional clients, determine the timing and priority of          opinion, and a statement from our Inspector Gen-
engagements they are responsible for.                         eral. We issued our performance plan for fiscal 2004
                                                              in July 2003 and plan to issue our fiscal 2005 perfor-
As a legislative branch agency, we differ in some             mance plan in early fiscal 2004. However, we have
ways from executive branch agencies. We are, for              included some tentative information about future
instance, exempt from many laws applicable to the             plans in this report to provide as cohesive a view as
executive branch. However, because one of our                 possible of what we have done, what we are doing,
strategic goals is to maximize our value by serving           and what we expect to do to support the Congress
as a model agency for the federal government, we              and to serve the nation.
hold ourselves to the spirit of many of these laws,

1We   have not set a target for work that we initiate ourselves, known as research and development. In fiscal 2002 and
fiscal 2001, our research and development work represented 11 and 13 percent, respectively, of our engagement efforts.
2The  Federal Manager’s Financial Integrity Act requires ongoing evaluations and reports on the adequacy of the systems
of internal accounting and administrative control of each agency. The Government Performance and Results Act seeks
to improve public confidence in federal agency performance by requiring that measurement, including setting goals
and objectives and measuring progress toward achieving them. The Federal Financial Management Improvement Act
intends to improve federal financial management by requiring that federal agencies implement and maintain financial
management systems that comply with federal financial management systems requirements, federal accounting stan-
dards, and the United States Government Standard General Ledger at the transaction level.

4                                                                 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
How to Use This Report

                     This report describes GAO’s performance measures, results, and accountability pro-
                     cesses for fiscal 2003. In assessing our performance, we are comparing actual results
                     against targets and goals set in our annual performance plan, which we developed to
                     help us carry out our strategic plan. Our complete set of strategic planning and per-
                     formance and accountability reports is available from our Web site at

                     This report has four major parts:

                     ■   Management’s Discussion and Analysis
                         Look here for our agencywide performance and use of resources in fiscal 2003.
                         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 by strategic goal in fiscal 2003, the
                         targets we are aiming for in fiscal 2004, and for explanations of how we assess our
                         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 2003, including a letter from our
                         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 most significant accomplishments and
                         contributions recorded in fiscal 2003, for our Inspector General’s assessment of our
                         agency’s management challenges, and for our reports on our implementation of
                         Public Law 106-303 (an act giving us certain human capital management
                         flexibilities) and on information security reform measures.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                  7
Part I:
Discussion and

Supporting the Congress and Benefiting the
American People

In fiscal 2003, as in other years, the challenges that           We performed our work in accordance with our
most urgently engaged the attention of the Con-                  core values and within our strategic plan. Our stra-
gress helped to define our priorities. Our work on               tegic plan sets forth four broad strategic goals that
issues such as the nation’s ongoing battle against               serve as the organizing principles for our work,
terrorism, Social Security and Medicare reform, the              which is as wide-ranging as the interests and con-
implementation of major education legislation,                   cerns of the Congress. Teams supporting the first
human capital transformations at selected federal                three goals completed congressional requests, man-
agencies, and the security of key government infor-              dates, and self-initiated work related to federal
mation systems all helped congressional members                  social programs, defense, and government effi-
and their staffs to develop new federal policies and             ciency and effectiveness. Staff in other teams and
programs and oversee ongoing ones.                               units implemented initiatives in support of the
                                                                 fourth goal—an internal one that challenges us to
                                                                 continuously improve our operations and resources
                                                                 (see table I.1).

Table I.1: GAO’s Goals and Selected Issues
     Goal                       Description                                           Work emphasis

        1      Provide timely, quality service to the Congress   Medicare, Medicaid, veterans’ and military health care,
               and the federal government to address current     public health, private health insurance, bioterrorism,
               and emerging challenges to the well-being and     education and training, child care, support for the needy,
               financial security of the American people.        child support, child welfare, adoption, worker protection,
                                                                 pensions, Social Security, housing, community
                                                                 development, postal service, drug control, natural
                                                                 resources, environmental protection, transportation, the
                                                                 justice system, the Coast Guard, and customs.

        2      Provide timely, quality service to the Congress   Military capability and readiness, homeland security,
               and the federal government to respond to          information security, weapons systems acquisition,
               changing security threats and the challenges of   military contracting, the National Aeronautics and Space
               global interdependence.                           Administration (NASA), energy and nuclear energy
                                                                 issues, banking, financial markets, international affairs,
                                                                 trade, and debt collection.

        3      Help transform the federal government’s role      Federal information management, architecture, and
               and how it does business to meet 21 st century    systems; tax administration; federal budget issues;
               challenges.                                       governmentwide management; human capital; the
                                                                 Census; federal financial management; high-risk and
                                                                 performance accountability issues; and bid protests.

        4      Maximize the value of GAO by being a model        GAO-specific initiatives related to improving client and
               federal agency and a world-class professional     customer service, staff recruitment and retention, staff
               services organization.                            development, work processes, management of
                                                                 institutional knowledge, information systems, and
                                                                 workplace security and safety.

Source: GAO.

10                                                                   GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                       PART I

Agencywide Results                                                ommendations, and recommendations made that
                                                                  help us to achieve financial and other benefits. Tes-
To support the Congress in meeting its constitu-                  timonies and timeliness measures indicate to a great
tional responsibilities, we provided congressional                extent how well we, as an information provider,
committees, members, and staff with information in                serve our primary client, the Congress.
the form of reports; recommendations; testimonies;
briefings; and expert comments on bills, laws, and                In fiscal 2003, we greatly exceeded two of our
other legal matters affecting the federal govern-                 annual performance targets—other benefits and
ment. We monitored our performance of these                       new recommendations made. We surpassed our tar-
efforts using seven annual performance measures,                  get for other benefits by about 30 percent because
and the results of our work are reflected in our out-             we worked on issues that were of significant value
standing performance this year—we exceeded our                    to the Congress, the executive branch, and the pub-
performance targets for six of our seven measures                 lic. Our work helped to shape legislation in a vari-
(see table I.2).3 Two of these measures—financial                 ety of areas and to improve government operations
benefits and other benefits—illustrate the outcomes               and functions. We exceeded our target for new rec-
of our work and our value to the American people                  ommendations made primarily because we issued
because they track federal dollars saved or better                several products that contained very specific, rec-
used and programmatic improvements imple-                         ommendations that helped the agencies being
mented as a result of our work. Three additional                  reviewed systematically implement changes
measures track recommendations implemented,                       needed. Our experience has shown that some
new products (i.e. issued in fiscal 2003) with rec-               agencies with which we have good working rela-
Table I.2: Agencywide Summary of Annual Measures and Targets

                                        1999       2000        2001       2002                                          2004
 Performance measure                   Actual     Actual      Actual     Actual      Target      Actual      Met?      Target

 Financial benefits (billions)           $20.1      $23.2      $26.4     $37.7a       $32.5       $35.4       Yes        $35.0

 Other benefits                            607        788        799        906         800       1,043       Yes        900b

 Past recommendations
 implemented                              70%        78%        79%        79%         77%        82%         Yes       79% b

 New recommendations made                  940      1,224      1,563      1,950       1,250       2,175       Yes      1,500b

 New products with
 recommendations c                        33%        39%        44%        53%         50%        55%         Yes        50%

 Testimonies                               229        263        151        216         180        189        Yes        190b

 Timeliness                               96%        96%        95%        96%         98%        97%          No        98%

Source: GAO.

aChanges    GAO made to its methodology for tabulating financial benefits in part caused our results to increase beginning with
the fiscal 2002 results.

b On the bases of past performance and expected future work, we revised these targets after we issued our fiscal 2004
performance plan. The original targets were other benefits, 820; past recommendations implemented, 77%; new
recommendations made, 1,250; and testimonies, 200.

c Not all products that we issue during the fiscal year contain recommendations—some are purely informational. This target

allows us to respond to a variety of requests that may not result in recommendations.

3For more information on our annual performance measures and how we ensure the completeness and reliability of
our performance data, see the Data Quality and Program Evaluation section in Part II of this report.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                    11

Table I.3: Four-Year Averages for Selected GAO Measures
 Performance measure                               1999            2000          2001         2002         2003

 Financial benefits (billions)                     $19.5           $21.0        $22.4        $26.9        $30.7

 Other benefits                                        451           581          683          775          884

 New recommendations made                              898           997        1,179        1,419        1,728

 New products with recommendations                 33%              35%          37%          42%          48%

 Testimonies                                           212           233          225          215          205

 Timeliness                                        88%              94%          95%          96%          96%

Source: GAO.

tionships are addressing problems we identify while          mation about the 2-year performance goals devel-
our work is being conducted, which precludes the             oped to measure our progress toward achieving
need for a recommendation. We anticipate that                each of our four strategic goals.
more agencies will take such proactive steps to
improve their operations.                                    We also consider our actual performance to deter-
                                                             mine whether changes are needed to our targets for
To help us examine trends over time, we also look            the next fiscal year. On the basis of our actual per-
at 4-year averages for all measures except past rec-         formance in fiscal 2003, we have adjusted many of
ommendations implemented because the number                  the targets for our performance in fiscal 2004 since
of recommendations made in each year is not con-             issuing our fiscal 2004 performance plan. Targets
stant and varies. Calculating 4-year averages mini-          for the two measures that we assess at the agency-
mizes the effect of an atypical result in any given          wide level—timeliness and the percentage of new
year. Table I.3 shows that between fiscal 1999 and           products with recommendations—remain the same
fiscal 2003 financial benefits reported have                 compared with the plan. For the other measures,
increased along with the number of other benefits            we have made changes at the goal level and discuss
reported, new recommendations made, and new                  these changes along with our results in Part II of
products with recommendations. Our 4-year aver-              this report. We have raised our targets for other
ages for timeliness increased between 1999 and               benefits and new recommendations made in goals
2001 and remained steady in 2002 and 2003.                   2 and 3 and lowered the targets for goal 1 to reflect
                                                             our past performance and expectations of future
In addition to our seven annual performance mea-             work. These changes result in a net increase to
sures, we monitored our progress on 2-year perfor-           these numbers agencywide. Because our actual per-
mance goals that describe the work we planned to             formance on percentage of past recommendations
do to achieve our strategic goals and objectives. At         implemented has generally exceeded the target of
the beginning of the assessment cycle in fiscal 2002,        77 percent, we have raised the target to 79 percent
our senior managers identified the key efforts               across all goals, even though goal 1 has not been
needed to achieve each of our 98 performance                 successful in meeting the target. During fiscal 2004,
goals. Throughout the 2-year period, staff tracked           we will update our performance goals for each of
work completed that related to these key efforts             our strategic goals; we plan to continue efforts on
and goals. At the close of the cycle in fiscal 2003,         each of the performance goals that were not met by
senior managers determined that enough work had              the end of fiscal 2003.
been completed to meet 95 percent of our 2-year
performance goals. We did not meet five of our per-          Benefits Reported
formance goals because resources were needed for             Many of the benefits produced by our work can be
other work requested by the Congress or, in the              quantified as dollar savings for the federal govern-
case of goal 4, for higher-priority work within GAO.         ment (financial benefits), while others cannot (other
In Part II of this report, we present detailed infor-        benefits). Both types of benefits resulted from our
                                                             efforts to provide information to the Congress that
                                                             helped to (1) improve services to the public, (2)

12                                                               GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                              PART I

change laws and regulations, and (3) promote                             calculated in net present value terms. Our staff fol-
sound agency and governmentwide management.                              low established policies and procedures in report-
(See figure I.1.)                                                        ing of financial benefits. Estimates must be based
                                                                         on independent third-party sources and reduced by
Financial Benefits                                                       any identifiable offsetting costs. The third parties
We produce financial benefits when our work con-                         are typically the agency that acted on our work, a
tributes to actions taken by the Congress or the                         congressional committee, or the Congressional Bud-
executive branch to                                                      get Office.

■   reduce annual operating costs of federal
    programs or activities;                                              Figure I.2: GAO’s Fiscal 2003 Financial Benefits

■   lessen the costs of multiyear projects or                            Dollars in billions
    entitlements; or                                                     40                                  37.7
■   increase revenues from debt collection, asset                                                                    32.5
    sales, changes in tax laws, or user fees.                            30                        26.4
In fiscal 2003, our work generated $35.4 billion in                              20.1
financial benefits (see figure I.2). The funds made
available in response to our work may be used to
reduce government expenditures or reallocated by                         10
the Congress to other priority areas. To ensure con-
servative estimates of net financial benefits, reduc-                      0
                                                                                 1999    2000      2001      2002   2003     2003
tions in operating cost are typically limited to 2
years of accrued reductions. Multiyear reductions in                                         Actual                 Target   Actual
                                                                         Source: GAO.
long-term projects, changes in tax laws, program
terminations, or sales of government assets are lim-
ited to 5 years. In addition, all financial benefits are

Figure I.1: Types of Benefits Recorded in Fiscal 2003 from Our Work
                             Financial Benefits                                                 Other Benefits
                              Total $35.4 billion                                                Total 1,043
                          $1.8 billion

       $13.9 billion                                                             525                                  (43.7%)
         (39.3%)                                                               (50.3%)

                                                        $19.7 billion


           Agencies acted on GAO information to improve services to the public
           Information GAO provided to the Congress resulted in statutory or regulatory changes
           Core business processes improved at agencies and governmentwide management reforms advanced by GAO’s work
       Source: GAO.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                         13

Table I.4: GAO’s Selected Major Financial Benefits for Fiscal 2003 (Dollars in millions)
Description                                                                                                          Amount

                                          Financial Benefits Exceeding $1 Billion

Updated the Consumer Price Index (CPI): Recommended that the Bureau of Labor Statistics periodically
update the expenditure weights of its market basket of goods and services used to calculate the CPI to
make it more timely and representative of consumer expenditures. The Bureau agreed to do this every 2
years, and the CPI for January 2002 reflected the new weights. The adjustments have resulted in, among
other things, lower federal expenditures on programs like Social Security that use the CPI to calculate
benefits. (See app. 1, item 1.49.)                                                                                    $9,200

Eliminated Medicaid’s Upper Payment Limit Loophole: Identified a weakness in Medicaid’s upper
payment limit methodology that allowed states to make excessive payments to local, government-owned
nursing facilities and then have the facilities return the payments to the states, creating the illusion that they
made large Medicaid payments in order to generate federal matching payments. Closing the loophole
prevented the federal government from making significant federal matching payments to states above those
intended by Medicaid. (See app. 1, item 1.2.)                                                                          5,900

Made Funds Available for Lighter-Weight Weapons Systems: Identified the Crusader artillery system as
a duplicative weapons system that was inconsistent with the Department of the Army’s plans to transform
itself into a light-weight combat force. The Department of Defense (DOD) terminated the Crusader program,
resulting in costs avoided. (See app. 1, item 2.15.)                                                                   3,900

Reduced the Cost of Federal Housing Programs: Improved management of the Department of Housing
and Urban Development’s unexpended balances resulting in the recapture of unobligated funds. (See app.
1, item 1.50.)                                                                                                         3,400

Reduced the Cost of the DOD’s Services Acquisition Process: Examined the acquisition practices of
leading commercial companies and recommended a more strategic approach for acquiring services at
DOD. (See app. 1, item 3.4.)                                                                                           1,700

Avoided Costs Associated with an Increase in the Skilled Nursing Facilities Rate: Determined that the
Congress’s increase in the nursing component of Medicare’s daily rate for skilled nursing facilities had little
effect on increasing the ratios of nursing staff to patients in these facilities. The nursing component increase
expired on October 1, 2002, and despite arguments from the nursing facility industry, the nursing
component increase has not been reinstated. (See app. 1, item 1.8.)                                                    1,000

                            Selected Financial Benefits between $500 Million and $1 Billion

Recovered Supplemental Security Income (SSI) Overpayments: Identified weaknesses in the Social
Security Administration’s (SSA) efforts to recover SSI overpayments that led to the development of SSA’s
automated reconciliation process. (See app. 1, item 1.20.)                                                             $990

Reduced DOD’s Implementation Risks and Purchase Costs for the Navy-Marine Corps Intranet:
Highlighted the need for various management controls related to the acquisition and implementation of the
Navy-Marine Corps intranet. As a result, DOD modified the Navy-Marine Corps intranet contract and
reduced contract amounts in fiscal 2002 and fiscal 2003, reduced program risks, and increased the
likelihood that the program will be acquired and implemented successfully. (See app. 1, item 3.10.)                     780

Ensured Defense Emergency Response Funds are Better Targeted: Identified millions of dollars in
unobligated DOD Emergency Response funding, a portion of which the Congress rescinded or directed
DOD to reallocate for other fund purposes. (See app. 1, item 2.48.)                                                     517

Source: GAO.

To document financial benefits, our staff complete                   reviews all financial benefits and must approve
accomplishment reports. All accomplishment                           benefits of $100 million or more, which amounted
reports for financial benefits are documented and                    to 95 percent of the total dollar value of benefits
are reviewed by (1) another GAO staff member not                     recorded in fiscal 2003. Additionally, our Office of
involved in the work and (2) a senior executive in                   Inspector General reviews all benefits of $500 mil-
charge of the work. Also, a separate independent                     lion or more.
unit (Quality and Continuous Improvement)

14                                                                        GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                       PART I

Nine accomplishments accounted for nearly $27.4                   Figure I.3: Other Benefits
billion, or 77 percent, of our total financial benefits           Number
in fiscal 2003. Six of these accomplishments totaled
$25.1 billion. Table I.4 lists selected major financial                                                                1,043
benefits for fiscal 2003 and describes the work con-              1,000                               906
tributing to financial benefits over $500 million.                                  788      799              800
Other Benefits                                                      600
Many of the benefits that flow to the American peo-
ple from our work cannot be measured in dollar
terms. During fiscal 2003, we recorded a total of                   200
1,043 other benefits (see figure I.3). We docu-
mented 456 instances where federal agencies                                 1999   2000     2001     2002     2003     2003
improved services to the public, 62 instances where                                    Actual                Target    Actual
information we provided to the Congress resulted                  Source: GAO.
in statutory or regulatory changes (see table I.5),
                                                                  In addition to the financial and other benefits that
and 525 instances where agencies improved core
                                                                  accrued in fiscal 2003 from our work, we also
business processes or governmentwide reforms
                                                                  achieved the following results.
were advanced. These actions spanned the full
spectrum of national issues from securing informa-
tion technology systems to improving the perfor-
mance of state child welfare agencies.

Table I.5: Examples of Public Laws to Which GAO Contributed during Fiscal 2003
Legislation                    GAO’s contribution

Consolidated                   The law includes GAO’s recommended language that the administration’s competitive
Appropriations Resolution,     sourcing targets be based on considered research and sound analysis.
2003, Pub. L. No. 108-7

Smallpox Emergency             GAO’s report on the National Smallpox Vaccination program highlighted volunteers’ concerns
Personnel Protection Act of    about losing income if they sustained injuries from an inoculation. This law provides benefits
2003, Pub. L. No. 108-20       and other compensation to covered individuals injured in this way.

Postal Civil Service           Analyses performed by GAO and the Office of Personnel Management culminated in the
Retirement System              enactment of this law that reduces the U.S. Postal Service’s pension costs by an average of
Funding Reform Act of          $3 billion per year over the next 5 years. The Congress directed that the first 3 years of
2003, Pub. L. No. 108-18       savings be used to reduce the Postal Service’s debt and hold postage rates steady until fiscal

Accountability of Tax          A GAO survey of selected agencies that are not subject to the Chief Financial Officers Act
Dollars Act of 2002, Pub. L.   demonstrated the significance of audited financial statements in that community. GAO
No. 107-289                    provided legislative language that requires 70 additional executive branch agencies to
                               prepare and submit audited annual financial statements.

Emergency Wartime              GAO drafted legislation that provides up to $64 million to the Corporation for National and
Supplemental                   Community Service to liquidate previously incurred obligations, provided that the Corporation
Appropriations Act, 2003,      reports overobligations in accordance with the requirements of the Antideficiency Act.
Pub. L. No. 108-11

Intelligence Authorization     GAO recommended that the Director of Central Intelligence report annually on foreign entities
Act for Fiscal Year 2003,      that may be using U.S. capital markets to finance the proliferation of weapons, including
Pub. L. No. 107-306            weapons of mass destruction, and this statute instituted a requirement to produce this report.

Source: GAO.

Note: This table includes public laws enacted in fiscal 2003 that were not listed in our Fiscal 2002 Performance and
Accountability Report.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                  15

Past Recommendations Implemented                              Figure I.5: Cumulative Implementation Rate for
One way we measure our effect on improving the                Recommendations Made in Fiscal 1999
government’s accountability, operations, and ser-             Percentage
vices is by tracking the percentage of recommenda-
                                                               90                                           82%
tions that we made 4 years ago that have since been
implemented. At the end of fiscal 2003, 82 percent
of the recommendations we made in fiscal 1999                                                   56%
had been implemented (see figure I.4), primarily by            50                  44%
executive branch agencies. It is putting those rec-                     40%
ommendations into practice that will generate tangi-           30
ble benefits for the American people in the years              20
ahead.                                                         10
                                                                        After      After       After        After
Figure I.4: Past Recommendations Implemented                           1 year     2 years     3 years      4 years
                                                              Source: GAO.
4-year implementation rate
90                                              82%           New Recommendations Made
               78%     79%     79%     77%
                                                              As shown in figure I.6, we made 2,175 new recom-
70                                                            mendations in fiscal 2003, which again exceeded
60                                                            our target for this year and actual performance the
50                                                            past 4 years. Though all of the products we issued
40                                                            did not include recommendations, developing
30                                                            implementable recommendations is an important
20                                                            part of our work for the Congress because it helps
10                                                            to improve how the government functions and
 0                                                            often leads to financial and other benefits for the
       1999    2000   2001     2002    2003     2003
                                                              public. This year 415 of the 750 written products we
                  Actual              Target   Actual
Source: GAO.
                                                              issued (excluding testimonies) yielded the 2,175
                                                              recommendations reported.4 These recommenda-
The 82 percent implementation rate for fiscal 2003            tions included, for example, those to the Secretary
exceeded our target for the year by 5 percentage              of State to develop clear policies on using the visa
points as well as our actual performance for fiscal           issuing process as a screen against potential terror-
1999 through fiscal 2002. As figure I.5 indicates,            ists and to the Secretary of Defense to better man-
agencies need time to act on recommendations.                 age service procurement. For more information on
Therefore, we assess recommendations imple-                   new recommendations by strategic goal, see Part II
mented after 4 years, the point at which past experi-         of this report.
ences have shown that if a recommendation has not
been implemented it is not likely to be.

4We have an extensive product line including oral briefings, testimonies, and various types of other written products.
The 415 written products cited here include chapter reports, letter reports, and numbered correspondence, some of
which contain classified or sensitive material.

16                                                                  GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                     PART I

Figure I.6: New Recommendations Made                                  Testimonies
Number made                                                           During fiscal 2003, experts from our staff testified at
                                                                      189 congressional hearings covering a wide range
                                                             2,175    of complex issues (see figure I.8). For example, our
2,000                                     1,950                       executives testified on the placement of children in
                                 1,563                                state care solely to obtain mental health services,
1,500                                                                 actions needed to better prepare financial markets
                       1,224                        1,250
                                                                      for terrorist attacks, and long-term challenges to
1,000          940
                                                                      transportation security and management challenges
                                                                      facing NASA. See the following page for a summary
                                                                      of issues we testified on by strategic goal in fiscal
     0                                                                2003.
          1999         2000      2001     2002      2003     2003
                            Actual                 Target    Actual
Source: GAO.                                                          Figure I.8: Testimonies
                                                                      Hearings at which GAO testified
New Products Containing Recommendations
This year, 55 percent of the 750 written products we                                 263
issued (excluding testimonies) included recommen-                     250      229
dations. (See figure I.7.) This measure recognizes                                                                    189
                                                                      200                                    180
that a report containing a single broad recommen-
dation may have more impact than a report contain-                    150
ing a dozen specific ones. GAO also often provides
products that are purely informational and contain
no recommendations. Hence, the target provides                         50
ample leeway for responding to requests for infor-                       0
mational products.                                                            1999   2000   2001     2002    2003    2003
                                                                                        Actual              Target   Actual
                                                                      Source: GAO.
Figure I.7: New Products with Recommendations
                                                                      While the vast majority of our products—97 per-
60                                                           55%
                                         53%                          cent—were completed on time for our congres-
                                                                      sional clients and customers in fiscal 2003, we
                     39%                                              slightly missed our target of providing 98 percent of
         33%                                                          them on the promised day. (See figure I.9.) We
30                                                                    track the percentage of our products that are deliv-
                                                                      ered on the day we agreed to with our clients
                                                                      because it is critical that our work be done on time
10                                                                    for it to be used by policymakers. Though our 97-
                                                                      percent timeliness rate was a percentage point
       1999          2000      2001      2002     2003      2003      improvement over our fiscal 2002 result, we are tak-
                        Actual                    Target    Actual    ing steps to improve our performance in the future
Source: GAO.                                                          by encouraging matrix management practices
                                                                      among the teams supporting various strategic goals
                                                                      and identifying early those teams that need addi-
                                                                      tional resources to ensure the timely delivery of
                                                                      their products to our clients.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                17
              PART I


   GOAL 1                      Well-Being and Financial Security of the American People

      Nursing home quality                     Foster care management                     Coast Guard transformation
      VA health care challenges                Teacher training                           Postal Service transformation
      Medicare fiscal challenges               Research on Head Start's effectiveness     Highway safety
      SARS                                     Changes to VA's Disability Criteria        FAA reauthorization
      Bioterrorism preparedness                Unemployment insurance                     Restoring South Florida ecosystem
      Social Security pension loophole         Workforce Investment Act                   Handling invasive species
      Risks facing PBGC's single-employer      FBI reorganization                         Postal Service anthrax testing
        pension program                        Transportation for the disadvantaged       Social Security disability reviews
      Social Security reform

   GOAL 2                      Changing Security Threats and Challenges of Globalization

      Combating terrorism                                           Nuclear security challenges
      Chemical and biological terrorism                             Border security technology
      DOD human capital reforms                                     Agriculture's debt collection challenges
      Major weapons systems                                         Gulf War illnesses
      Modernizing DOD's business systems                            Preparing financial markets for terrorism
      Conditions of overseas diplomatic facilities                  Rightsizing U.S. overseas presence
      Russia's nonproliferation program                             Mutual funds
      Customs radiation detection devices

    GOAL 3                             Transforming the Federal Government’s Role

      Federal government restructuring efforts                      Paid tax preparer services
      Federal paperwork burden                                      Federal sourcing and acquisition
      Federal performance management systems                        Strategies to address the federal government's improper
      Implementing the President's Management Agenda                  payments
      Fragmented federal grant system                               Government credit card vulnerabilities
      Performance budgeting                                         Governmentwide financial management reforms
      Effective use of federal funds                                OMB's E-government initiatives
            18                                                             GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
Source: See Image Sources..
                                                                                                          PART I

Figure I.9: Timeliness                                       Figure I.10: Two-Year Performance Goals
Percentage of products on time                                           98 two-year performance goals
100     96%     96%     95%     96%     98%     97%
                                                                         Not met


 20                                                                                       95%

        1999    2000    2001    2002    2003    2003
                   Actual              Target   Actual
Source: GAO.                                                             Source: GAO.

Two-year Performance Goals
In addition to our seven annual measures, we track           A Balanced Scorecard
our progress on 98, 2-year performance goals. At
the end of fiscal 2003, we had met 95 percent of             In addition to our annual and 2-year performance
our performance goals (see figure I.10). These per-          measures, we have been developing over the last 4
formance goals measure the extent to which we did            years an expanded approach for assessing our per-
the work we had planned to do to support the Con-            formance that incorporates features of Robert S.
gress during fiscal 2002 and fiscal 2003. Our senior         Kaplan and David P. Norton’s “balanced scorecard”
managers developed these performance goals at the            concept.5 We believe our balanced scorecard will
beginning of the assessment cycle (fiscal 2002)              allow us to better monitor, track, and report our
based on their knowledge of the specific subject             achievement of results and better measure our effi-
area and in consultation with our customers and cli-         ciency.
ents. However, because congressional or GAO pri-
orities changed over the 2-year period, we were not          The balanced scorecard is a tool that helps execu-
able to meet some of these performance goals                 tives identify financial as well as nonfinancial indi-
because resources had to be shifted away from                cators that provide a “balanced” picture or
planned work to address new or more urgent prior-            comprehensive assessment of an organization’s per-
ities. In such circumstances, we do not view an              formance. This approach addresses the limitations
unmet performance goal as a failure. Rather, we              of financial performance reporting and recognizes
believe it shows that we are responsive in carrying          that in a knowledge-based age, investments in an
out our mission of serving the Congress and the              organization’s intangible assets—employees, data-
nation and devoting our resources to efforts of criti-       bases, and information technologies—are as critical
cal importance. We consider these performance                to its success as its tangible assets—physical assets
goals qualitative rather than quantitative because           and access to capital. The balanced scorecard con-
our senior managers must judge whether enough                cept also recognizes that financial reporting alone
work on the key efforts has been performed to                cannot communicate the full story about an organi-
achieve a performance goal. In Part II of this report,       zation’s performance. Financial indicators cannot
we list by strategic goal the 2-year performance             measure an organization’s activities, operating pro-
goals supporting each strategic objective, indicate          cesses, innovations, or customer relationships that
whether the performance goal was met, and list the           create value. Nor can they account for the political,
criteria we use for determining whether the goal             regulatory, or societal constraints that impact on the
was met.                                                     organization. Thus, the balanced scorecard supple-
                                                             ments measures of financial performance with other

5The   Balanced Scorecard, Robert S. Kaplan and David P. Norton, 1996.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                     19

measures that indicate, for example, how well the                benefits, recommendations implemented,
organization is developing, nurturing, and mobiliz-              recommendations made, and new products with
ing its employees to accomplish the mission of the               recommendations.
organization. In accordance with the concept, the
                                                             ■   People. As our most important asset, our people
measures included in a balanced scorecard should
                                                                 define our character and capacity to perform.
be directly linked to the organization’s vision and
                                                                 Our strategy in this area draws upon a variety of
                                                                 data sources to create a comprehensive picture of
                                                                 our performance. To determine how well we are
The balanced scorecard that we are developing
                                                                 acquiring, maintaining, and maximizing our
reflects our mission and strategic goals and will
                                                                 human resources, we plan to measure how well
focus on three key areas: clients, results, and peo-
                                                                 we are attracting and retaining high-quality staff;
                                                                 developing, supporting, and using staff; and
                                                                 leading, recognizing, and listening to staff. We are
■    Clients. Our strategy in this area draws upon a
                                                                 currently examining the use of various indicators
     variety of data sources to obtain information on
                                                                 that will help us to collectively measure our
     the services we are providing to our
                                                                 performance in each of these areas. Our annual
     congressional clients. To judge how well we are
                                                                 confidential survey of employees will provide
     serving our clients, we will assess direct client
                                                                 some of the information that we will use to gauge
     feedback on individual products and testimonies
                                                                 the agency’s performance on how well staff
     via the Comptroller General’s discussions with
                                                                 believe their skills are being developed and used
     congressional leadership and members;
                                                                 and whether we engender a positive, productive
     continuous outreach to congressional committees
                                                                 work environment and provide effective
     by our senior executives and managers; and a
                                                                 leadership. (See table I.6.)
     new Web-based, client feedback survey of
     congressional staff. Last year, we tested the Web-      We have identified benchmarks and are developing
     based survey with a sample of 113 recipients of         baselines for our balanced scorecard measures. For
     our written products in 2002. We will also              example, we will use our new hire acceptance rate
     continue to count the number of testimonies             and our attrition rate for the last two fiscal years—
     given and track how often we deliver products           81 percent and 8.8 percent, respectively, in fiscal
     on time to our customers.                               2002 and 72 percent and 7.7 percent, respectively,
                                                             in fiscal 2003—to help us set challenging, yet rea-
■    Results. Focusing on results—and the efficiency
                                                             sonable targets to support our people measure for
     of the processes needed to achieve them—is
                                                             attracting and retaining staff. We plan to establish
     fundamental to accomplishing our mission. Our
                                                             targets for our client and people measures—as we
     strategy in this area has been to revisit, modify,
                                                             already have for our results measure—analyze any
     and restructure our current measures. To assess
                                                             gaps between measures and metrics, and assess our
     our results, we will continue to use most of the
                                                             performance by strategic goal using all three of the
     performance measures discussed previously in
                                                             measures—clients, results, and people—in fiscal
     this report: financial benefits, other (nonfinancial)
                                                             2004 through 2005.

20                                                                GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                    PART I

Table I.6: Preliminary Indicators of GAO’s Performance in the People Area
People measure             Indicator                               Metric

Attracting and             —Success in attracting a quality        —Ratio of the number hired to the number we planned
retaining staff             workforce                               to hire (hiring goals)
                           —New hire acceptance rate               —Ratio of the number of applicants accepting offers to
                                                                    the number of offers made
                           —Education levels of new hires
                                                                   —Percent of new hires with advanced degrees
                           —New hires’ major areas of study
                                                                   —Ratio of the number of staff leaving GAO during the
                                                                    fiscal year to the average number of employees on
                                                                    board during the year

Developing,                —Staff development                      —Employee responses to annual, confidential survey
supporting, and using
                           —Staff utilization                      —Number of continuing professional education units
                                                                    staff earned during a 2-year period

Leading, recognizing,      —Organizational climate                 —Employee responses to annual, confidential survey
and listening to staff

Source: GAO.

GAO’s High-Risk Program                                        many other areas of high risk and have increasingly
                                                               used the high-risk program to draw attention to the
Issued to coincide with the start of each new Con-             challenges faced by government programs and
gress, our high-risk update lists government pro-              operations in need of broad-based transformations.
grams and operations in need of special attention or
transformation to ensure that the federal govern-              Our high-risk program includes five high-risk areas
ment operates in the most economical, efficient,               added in 2003:
and effective manner possible. Our latest report,
released in January 2003, spotlights more than 20              ■    Implementing and transforming the new
troubled areas across government.6 Many of these                    Department of Homeland Security;
areas involve essential government services, such as           ■    Modernizing federal disability programs;
Medicare, housing programs, and postal service
operations, that directly affect the well-being of the         ■    Federal real property;
American people.                                               ■    Medicaid program; and
Since our high-risk program began in 1990, we                  ■    Pension Benefit Guaranty Corporation’s (PBGC)
have issued periodic updates of our high-risk series,               single-employer pension insurance program.7
identifying and reporting on federal programs and              PBGC’s single-employer insurance program, the
operations that have greater vulnerabilities to waste,         most recent addition to our high-risk list, insures the
fraud, abuse, and mismanagement than other pro-                pension benefits of over 34 million participants in
grams or have major challenges associated with                 more than 30,000 private defined benefit plans. We
their economy, efficiency, or effectiveness.                   designated this program as high risk primarily
Although some agencies have made strong efforts                because the program moved from a $9.7 billion
to address the deficiencies cited in the high-risk             accumulated surplus in 2000 to a $3.6 billion accu-
report—and some of the programs included on our                mulated deficit in fiscal 2002, brought about by the
high-risk list since 1990 have improved enough to              termination of a number of large underfunded pen-
be removed from the list—we continue to identify               sion plans of bankrupt companies. Many of these

6U.S.   General Accounting Office, High Risk Series: An Update, GAO-03-119 (Washington, D.C.: January 2003).
7We   added this issue in July 2003 after we published the January 2003 update.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                               21

companies were in troubled industries like steel or          accountability for seized and forfeited property
aviation. In addition, the program’s risk pool has           and have demonstrated a commitment to
become concentrated in industries affected by glo-           communicate and coordinate where joint efforts
bal competition and the movement from an indus-              could help reduce costs and eliminate duplicative
trial- to a knowledge-based economy. For example,            activities. For example, Justice’s Drug
in 2001, almost half of all program-insured partici-         Enforcement Administration and Federal Bureau
pants were in plans sponsored by firms in manufac-           of Investigation have taken many actions to
turing industries. Given significant risk of                 address our recommendations to improve
termination of other large underfunded plans, we             physical safeguards over drugs and firearms
determined that this program warranted highlight-            evidence and strengthen accountability for such
ing as one in need of congressional and agency               evidence. In addition, Treasury’s Forfeiture Fund
action.                                                      and Justice’s Asset Forfeiture Fund and Seized
                                                             Asset Deposit Fund have strengthened their
In fiscal 2003, we also removed the high-risk desig-         financial management and accountability over
nation from two programs: SSA’s SSI program and              seized and forfeited property, in part evidenced
the Asset Forfeiture programs administered by the            by the unqualified opinions on these entities’
U.S. Departments of Justice and the Treasury.                financial statements over the past several years.
                                                           In fiscal 2003, we issued 208 reports and delivered
■    We designated SSI as a high-risk area in 1997
                                                           112 testimonies related to high-risk areas, and our
     after several years of reporting on specific
                                                           work has resulted in financial benefits totaling
     instances of abuse and mismanagement,
                                                           almost $21 billion. In the past, our focus on high-
     increasing overpayments, and poor recovery of
                                                           risk issues has helped the Congress enact a series of
     outstanding SSI overpayments. SSA’s actions
                                                           governmentwide reforms to strengthen financial
     since then included developing a major SSI
                                                           management, improve information technology, and
     legislative proposal with numerous overpayment
                                                           create a more results-oriented government. More
     deterrence and recovery provisions that has been
                                                           recently, the President’s Management Agenda for
     enacted. The legislation directly addresses many
                                                           reforming the federal government now mirrors
     of our prior recommendations. In addition, SSA
                                                           many of the management challenges and program
     initiated a number of internal administrative
                                                           risks that we have reported in our Performance and
     actions to further strengthen SSI program integrity
                                                           Accountability Series and High-Risk Series, includ-
     and increased the number of SSI financial re-
                                                           ing a governmentwide initiative to focus on strate-
     determinations that it conducts and the level of
                                                           gic management of human capital.
     resources in its Office of Inspector General
     devoted to investigating SSI fraud and abuse.
                                                           We have an ongoing dialog with the Office of Man-
■    We first designated the Asset Forfeiture programs     agement and Budget (OMB) regarding the high-risk
     as a high-risk area in 1990 because of                areas, and OMB is working with agency officials to
     shortcomings in the management of and                 address many of our high-risk areas. Also, top man-
     accountability for seized and forfeited property      agement challenges reported by Inspectors General
     and the potential for cost reduction through          at many executive branch agencies are similar to
     administrative improvements and consolidation         issues in our high-risk report.
     of the programs’ post-seizure management and
     disposition of noncash seized property, such as       To learn more about our work on the high-risk
     drugs and firearms. Since then the Departments        areas shown in table I.7 or to download the update
     of Justice and the Treasury have made substantial     in full, go to www.gao.gov/pas/2003/.
     progress in improving the management of and

22                                                             GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                          PART I

Table I.7: GAO’s 2003 High-Risk List
2003 High-Risk Areas                                                                                   Year Designated High Risk

Addressing Challenges In Broad-based Transformations

      Strategic Human Capital Management a                                                                                 2001

      U.S. Postal Service Transformation Efforts and Long-Term Outlook a                                                   2001

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

      Implementing and Transforming the new Department of Homeland Security                                                2003

      Modernizing Federal Disability    Programs a                                                                         2003

      Federal Real Propertya                                                                                               2003

Ensuring Major Technology Investments Improve Services

      FAA Air Traffic Control Modernization                                                                                1995

      IRS Business Systems Modernization                                                                                   1995

      DOD Systems Modernization                                                                                            1995

Providing Basic Financial Accountability

      DOD Financial Management                                                                                             1995

      Forest Service Financial Management                                                                                  1999

      FAA Financial Management                                                                                             1999

      IRS Financial Management                                                                                             1995

Reducing Inordinate Program Management Risks

      Medicare Program a                                                                                                   1990

      Medicaid Program a                                                                                                   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

      PBGC Single-Employer Insurance        Programa                                                                       2003

Managing Large Procurement Operations More Efficiently

      DOD Weapon Systems Acquisition                                                                                       1990

      DOD Contract Management                                                                                              1992

      Department of Energy Contract Management                                                                             1990

      NASA Contract Management                                                                                             1990

Source: GAO.

aAdditional    authorizing legislation is likely to be required as one element of addressing this high-risk area.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                     23

Managing Our Resources                                             Our budget consists of an annual appropriation
                                                                   covering salaries and expenses and revenue from
Resources Used to Achieve Our Fiscal 2003                          reimbursable audit work and rental income. For fis-
Performance Goals                                                  cal 2003, our total budgetary resources of $474.3
                                                                   million increased by $32 million from fiscal 2002.
Our financial statements for fiscal 2003 received an
                                                                   This increase consists primarily of funds needed to
unqualified opinion from an independent auditor.
                                                                   cover mandatory and uncontrollable costs and $4.8
The auditor found our internal controls to be effec-
                                                                   million for nonrecurring enhancements for the
tive with no material weaknesses identified, and the
                                                                   safety and security of our staff.
auditor reported substantial compliance with the
requirements in the Federal Financial Management
                                                                   Our total assets were $128.2 million, consisting
Improvement Act of 1996 for financial systems. The
                                                                   mostly of property and equipment (including the
auditor also found no instances of noncompliance
                                                                   headquarters building, land and improvements, and
with the laws or regulations in the areas tested. The
                                                                   computer equipment and software) and funds with
financial statements and their accompanying notes,
                                                                   the Treasury. The major change in our assets was in
along with the auditor’s report, appear in Part III of
                                                                   funds with the Treasury, which increased in fiscal
this report. Table I.8 summarizes key financial data.
                                                                   2003 because of differences from the prior year-end
                                                                   in the timing of payments. Total liabilities of
Compared with the statements of large and com-
                                                                   $85.6 million were composed largely of employees’
plex agencies in the executive branch, our state-
                                                                   accrued annual leave, amounts owed to other gov-
ments present a relatively simple picture of a small
                                                                   ernment agencies, accounts payable, and workers’
agency in the legislative branch that focuses most of
                                                                   compensation liability. The greatest changes in the
its financial activity on the execution of its congres-
                                                                   liabilities were made up of decreases in both
sionally approved budget with most of its resources
                                                                   accounts payable and deferred lease revenue. The
devoted to the human capital needed for its mission
                                                                   decrease in accounts payable is a result of the tim-
of supporting the Congress with information and
                                                                   ing of payments made on several large contracts. In
                                                                   fiscal 2003, we amortized the remaining balance of
                                                                   deferred lease revenue liability as rental credits to
                                                                   the U.S. Army Corps of Engineers that rents space
                                                                   in the GAO headquarters building.

Table I.8: GAO’s Financial Highlights: Resource Information
(Dollars in millions)
                                                                                         Fiscal 2002           Fiscal 2003

 Total budgetary resources                                                                   $442.6                 $474.3

 Total outlays                                                                               $427.8                 $451.3

 Net cost of operations

       Goal 1: Well-being and financial security of the American people                      $178.3                 $186.4

       Goal 2: Changing security threats and challenges of globalization                      110.5                  122.0

       Goal 3: Transforming the federal government’s role                                     141.0                  144.9

       Goal 4: Maximizing the value of GAO                                                     25.3                   20.0

       Less reimbursable services not attributable to goals                                     (2.1)                 (2.2)

 Total net cost of operations a                                                              $453.0                 $471.1

 Actual full-time equivalents                                                                 3,210                  3,269

Source: GAO.

aThe  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.

24                                                                        GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                       PART I

The net cost of operating GAO during fiscal 2003         Figure I.12: Net Costs by Goal, Unadjusted
was approximately $471 million. As shown in                 Dollars in millions
figure I.11, expenses for salaries and related bene-        200
fits accounted for 79 percent of our net cost of
operations in fiscal 2003.

Figure I.11: Use of Funds by Category                       100

Percentage of total net costs
and benefits        79.0%
Building and
hardware maintenance
                                                                        Goal 1    Goal 2   Goal 3    Goal 4
services             10.2%
                                                             2000       153.4      97.0    134.6      19.8
Rent (space
and hardware)        3.6%
                                                             2001       161.1      93.4    139.5      20.7
                                                             2002       178.3     110.5    141.0      25.3
Depreciation         3.4%
                                                             2003       186.4     122.0    144.9      20.0
Other                3.8%
                                                         Source: GAO.

Source: GAO.
                                                         Figure I.13: Net Costs by Goal, Adjusted for
We report net cost of operations according to our        Inflation
four strategic goals, consistent with our strategic         Dollars in millions
plan. Activities in goals 1 and 2 were responsible
for most of the increase in our net cost of opera-
tions between fiscal 2002 and fiscal 2003. Goal 1
saw an increase due to expanded efforts in the area         150
of education, workforce, and income security. In
goal 2 additional resources were focused on issues          100
in the area of military capabilities and readiness.
Figure I.12 and I.13 show our net costs by goal for
fiscal 2000 through fiscal 2003. Figure I.12 shows              0
the costs unadjusted for inflation, while figure I.13                   Goal 1    Goal 2   Goal 3    Goal 4
shows the same costs in 2003 dollars, that is,               2000       169.6     107.2    148.8      21.9
adjusted for inflation.
                                                             2001       172.2      99.9    149.1      22.1
                                                             2002       184.4     114.3    145.8      26.2
As these figures indicate, our first goal, under which
                                                             2003       186.4     122.0    144.9      20.0
we organize our work on challenges to the well-
                                                         Source: GAO.
being and financial security of the American peo-
ple, accounted for the largest share of the costs. We    Audit Advisory Committee
expect this goal to continue to represent the largest    Assisting the Comptroller General in overseeing the
share of our costs.                                      effectiveness of GAO’s financial operations is a
                                                         three-member external Audit Advisory Committee.
                                                         The committee’s report for fiscal 2003 appears in
                                                         Part III of this report after our financial statements
                                                         and accompanying notes. Current members of the
                                                         committee are

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                  25

■    Sheldon S. Cohen (Chairman), a certified public               include $460.3 million in direct appropriations and
     accountant and practicing attorney in                         estimated revenue of $6 million from reimbursable
     Washington, D.C.; a former Commissioner and                   audit work and rental income. Our fiscal 2004
     Chief Counsel of the Internal Revenue Service;                resources represent a modest 2 percent increase
     and a Senior Fellow of the National Academy of                over fiscal 2003 resources—primarily for mandatory
     Public Administration.                                        pay and uncontrollable costs. Savings from nonre-
                                                                   curring fiscal 2003 investments will help offset
■    Edward J. Mazur, CPA; Member of the
                                                                   needed funds for further investments in critical
     Governmental Accounting Standards Board; Vice
                                                                   areas, such as security and human capital.
     President for Administration and Finance of
     Virginia State University; former State Comptroller
                                                                   Table I.9 provides an overview of how our budget-
     of Virginia; and a former Controller of the Office
                                                                   ary and human capital resources will be allocated
     of Federal Financial Management in OMB.
                                                                   among our four strategic goals.
■    Charles O. Rossotti, a former Commissioner of
     the Internal Revenue Service and co-founder of                During fiscal 2004, we plan to sustain our invest-
     American Management Systems, Inc., an                         ments in maximizing the productivity of our work-
     international business and information                        force by continuing to address key management
     technology consulting firm.                                   challenges: human capital and information and
                                                                   physical security. We will continue to take steps to
Planned Resources to Achieve Our Fiscal 2004                       “lead by example” within the federal government in
Performance Goals                                                  connection with these and other critical manage-
We have received budget authority of $466.3 mil-                   ment areas. On the human capital front, to ensure
lion for fiscal 2004 to maintain current operations                our ability to attract, retain, motivate, and reward
for serving the Congress as outlined in our strategic              high-quality staff, we plan to devote additional
plan and to continue initiatives to enhance our                    resources to our employee training and develop-
human capital; support business processes; and                     ment program. We will target resources to continue
ensure the safety and security of our staff, facilities,           initiatives to address skill gaps, maximize staff pro-
and information systems. This funding level will                   ductivity, and increase staff effectiveness by updat-
allow us to maintain our authorized level of 3,269                 ing our training curriculum to address
full-time equivalent (FTE) personnel. Our resources                organizational and technical needs and training
Table I.9: Fiscal 2004 Budgetary Resources by Strategic Goal
(Dollars in millions)
 Strategic goal                                                                                        FTEs     Amount

 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.        1,236      $177.1

 Goal 2
      Provide timely, quality service to the Congress and the federal government to respond to
      changing threats and the challenges of global interdependence.                                    920       131.8

 Goal 3
      Help transform the federal government’s role and how it does business to meet 21 st century
      challenges.                                                                                       967       138.6

 Goal 4
      Maximize the value of GAO by being a model federal agency and a world-class professional
      services organization.                                                                            146        18.7

 Total                                                                                                3,269      $466.3

Source: GAO.

Note: Numbers do not total due to rounding.

26                                                                     GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                           PART I

new staff. Also, to enhance our recruitment and            Strategies for Achieving Our Goals and
retention of staff, we will continue to offer the stu-     Coordinating with Others
dent loan repayment program and transit subsidy            As the audit, evaluation, and investigative arm of
benefit established in fiscal 2002. In addition, we        the Congress, we have a unique role to play. Within
will continue to focus our hiring efforts in fiscal        the legislative branch, we are the only agency with
2004 on recruiting talented entry-level staff.             staff in the field, conducting performance analyses
                                                           and financial audits among other congressionally
On the information security front, in fiscal 2004, we      requested activities, and reporting our findings not
plan to implement tools that will ensure a secure          only to our congressional clients but also to the
environment, detect intruders in our systems, iden-        American public. While we work with the Inspec-
tify appropriate users, and recover in the event of a      tors General at every federal agency, our engage-
disaster. We plan to apply additional intrusion-           ments differ from theirs in that ours are often more
detection software to our internal servers and com-        strategic and longer-range in nature, government-
plete our disaster recovery plan.                          wide or multiagency in scope, and initiated by
                                                           requests from the Congress.
We are continuing to make the investments neces-
sary to enhance the safety and security of our peo-        Attaining our goals and objectives rests, for the
ple, facilities, and other assets for the mutual benefit   most part, on providing professional, objective, fact-
of GAO and the Congress. In fiscal 2004, we plan to        based, fair and balanced, nonpartisan, and nonideo-
complete the installation of our building access con-      logical information. We develop and present this
trol and intrusion-detection system and supporting         information in a number of ways to support the
infrastructure and provide life-safety devices.            Congress in carrying out its constitutional responsi-
                                                           bilities, including:
In addition, we plan to continue initiatives designed
to further increase employees’ productivity, facili-       ■   evaluating federal policies and the performance
tate knowledge-sharing, maximize the use of tech-              of agencies;
nology, and enhance employee tools available at
                                                           ■   overseeing government operations through
the desktop. We also will continue to devote
                                                               financial and other management audits to
resources to reengineer the information technology
                                                               determine whether public funds are spent
(IT) systems that support business processes, such
                                                               efficiently, effectively, and in accordance with
as our engagement tracking system and our human
                                                               applicable laws;
capital operations.
                                                           ■   investigating whether illegal or improper
                                                               activities are occurring;
Strategies and Challenges                                  ■   analyzing the financing for government activities;
The Government Performance and Results Act                 ■   conducting constructive engagements in which
directs agencies to articulate not just goals, but also        we work proactively with agencies, when
strategies for achieving those goals. As detailed in           appropriate, to provide advice that may assist
the following sections, our strategies primarily               their efforts toward positive results;
emphasize conducting audits, evaluations, analyses,
research, and investigations and providing the infor-      ■   providing legal opinions that determine whether
mation from that work to the Congress and the                  agencies are in compliance with applicable laws
public in a variety of forms. Our strategies also              and regulations;
emphasize the importance of two overarching                ■   conducting policy analyses to assess needed
approaches: (1) working with other organizations               actions and the implications of proposed actions;
on crosscutting issues and (2) effectively addressing          and
the challenges to achieving our agency’s goals—
                                                           ■   providing additional assistance to the Congress in
that is, those internal and external factors that could
                                                               support of its oversight and decision-making
impair our performance.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                      27

The performance goals listed in Part II of this report      ■   In February 2003, we and the National Academies
lay out the work we planned to complete by the                  hosted a forum with national leaders and experts
end of fiscal 2003 using the strategies above. In our           on key national indicators. Among other things,
annual performance plan for fiscal 2005, we will                forum participants (1) examined how the world’s
issue our performance goals covering the work we                leading democracies measure national
plan to do in fiscal 2004 and fiscal 2005.                      performance, (2) explored what the United States
                                                                might do to improve its approach, (3) identified
Because achieving our strategic goals and objectives            important areas to measure in assessing
also requires strategies for coordinating with other            performance, and (4) discussed how the United
organizations with similar or complementary mis-                States’ approaches might be led and
sions, we                                                       implemented.
                                                            ■   In August 2003, we launched the speakers’ series
■    use advisory panels and other bodies to inform
                                                                “Conversations on 21st Century Challenges”
     our strategic and annual work planning and
                                                                wherein prominent leaders discuss emerging
■    initiate and support collaborative national and            themes and their implications for public policy.
     international audit, technical assistance, and other
                                                            Advisory boards and panels also support our strate-
     knowledge-sharing efforts.
                                                            gic and annual work planning by alerting us to
These two types of strategic working relationships          issues, trends, and lessons learned across the
allow us to extend our institutional knowledge and          national and international audit community that we
experience and, in turn, to improve our service to          should factor into our own work. These groups
the Congress and the American people. Our office            include the Comptroller General’s Advisory Board,
of Strategic Planning and External Liaison takes the        whose 40 members from the public and private sec-
lead on and provides strategic focus for our work           tors have broad expertise in areas related to our
with crosscutting organizations, while our research,        strategic objectives. The board meets with our lead-
audit, and evaluation teams lead our work with              ership annually to share its views on our strategic
most of the issue-specific organizations.                   direction and specific initiatives. Through the
                                                            National Intergovernmental Audit Forum, chaired
Strategic and Annual Work Planning                          by the Comptroller General, and 10 regional inter-
Through a series of forums, advisory boards, and            governmental audit forums, we consult regularly
panels, and a newly established speakers’ series, we        with federal Inspectors General and state and local
gather information and perspectives for our strate-         auditors. In addition, through the Domestic Work-
gic and annual performance planning efforts. In fis-        ing Group, the Comptroller General and the heads
cal 2003, the Comptroller General convened various          of 18 federal, state, and local audit organizations
experts from the public and private sectors in a            exchange information and seek opportunities to
series of forums and panels intended to enhance             collaborate.
our understanding of emerging issues and to iden-
tify opportunities for action:                              We also work with a number of issue-specific and
                                                            technical panels to improve our strategic and work
■    In November 2002, we issued a report that              planning, including the following:
     summarized the findings of a forum entitled
     Mergers and Transformation: Lessons Learned for        ■   The Advisory Council on Government Auditing
     a Department of Homeland Security and Other                Standards, provides us guidance on promulgating
     Federal Agencies.                                          auditing standards. The council played a
                                                                significant role in revising the June 2003
■    In December 2002, we convened a corporate
                                                                Government Auditing Standards
     governance forum to discuss challenges facing
                                                                (www.gao.gov/govaud/ybk01.htm), commonly
     regulators, the accounting profession, and boards
                                                                referred to as the “Yellow Book,” which was
     of directors in improving public confidence in
                                                                updated to redefine the types of audits and
     U.S. corporate governance and accountability
                                                                services covered by the standards, provide
                                                                consistency for certain requirements among all
                                                                types of audits, and strengthen the standards in

28                                                               GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                       PART I

    some areas. These standards articulate auditors’      countries meet annually to discuss mutual chal-
    responsibilities when examining government            lenges, share experiences, and identify opportuni-
    organizations, programs, activities, or functions     ties for collaboration with each other. The 2003
    and government assistance received by                 meeting featured a joint session with Office of Eco-
    contractors, nonprofits, and other                    nomic Cooperation and Development budget offi-
    nongovernment organizations. The council’s            cials on long-range fiscal challenges and an
    work ensured that the revised standards would         initiative in which members will participate in peer
    be generally accepted and feasible.                   reviews of each others’ audit institutions.
■   The Accountability Advisory Council, made up of
                                                          Collaborating with Others
    experts in the financial management community,
    advises us on audits of the U.S. government’s         By collaborating with numerous organizations and
    consolidated financial statements and emerging        individuals, we have strengthened professional
    issues involving financial management and             standards, provided technical assistance, leveraged
    accountability reporting. In 2003, the council also   resources, and developed best practices. In our
    provided insights that were valuable in carrying      work with INTOSAI, GAO chairs the accounting
    out various GAO corporate governance studies          standards committee and is an active member of
    mandated by the Sarbanes-Oxley legislation.           INTOSAI’s auditing standards, internal control stan-
                                                          dards, and other technical committees. As a mem-
■   The Executive Council on Information                  ber of the public debt committee, we identified and
    Management and Technology, whose 19                   developed partnerships with the World Bank and
    members are experts from the public and private       the United Nations Conference on Trade and Devel-
    sectors and representatives of related professional   opment to design and deliver regionally based
    organizations, met in May 2003 to discuss high-       training programs for auditors and managers. We
    risk and emerging issues. The results of the          also publish INTOSAI’s quarterly International
    discussions on high-risk areas—modernization,         Journal of Government Auditing (www.into-
    cyber security, the Department of Homeland            sai.org/2_IJGA_.html) in five languages to further
    Security’s information technology, file sharing,      the global understanding of standards, best prac-
    and security and privacy issues–will be used to       tices, and technical issues. To help ensure that the
    support ongoing and planned work. The results         public sector perspectives are reflected in the Inter-
    of the discussions on emerging issues will be         national Federation of Accountants standards devel-
    used to support the development of an                 opment project, we collaborated closely with the
    overarching issues framework for our future IT        International Auditing and Assurance Standards
    work.                                                 Board and the World Bank to develop international
■   The Comptroller General’s Educators’ Advisory         auditing standards through an effort led by the
    Panel, composed of deans, professors, and other       National Audit Office of Sweden.
    academics from prominent universities across the
    United States, met with us in June 2003 to advise     To build capacity in national audit offices around
    the agency on recruiting, retaining, and              the world, we conduct an international fellows
    developing staff and strategic planning matters.      training program each year for mid- to senior-level
                                                          staff from other countries. In 2003, 16 fellows from
Internationally, we participate in the International      Africa, Asia, Latin America, the South Pacific, the
Organization of Supreme Audit Institutions (INTO-         Caribbean, and Eastern Europe spent about 4
SAI)—the professional organization of the national        months at GAO learning how we are organized to
audit offices of 184 countries. During fiscal 2003,       do our work, how we plan work, and what meth-
we led a 10-nation task force to develop a 5-year         odologies we use, particularly for performance
strategic plan—the first in INTOSAI’s 50-year his-        audits. As part of our strategy to promote continu-
tory. The plan’s framework was approved at the            ous learning and sustainability once the fellows
October 2002 Governing Board meeting and will be          return to their countries, we are working with major
circulated to all INTOSAI members for comment             donors—such as the World Bank and the U.S.
and approval in 2004. The Comptroller General also        Agency for International Development—to identify
leads the Auditor General Global Working Group,           or support relevant capacity building projects in fel-
in which the heads of our counterparts from 15            lows’ institutions. Our partnerships with the Inter-

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                  29

american Development Bank, the INTOSAI                        concerning alleged irregularities in contract
Development Initiative, and the Organization of               administration. The investigation identified
Latin American and Caribbean Audit Institutions               improper billing practices for open market items
resulted in the design and delivery of performance            by the contractor and poor government oversight
audit courses for our counterparts in Latin America.          of the $20 million in annual charges.
Plans are underway for additional training courses
                                                          ■   In October 2002, we issued a report on invasive
in environmental auditing and information technol-
                                                              species that was based on a close working
                                                              relationship with Canada’s Auditor General.
Among the other collaborative activities undertaken
                                                          Using Our Internal Experts
by our staff during fiscal 2003 were the following:
                                                          We coordinated extensively within our own organi-
                                                          zation on our strategic and annual performance
■    We collaborated with the Joint Financial
                                                          planning efforts, as well as on the preparation of
     Management Improvement Program principals in
                                                          our performance and accountability reports. Our
     fostering financial management reform
                                                          efforts are completed under the overall direction of
     governmentwide; with the Federal Accounting
                                                          the Comptroller General and the Chief Operating
     Standards Advisory Board in establishing
                                                          Officer. We relied on our Chief Financial
     generally accepted accounting principles for the
                                                          Officer/Chief Mission Support Officer and her staff
     federal government; and with the President’s
                                                          to provide key information, such as the financial
     Council on Integrity and Efficiency (PCIE), a
                                                          information that is included in Part III of this report.
     group primarily composed of presidentially
                                                          Her staff also coordinated with others throughout
     appointed Inspectors General in publishing and
                                                          the agency to provide the information on goal 4’s
     updating a joint Financial Audit Manual
                                                          results, which appears in Part II of this report, and
                                                          provided input on other efforts dealing with issues
■    Several GAO teams are conferring with the            that include financial management, budgetary
     Private Sector Council, a nonprofit, nonpartisan,    resources, training, and security. We obtained input
     public service organization committed to helping     on all aspects of our strategic and annual perfor-
     the federal government improve its efficiency,       mance planning and reporting efforts from each of
     management, and productivity through the             our engagement teams and organizational units
     cooperative sharing of knowledge. Council            through their respective Managing Directors, as well
     members have assisted us on a number of              as other staff responsible for planning or engage-
     engagements. For example, the Council is             ment activities in the teams. Our Quality and Con-
     assisting a GAO team that is examining “best         tinuous Improvement staff prepared the report,
     practices” used by private sector companies to       ensuring, among other things, that the report was
     prepare for disastrous events while maintaining      responsive to comments and suggestions received
     operations.                                          from the Association of Government Accountants
■    As part of an effort led by the State Auditor of     and George Mason University’s Mercatus Center. In
     Louisiana (that included the Office of Inspector     short, we involved virtually every part of GAO and
     General of the U.S. Department of Transportation     used our internal expertise to assist our planning
     and the State Auditors of Arkansas, Connecticut,     and reporting efforts.
     New York, and Rhode Island), we helped to
     develop a guide for evaluating security efforts      Addressing Management Challenges That
     within the nation’s transportation system.           Could Affect Our Performance
                                                          At GAO, management challenges are identified by
■    In February 2003, we issued a report—developed       the Comptroller General and the agency’s senior
     with the participation of auditors from 11 states–   executives through the agency’s strategic planning,
     that contained recommendations for improving         management, and budgeting processes. Our
     the security of the food system.                     progress in addressing the challenges is monitored
■    Our Office of Special Investigations conducted a     through our annual performance and accountability
     joint investigation with the Department of           process. Under our strategic goal 4, we establish
     Veterans’ Affairs Office of Inspector General        performance goals focused on each of our manage-

30                                                             GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                        PART I

ment challenges, track our progress in completing          profile of our staff to ensure we have the appropri-
the key efforts for those performance goals quar-          ate resources strategically placed to pursue our
terly, and report whether the performance goals            goals and objectives now and in the future.
have been met or not met at 2-year intervals. We
have also asked our Office of Inspector General to         We also built on our fiscal 2002 accomplishments in
examine management’s assessment of the chal-               attracting and retaining a diverse workforce with
lenges and the agency’s progress in addressing             the knowledge, skills, and abilities to meet the new
them. Its assessment can be found in this report in        century’s challenges. We expanded the scope of our
appendix 2.                                                college recruiting and hiring program to focus on
                                                           gaps identified during our workforce planning
In fiscal 2003, we had three major management              effort. The Human Capital Office worked with
challenges. We have reported in the past on our            teams to help identify and reach prospective gradu-
efforts to address two of these challenges—human           ates with the required skill sets. In addition, we
capital and physical security. Although we have            focused the intern program on attracting student
made progress with both of these challenges, we            interns with the skill sets needed for our analyst
still have work to do. The third challenge, informa-       positions since many of our interns are hired as
tion security, was added in fiscal 2003. This chal-        entry-level employees upon successful completion
lenge replaced a previous IT challenge because we          of their internships. To promote the retention of
had completed our work on that original manage-            staff with critical skills and 1 to 3 years of GAO
ment challenge. However, independent reviews of            experience, we continued to utilize recent legisla-
our information security program indicated that we         tion (5 U.S.C. 5379) authorizing federal agencies to
needed to further tighten IT security. Moreover, the       offer student loan repayments in exchange for com-
potential for harm and threats to IT systems and           mitments to federal service. In accordance with
information assets has never been greater, nor has         Office of Personnel Management regulations, we
there ever been a greater need for planning for            disbursed repayments of between $4,000 and
disaster recovery and continuity of operations given       $6,000 directly to lending institutions during fiscal
continuing terrorist threats and events.                   2003 for 247 employees, each of whom signed a 3-
                                                           year agreement to continue working at GAO.
The Human Capital Challenge
Given our role as a key provider of information and        Finally, we have requested that the Congress enact
analyses to the Congress, maintaining the right mix        additional human capital legislation for us that
of technical knowledge and expertise as well as            would (1) make permanent our 3-year authority to
general analytical skills is vital to achieving our mis-   offer early outs and buyouts, (2) allow us to set our
sion. We spend about 80 percent of our resources           own annual pay adjustment system separate from
on our people, but without excellent human capital         the executive branch, (3) permit us to set the pay of
management, we could run the risk of being unable          an employee demoted as a result of workforce
to meet the expectations of the Congress and the           restructuring or reclassification to keep his or her
nation. However, we are continuing to make signif-         basic pay but to set future increases consistent with
icant improvements in our human capital manage-            the new position’s pay parameters, (4) provide
ment. During fiscal 2003, we developed our first           authority to reimburse employees for some reloca-
formal and comprehensive strategic plan for human          tion expenses when that transfer has some benefit
capital. The purpose of the plan is to communicate         to us but does not meet the legal requirements for
both internally and externally GAO’s strategy for          reimbursement, (5) provide authority to place
becoming a model professional services organiza-           upper-level hires with fewer than 3 years of federal
tion, including how we plan to attract, retain, moti-      experience in the 6-hour leave category, (6) autho-
vate, and reward a high-performing and top-quality         rize an executive exchange program with the pri-
workforce. GAO expects to publish the plan early           vate sector, and (7) change our legal name from the
in fiscal 2004 and make it available on GAO’s Web          “General Accounting Office” to the “Government
site. We also fully implemented our workforce plan-        Accountability Office.”
ning process, addressing the size, deployment, and

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                   31

The Physical Security Challenge                          and protect the security of our information systems
In the aftermath of the September 11 terrorists          and data. Our information security plan is in appen-
attacks, subsequent anthrax incidents, and the           dix 4. As part of our continuing disaster recovery
recent Operation Enduring Freedom and Afghani-           efforts and emergency preparedness plan, we
stan operations, our ability to provide a safe and       upgraded the level of telecommunications services
secure workplace was challenged. Protecting our          between our disaster recovery site and headquar-
people and our assets is critical to our ability to      ters, expanding our remote connectivity capability,
carry out our mission. We have devoted additional        and improving response time and transmission
resources to this area and have implemented mea-         speed. To further protect our data and resources,
sures, such as upgrading the headquarters fire           we drafted an update to our Information Systems
alarm system and installing a parallel emergency         Security Policy, issued network user policy state-
notification system. We have also designed several       ments, implemented hardware and software
security enhancements to be installed in fiscal 2004,    upgrades to harden our internal network security,
such as vehicle restraints at the guard ramps; ballis-   significantly expanded our efforts in intrusion
tic-rated security guard booths; vehicle surveillance    detection, and addressed concerns raised during the
equipment at the garage entrances; and state-of-the-     most recent network vulnerability assessment. Fur-
art electronic security comprised of intrusion detec-    ther, we deployed computer software to our senior
tion, access control, and closed-circuit surveillance    management that provides authoritative and timely
systems. We have made great progress in enhancing        assurance that critical e-mail has been received
our communication with staff. We distributed a           intact—without changes or modifications.
Shelter in Place plan, provided Emergency Pre-
paredness briefings for staff, and conducted the         Mitigating External Factors That Could Affect
third annual Security Fair to disseminate informa-       Our Performance
tion on security at the workplace and at home. We        Several external factors could affect the achieve-
drafted an Emergency Response Handbook for               ment of our performance goals, including national
headquarters occupants. To further increase the          and international developments and the resources
security of the headquarters building, we have           we receive. Limitations imposed on our work by
obtained access to the National Crime Information        other organizations or limitations on the ability of
Center Database to conduct minimal investigations        other federal agencies to make the improvements
on visitors, vendors, couriers, and non-GAO              we recommend are additional factors that could
employees entering the building. To ensure our           affect the achievement of our goals.
continuity of operations should GAO have to vacate
its headquarters due to an emergency, we made            As the Congress focuses on unpredictable events—
arrangements for an alternate facility to house our      such as the global threat posed by sophisticated ter-
operations. Finally, we completed a study of per-        rorist networks, international financial crises, or nat-
sonal protective equipment and based on the result-      ural disasters—the mix of work we are asked to
ing decision paper, we have purchased escape             undertake may change, diverting our resources
hoods, bottled water, and glow sticks. Staff will be     from some of our strategic objectives and perfor-
trained in the use of this equipment during fiscal       mance goals. We can and do mitigate the impact of
2004.                                                    these events on the achievement of our goals in
                                                         various ways:
The Information Security Challenge
Protecting our information assets and ensuring           ■   We are alert to possibilities that could shift the
information systems security and disaster recovery           Congress’s and, therefore, our priorities.
that allow for continuity of operations is a critical    ■   We continue to identify in our products and
requirement for us. The risk is that in an emer-             meetings with the Congress conditions that could
gency, our information could be compromised and              trigger new priorities.
we would be unable to respond to the needs of the
Congress. In light of this risk, and in keeping with     ■   We quickly redirect our resources, when
our goal of being a model federal agency, we have            appropriate, so that we can deal with major
a wide range of initiatives underway to strengthen           changes that do occur.

32                                                            GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                    PART I

■   We maintain broad-based staff expertise so that   we had the authority to access or inspect records or
    we can readily address emerging needs.            other materials held by other countries or, gener-
                                                      ally, by the multinational institutions that the United
■   We perform self-initiated research on a limited
                                                      States works with to protect its interests. Conse-
    number of selected topics.
                                                      quently, our ability to fully assess the progress
Another external factor is the extent to which we     being made in addressing national and homeland
can obtain access to certain types of information.    security issues may be hampered, and because
With concerns about operational security being        some of our reports may be subjected to greater
unusually high at home and abroad, we may have        classification reviews than in the past, their public
more difficulty obtaining information and reporting   dissemination may be limited. We will work with
on sensitive issues. Historically, our auditing and   the Congress to identify both legislative and nonleg-
information gathering has been limited whenever       islative opportunities for strengthening our access
the intelligence community is involved, nor have      authority as necessary and appropriate.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                               33

Part II:

How We Assess Our Performance

The hierarchy of elements in our strategic plan                     almost all of our products when we promised to,
establishes the structure we use in discussing our                  that we are being invited to present testimony
performance. As shown in figure II.1, at the top of                 before the Congress and are responding to those
the hierarchy are our four broad strategic goals.                   requests, that we are making a sufficient effort to
Below them are 21 strategic objectives that are                     recommend improvements to the conditions we
more specific and that are, in turn, supported by 98                have uncovered during our fieldwork, that our rec-
performance goals, which articulate the strategies                  ommendations are being implemented by the agen-
we will use for achieving the higher-level objectives               cies to which they are directed, and, ultimately, that
and goals as well as 7 annual performance mea-                      implementation has led to benefits for the American
sures. At the lowest level of the hierarchy are more                people.
than 400 key efforts that describe the work we must
do to implement the strategies laid out in the per-
formance goals. This section explains how we                        Our Strategic Management
assess our agency’s performance using this structure
and how our annual measures help us gauge
whether we are making progress toward our strate-                   Our work is aligned under four strategic goals that
gic goals.                                                          are designed to fulfill our mission to support the
                                                                    Congress in meeting its constitutional responsibili-
                                                                    ties and to help improve the performance and
Figure II.1: GAO’s Strategic Planning                               ensure the accountability of the federal government
Elements and Performance Measures
                                                                    for the benefit of the American people. The first
                                                                    three of the strategic goals focus outwardly on the
                                                                    nature of the information and recommendations we
                                    Strategic                       provide. We often refer to these as our external
                                    Goals (4)
                                                                    goals as opposed to the fourth strategic goal, which
                                Strategic                           is our internal goal. This internal goal focuses on
                              Objectives (21)                       improving our own agency so that it can perform
                                                                    better under the external goals and also serve as a
                        2-Year               1-Year
                      Performance          Performance              model for others. The four strategic goals are as fol-
                       Goals (98)          Measures (7)
                                               Financial and
                                              Other Benefits;
                                          Past Recommendations
                                                                    ■   Provide timely, quality service to the Congress
               Key Efforts (400+)
                                            Implemented; New            and the federal government to address current
                                           Made; Products with          and emerging challenges to the well-being and
                                            Recommendations;            financial security of the American people.
                                          Testimonies; Timeliness
                                                                    ■   Provide timely, quality service to the Congress
Source: GAO.                                                            and the federal government to respond to
If, for instance, we are providing timely, quality ser-                 changing security threats and the challenges of
vice to the Congress and the federal government to                      global interdependence.
address current and emerging challenges to the                      ■   Help transform the federal government’s role and
well-being and financial security of the American                       how it does business to meet 21st century
people as our first strategic goal calls for us to do,                  challenges.
the indicators should show that we are delivering

36                                                                       GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                          PART II

■   Maximize the value of GAO by being a model              tegic objective on health care needs of an aging and
    federal agency and a world-class professional           diverse population. One of these—to evaluate
    services organization.                                  Medicare reform, financing, and operations—has
                                                            six key efforts, among them analyzing the potential
Each of the four strategic goals is supported by a set
                                                            consequences of Medicare structural reforms and
of strategic objectives. (The framework diagram on
                                                            assessing the effects of expanding managed care in
page 3 provides an at-a-glance summary of all the
strategic goals and objectives.) Under strategic goal
1, for instance, are eight strategic objectives that call
                                                            At the conclusion of each 2-year cycle, we assess
for us to address issues that range from health care
                                                            whether we have met these performance goals. If
needs and financing to a secure and effective
                                                            we have met most of our performance goals, we
national physical infrastructure. All together, we
                                                            have made progress in achieving our strategic
have 21 strategic objectives. Our organizational
                                                            objectives and the broader strategic goals. To assess
units typically contribute to the achievement of
                                                            the performance goals, we examine the work com-
more than one strategic objective, with some work-
                                                            pleted under the performance goal’s key efforts. For
ing in more than one strategic goal as well. This
                                                            a performance goal to be met, the responsible
matrixing allows us more flexibility in deploying the
                                                            senior executive considers the amount of work con-
agency’s resources to meet congressional requests
                                                            ducted and/or recommendations made for each key
on complex issues.
                                                            effort as well as any other assistance provided to
                                                            the client or customer that is related to these efforts.
Every 2 years, as a new Congress convenes, we
                                                            These senior executives then judge whether the
revisit our goals and objectives through an update
                                                            work completed collectively for all key efforts actu-
of our strategic plan. The update includes an “envi-
                                                            ally achieved the performance goal.
ronmental scan” involving staff at headquarters in
Washington, D.C., and in 11 field offices. During the
                                                            Results of the 2-year cycle that ended with the close
scan, we gather and distill information about trends
                                                            of fiscal 2003 on September 30 are detailed in this
and issues likely to have a critical effect on the lives
                                                            report. At the start of fiscal 2004, we will initiate a
of Americans. The information from the scan is
                                                            new 2-year cycle. To determine the performance
combined with information developed in each of
                                                            goals for the next cycle, we will draw from our stra-
our organizational units about the Congress’s likely
                                                            tegic planning effort that is underway. We generally
needs, the federal government’s most pressing chal-
                                                            carry forward any unmet performance goals unless
lenges, and the strategies we can use to address
                                                            they are no longer relevant to the Congress’s and
these needs and challenges in the near and long
                                                            the nation’s needs. We also carry forward perfor-
terms. Key to the update process is active consulta-
                                                            mance goals that reflect a continued focus of our
tion with Members of the Congress and their staffs
                                                            work and we include new performance goals based
and an open comment period during which the
                                                            on anticipated future needs of the Congress and our
Congress; members of the accountability commu-
                                                            internal customers. We will evaluate our progress
nity at the federal, state, and local levels; members
                                                            on the new performance goals at the conclusion of
of our own staff; and the public can suggest
                                                            fiscal 2005.
improvements to the draft plan.

When the final plan is issued, it contains not only
our strategic goals and objectives but also our strat-      Our Annual Performance
egies for achieving them—strategies that take the           Measures
form of performance goals that support each strate-
gic objective. (To view our current strategic plan, go      We measure the progress of the agency as a whole
to www.gao.gov/sp/html/splan02.html.) These per-            by using seven annual measures (see table II.1) to
formance goals are further defined by sets of key           assess our staff’s efforts to provide the kind of infor-
efforts, which currently number more than 400 for           mation and recommendations that will lead to ben-
the agency as a whole. (To view our current key             efits to the American people. We also use all of
efforts, go to www.gao.gov/sp/spsupp.html). For             these measures except for two—new products with
instance, seven performance goals support our stra-         recommendations and timeliness— to track

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                      37

Table II.1: GAO’s Annual Performance Measures
 Measure                              Indicates…

 Financial benefits                   Has our work provided financial benefits for the American people in the form of
                                      reduced or avoided costs, higher revenues, or better application of resources?

 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 written 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

 Timeliness                           Do we deliver most of our products to our requesters when agreed?

Source: GAO.

progress on each of our external strategic goals             Both of the benefits measures may come into play
(goals 1, 2, and 3). Together, this array of annual          years after our people have completed work and
indicators helps our senior executives and manag-            reported our findings and recommendations for
ers determine where we are succeeding in our mis-            improvements to government accountability, opera-
sion and where we need to do more.                           tions, or services. For benefits to accrue from our
                                                             work, federal agencies or the Congress must act on
In discussing our performance, we usually present            our findings and recommendations, which often
the longer-term outcomes first by looking at finan-          takes time. We then must be able to observe and
cial and other benefits and then looking at the indi-        document the results of those actions, which takes
cators that show the flow of newer work as it                additional time. Tabulating the benefits of our work
moves toward the stage at which it may provide               helps demonstrate the value we provide in return
benefits. Hence, the first three measures shown in           for the appropriations we receive and it also helps
table II.1 provide data on results that were achieved        focus our people on the need to design engage-
over a period of time, and the remaining measures            ments in ways that have the potential to produce
provide data on work completed in fiscal 2003.               benefits in the future.

The financial and other benefits for the nation that         Measuring the rate at which past recommendations
we report may take several forms. They may reflect,          have been implemented is an interim measure that
for instance, federal dollars freed up for other pur-        shows the percentage of recommendations that
poses because the Congress or federal agencies               were made 4 years ago and have been acted on by
used our findings or recommendations to make                 the agency to which they were directed. Assessing
government operations more efficient, less waste-            the status of “open” recommendations goes on
ful, or less subject to potential abuse. Or they may         throughout the year and is the responsibility of the
reflect instances in which our findings or recom-            unit that developed the recommendations (to see
mendations led to higher revenues for the govern-            what recommendations are currently open, go to
ment through asset sales or changes in tax laws or           www.gao.gov/openrecs.html). The staff close rec-
user fees. But, they may also reflect federal pro-           ommendations once implementation is documented
grams that serve Americans better because our find-          or, if implementation is not likely, close them as
ings and recommendations have helped to make                 unimplemented. This assessment process not only
them more accountable, responsive, and efficient—            paves the way for a later examination of any bene-
a type of benefit that cannot be measured in mone-           fits that implementation may have produced, it also
tary terms.                                                  prompts our staff to discuss implementation with

38                                                                GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                    PART II

the federal agencies involved, alerts our staff to     oversight or deliberating legislation. We assess our
areas where they may need to do more work to get       ability to meet that challenge by tracking the num-
intended results, and reinforces the need to make      ber of hearings at which our executives present tes-
recommendations that are likely to be implemented      timony. This measure serves as an indicator of how
because they are clearly stated, feasible, and cost-   responsive we are to testimony requests, which
effective. We measure the implementation rate for      require fast preparation of brief but information-rich
recommendations made 4 years ago because prior         presentations. Of course, the Congress itself deter-
experience has shown that recommendations often        mines the number of hearings it will conduct in a
take several years to be put in place. At the same     year and thus controls the number of possible
time, if a recommendation has not been imple-          opportunities we have to earn places at the witness
mented within 4 years, it is not likely to be imple-   tables.
                                                       Our final annual measure—timeliness—is, like the
Because providing recommendations that can be          testimonies measure, an indicator of the quality of
implemented is an important part of our work for       service we provide to our congressional clients.
the Congress and helps to improve how the gov-         However good our information and recommenda-
ernment functions, we encourage staff to design        tions may be, if what we provide reaches those
engagements that will allow them not only to           who need it too late to be useful, we have failed in
describe the conditions they find but also to recom-   our mission to support the Congress. We assess
mend improvements. We, therefore, count the num-       timeliness by comparing the date on which a spe-
ber of recommendations made each year and, at the      cific product is actually delivered with the date our
agencywide level, calculate the percentage of prod-    managers agreed with their congressional clients to
ucts that contain recommendations.                     deliver the product.

One essential way we fulfill our mission of support-   In the following sections, we discuss what our fiscal
ing the Congress is to present information directly    2003 results for these measures say about our per-
to the congressional committees that are conducting    formance.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                39
                Goal 1                                                  Goal 1’s Cost: $186.4 Million           39% of GAO’s Total

                                     Goal 1                                    Goal 2                          Goal 3               Goal 4

                           Well-being and financial
                         security of American people


                        $23.6 billion in financial benefits
                        - Recommended that expenditure weights for the Consumer Price Index be updated biannually, $9.2 billion
                        - Identified a Medicaid loophole that was subsequently closed, $5.9 billion
                        - Improved the Department of Housing and Urban Development's (HUD) management of unexpended
                          balances, $3.4 billion
                        - Determined that increased Medicare payments to skilled nursing facilities had little effect on nurse/patient
                          ratios, $1 billion
                        - Recovered overpayments in the Supplemental Security Income (SSI) program, $990 million
                        - Contained federal disability insurance costs, $600 million
                        - Additional financial benefits, $2.5 billion

                        217 other benefits
                        - Helped ensure the effectiveness of the smallpox vaccination program
                        - Recommended steps that financial regulators could take to fully recover from the September 11 attacks
                        - Advised transportation officials in many transportation modes on developing safety and security plans and
                        - 214 additional benefits

                        557 new recommendations made
                        - Ensure effective implementation of the No Child Left Behind Act
                        - Improve financial accountability at the Small Business Administration
                        - Increase training for food inspection personnel
                        - 554 additional improvements recommended

                        80 testimonies
                        - Child welfare
                        - Severe Acute Respiratory Syndrome (SARS)
                        - Transportation security
                        - FBI reorganization
                        - Nuclear waste cleanup
                        - 75 additional hearings on topics of national importance

Source: See Image Sources.
                                                                                                         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

Our first strategic goal upholds our mission to sup-
port the Congress in carrying out its constitutional
responsibilities by focusing on work that helps
address the current and emerging challenges affect-
ing the well-being and financial security of the
American people and American communities. Our
eight objectives for this goal are to support congres-
sional and federal efforts on

■   the health care needs of an aging and diverse        ■   led to better implementation of the No Child Left
    population,                                              Behind Act of 2001, by which the Congress
                                                             sought to increase accountability for states and
■   the education and protection of the nation’s
                                                             school districts to improve the academic
                                                             achievement of millions of students (see app. 1,
■   the promotion of work opportunities and the              items 1.9 and 1.10);
    protection of workers,
                                                         ■   raised awareness of the risks associated with the
■   a secure retirement for older Americans,                 single-employer pension insurance program that
■   an effective system of justice,                          is operated by the Pension Benefit Guaranty
                                                             Corporation (PBGC)—a step designed to spur
■   the promotion of viable communities,                     congressional and agency actions to strengthen a
■   responsible stewardship of natural resources and         program that insures the pension benefits of over
    the environment, and                                     34 millions Americans in more than 30,000
                                                             private-defined benefit plans (see app. 1, item
■   a secure and effective national physical                 1.19);
                                                         ■   reported on our observations of the
To accomplish our work under these strategic                 transformation of the FBI, which in the wake of
objectives, we conducted audits, analyses, and eval-         September 11 has been reorganizing to focus
uations at every major federal agency and devel-             more effectively on counterterrorism and
oped reports and testimonies on the efficacy and             counterintelligence (see app. 1, item 1.27);
soundness of those programs in response to con-
gressional requests and mandates. For example,           ■   identified critical security challenges in all realms
work under this goal                                         of transportation—air, surface, and maritime—
                                                             and offered recommendations to help mitigate
■   helped focus attention on improving the quality          the risks and enhance the government’s
    of care in the nation’s nursing homes, which             effectiveness in ensuring transportation safety
    provide care for about 1.7 million elderly and           (see app. 1, items 1.43, 1.44, and 1.47); and
    disabled residents in about 17,000 facilities (see   ■   highlighted federal entities whose missions and
    app. 1, item 1.1);                                       ways of doing business require modernized
                                                             approaches—among them the Postal Service, the
                                                             General Services Administration, and the Coast

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                     41

Table II.2: Annual Measures and Targets for Strategic Goal 1
                                              1999      2000       2001       2002                                       2004
 Performance measure                         Actual    Actual     Actual     Actual    Target     Actual       Met?    Target a

 Financial benefits (dollars in billions)     $13.8      $14.1      $8.9     $24.1b     $21.2         $23.6      Yes       $23.3

 Other benefits                                 140        182       210        226       208          217       Yes        215

 Past recommendations implemented              72%        72%       71%       72%        77%          71%         No       79%

 New recommendations made                       350        435       396        524       363          557       Yes        328

 Testimonies                                    123        131          73      111        85           80        No         77

Source: GAO.

aOn the basis of past performance and expected future work, we revised these targets after we issued our fiscal 2004

performance plan. The original targets were financial benefits, $21.3 billion; other benefits, 216; past recommendations
implemented, 77 percent; recommendations made, 363; and testimonies, 90.

b Between   fiscal 2001 and fiscal 2002, we changed our methodology for tabulating financial benefits. This change accounted
for part of the increase in the fiscal 2002 results. See table II.12 for details.

     Guard—and helping the Congress encourage and                 of testimonies for goal 1 has declined since fiscal
     oversee these entities’ transformation efforts (see          2000 while performance on other indicators has
     app. 1, item 1.48).                                          generally risen over time.
As shown in table II.2, we exceeded our fiscal 2003
targets for three of the five performance targets for
this strategic goal and did not meet two of the tar-              Financial Benefits
gets. Later parts of this section analyze each of our             The financial benefits reported for this goal in fiscal
quantitative performance measures, discuss the rea-               2003 totaled $23.6 billion, exceeding the target of
son for the unmet targets, and describe the targets               $21.2 billion by 11 percent. Six of our 10 accom-
for fiscal 2004. This analysis is followed by a discus-           plishments valued at over $500 million were
sion of our 2-year qualitative performance mea-                   achieved by this goal. Those 6 big-dollar accom-
sures, all but one of which were met for fiscal 2003.             plishments, reported in detail in the goal 1 section
                                                                  of appendix 1, accounted for 89 percent of the
To help us examine trends over time, we look at 4-                goal’s total. The largest of them, valued at $9.2 bil-
year averages for all but one of these measures.8                 lion, arose from our recommendation that updates
These 4-year averages, which are shown in                         to the Consumer Price Index be made more fre-
table II.3, minimize the effect of an atypical result in          quently than once every 10 years. Subsequent
any given year. This table indicates that the number              actions by the Bureau of Labor Statistics ultimately

Table II.3: Four-Year Averages for Strategic Goal 1
 Performance measure                                             1999          2000         2001              2002         2003

 Financial benefits (dollars in billions)                        $9.8         $11.8         $11.9             $15.2        $17.7

 Other benefits                                                   129           154             177            190          209

 New recommendations made                                         278           336             367            426          478

 Testimonies                                                      110           121             114            110           99

Source: GAO.

8We  do not look at averages for the percent of past recommendations implemented because the number of recommen-
dations made in each year is not constant.

42                                                                      GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                        PART II

resulted in lower estimates of federal expenditures
for some programs and higher estimates of federal
                                                          Additional Measures
revenues from other programs. The other financial         In addition to the benefits that accrued in fiscal
benefits for this goal stemmed from efforts such as       2003 from past work done under this goal, we
our work on the Medicaid and Medicare programs,           recorded the following results:
HUD’s budget request for fiscal 2001 and SSI’s debt
collection efforts.                                       ■   Past recommendations implemented—We
                                                              documented that the percent of
Because financial benefits often result from work             recommendations implemented for fiscal 2003
completed in prior years, we set our fiscal 2004 tar-         was 71 percent, results that fell short of the 77
get based on our assessment of the progress agen-             percent target for fiscal 2003. The shortfall was
cies are making in implementing our past                      due mainly to recommendations made in the
recommendations. We anticipate that the financial             homeland security and health care areas. Many of
benefits attributable to goal 1 will continue at the          the recommendations related to homeland
same level in the near future. We, therefore, have            security were made to several of the 22 legacy
set a target of $23.3 billion for fiscal 2004, a figure       agencies that were transferred to the Department
that is still high and will be challenging when com-          of Homeland Security (DHS) during its creation
pared with goal 1’s past annual results or with the           in fiscal 2003. The newly formed department has
4-year average results.                                       had difficulty determining and validating whether
                                                              many recommendations have been implemented.
                                                              Also, recommendations were often made to
Other Benefits                                                multiple agencies whose functions have now
                                                              been placed together to form new directorates
The other tangible benefits reported for goal 1 in            and bureaus. For example, in 1999, we made
fiscal 2003 included 199 actions taken by federal             several recommendations to both the
agencies to improve their services and operations in          Immigration and Naturalization Service in the
response to our work and another 18 in which                  Department of Justice and the Customs Service in
information we provided to the Congress resulted              the Department of Treasury. These functions now
in statutory or regulatory changes. This total of 217         fall under the newly formed Bureau of Customs
other benefits exceeded our target of 208 for the             and Border Protection within DHS. We will
year.                                                         continue to work with the new department on
                                                              ascertaining the status of our recommendations.
Among the key accomplishments in this category                Furthermore, many of the recommendations in
were enhancing air transportation safety, improving           our health care area were directed at the Centers
federal agencies’ management of real property that            for Medicare & Medicaid Services. Changes in
is worth hundreds of billions of dollars, helping the         leadership within the centers and the broader
Postal Service prevent cash and checks from getting           debate on major program reforms delayed the
lost, encouraging better radio frequency spectrum             agency’s implementation of our
management planning related to wireless technolo-             recommendations. We have asked the teams
gies, improving protections for veterans participat-          whose work contributes to the goal 1 results to
ing in research, assisting the Congress in Medicaid           continue their monitoring efforts to help meet the
formula enhancements, improving access to voting              target for fiscal 2004 in order to attain a 79-
and polling places, and increasing training for               percent rate of implementation—a target that is
workers involved in food inspection. These and                constant across all of our goals.
other accomplishments are reported in detail in the
goal 1 section of appendix 1.                             ■   New recommendations made—During fiscal
                                                              2003, we issued 557 new recommendations
For fiscal 2004, we set our target at 215 other bene-         under goal 1 for additional improvements to
fits, which is slightly above our fiscal 2003 target          government accountability, operations, and
and about the same as our fiscal 2003 actual perfor-          services, exceeding the target of 363 by 53
mance.                                                        percent. We exceeded our target partly because
                                                              of our increased emphasis on including in our

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                    43

     products constructive recommendations related           that was missed primarily due to external factors,
     to our work. In some areas, such as physical            such as the Congress’s need to focus on budget
     infrastructure, our work identified the need for        deliberations, which ran into the second quarter
     more recommendations than we have made in               of fiscal 2003 and delayed focusing on other
     the past. Among the recommendations made                issues that would have called for hearings. Also,
     were those to the Securities and Exchange               we believe that missing this target had no effect
     Commission to better prepare the U.S. financial         on our overall performance. For example, among
     markets for any future terrorist attacks, those to      the testimonies given were those on
     the Department of Education to effectively ensure       transportation security, the organization of the
     the implementation of the No Child Left Behind          FBI, and the SARS. On the basis of our
     Act, and those to both the Department of the            assessment of the potential need to testify on
     Interior and the Department of Agriculture’s            issues under this goal, we have set a target of
     Forest Service to provide better information in         presenting testimony at 77 hearings during fiscal
     rehabilitation treatments and emergency                 2004.
     stabilization of wildland fires. While we have
     some evidence that our performance in this area
     may continue to be high for fiscal 2004, we set a     Two-year Performance Goals
     lower target of 328 new recommendations partly
     because we find that agencies with which we           As shown in table II.4, at the close of fiscal 2003,
     have constructive relationships are making            we had met 36 of the 37 performance goals for this
     changes while our work is ongoing, preempting         strategic goal. We did not meet the performance
     the need for us to include a recommendation in        goal of assessing federal economic development
     our product. In addition, we anticipate that most     assistance and its impact on communities because
     of our recommendations during fiscal 2004 will        we did not receive requests to perform work in this
     relate to work performed under other goals. We        area and could not undertake self-initiated work
     will continue to examine our performance in this      due to resources being needed for work requested
     area to determine how to set future targets.          by the Congress in other areas. We have ongoing
                                                           work on federal empowerment zones and renewal
■    Testimonies—Our witnesses testified at 80             communities that will help us address this goal by
     congressional hearings related to this strategic      the end of fiscal 2005. In our fiscal 2004 perfor-
     goal, missing the fiscal 2003 target of 85            mance plan, we indicated that we plan to use the
     testimonies by 6 percent. As mentioned last year,     same performance goals for fiscal 2004 until the
     we did not believe the pace of hearings would be      completion of the update of our strategic plan in fis-
     the same in fiscal 2003 and had estimated the         cal 2004. We anticipate revising and publishing the
     target of 85 testimonies. Although we missed the      2-year performance goals for fiscal 2004 and fiscal
     target, which was set at an approximate level, we     2005 as part of our fiscal 2005 performance budget.
     believe it was a realistic estimate for fiscal 2003

44                                                             GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                       PART II

Table II.4: Strategic Goal 1’s Two-Year Performance Goals, Fiscal 2002 and Fiscal 2003
  Not Met    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

             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

             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

An effective system of justice

             Identify ways to improve federal agencies’ ability to prevent and respond to terrorist acts and other major

             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

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                   45

     Not Met   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

               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

               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

               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

Source: GAO.

Note: For a performance goal to be met, the responsible senior executive considers the amount of work conducted and/or
recommendations made for each key effort as well as any other assistance provided to the client or customer that is related to
these efforts. These senior executives then judge whether the work completed collectively for all key efforts actually achieved
the performance goal. To view the 160 key efforts for the 37 performance goals above, go to www.gao.gov/sp/spsupp.html.

46                                                                       GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                 PART II

             Goal 2                                                 Goal 2’s Cost: $122.0 Million                26% of GAO’s Total

                                      Goal 1                                Goal 2                             Goal 3               Goal 4
                                                                      Changing security
                                                                    threats and challenges
                                                                        of globalization

                        $7.1 billion in financial benefits
                        - Identified duplicative efforts that resulted in terminating the Army Crusader program, $3.9 billion
                        - Improved targeting of the Department of Defense's (DOD) emergency funds, $517 million
                        - Additional financial benefits, $2.68 billion

                        273 other benefits
                        - Helped to address challenges in constructing and implementing the Department of Homeland Security
                        - Improved military recruitment
                        - Increased knowledge of AIDS in Africa and other parts of the world
                        - Strengthened U.S. efforts to help other countries combat nuclear smuggling
                        - Improved security of nuclear weapons and radioactive sealed sources
                        - 268 additional benefits

                        846 new recommendations
                        - Improve contract management in the space program
                        - Better align military forces to ensure that missions are effectively carried out while maintaining military
                             readiness of participating forces
                        - Strengthen the U.S. visa process as an antiterrorism tool
                        - Improve collaboration among states to increase security of sealed radioactive sources
                        - 842 additional improvements recommended

                        48 testimonies
                        - Condition of overseas diplomatic facilities
                        - Chemical and biological defense
                        - Combating terrorism
                        - Security and safety of Americans at home and abroad
                        - 44 additional hearings on matters of national importance

Source: See Image Sources.
                                                                                                         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

As the world grows increasingly interconnected
through more open markets and rapidly developing
technology, globalization is creating new opportu-
nities 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 international instability sparked by
economic conditions, corruption, ethnic hatreds,
and nationalism. Consequently, the federal govern-       gressional requests. We then analyzed and distilled
ment is working to promote foreign policy goals,         the information we collected into hundreds of
sound trade policies, and other strategies to            reports, testimonies, and other types of information
advance the interests of the United States and its       services. For example, under this goal we
allies while also seeking to anticipate and address
the increasingly diffuse threats to the nation’s secu-   ■   built on previous efforts to identify the federal
rity and economy.                                            government’s vulnerability to cyber attacks and
                                                             intrusions (see app. 1, item 2.2);
Given the importance of those efforts to the nation
                                                         ■   provided snapshots of program performance and
and the Congress’s expressed needs for an objective
                                                             risk for DOD’s major weapons systems to help
look at the wide range of highly complex issues
                                                             the Congress gauge progress on individual
involved, our second strategic goal focuses on help-
                                                             programs (see app. 1, item 2.16);
ing the Congress and the federal government
respond to changing security threats and the chal-       ■   focused attention on security measures at the
lenges of global interdependence. Our four strategic         nation’s nuclear weapons laboratories that led the
objectives under this goal are to support congres-           Secretary of Energy to order a broad security
sional and federal efforts to                                overhaul at these facilities (see app. 1, item 2.18);
                                                         ■   reported on the costs and difficulties that had
■   respond to diffuse threats to national and global        been encountered in rebuilding efforts in other
    security,                                                countries and underscored the critical importance
■   ensure military capabilities and readiness,              of effective congressional oversight of U.S. efforts
                                                             to provide security in Iraq, reconstruct basic
■   advance and protect U.S. international interests,
                                                             infrastructure, create accountable government
                                                             institutions, foster conditions for democracy, and
■   respond to the impact of global market forces on         build a free-market economy (see app. 1, item
    U.S. economic and security interests.                    2.28);
To accomplish our work under these strategic             ■   created an electronic, searchable database of
objectives during fiscal 2003, we conducted field            China’s trade commitments for use as a tool to
work across five continents—Europe, Africa, Asia,            identify trade opportunities and monitor China’s
South America, and North America—to collect the              implementation of its agreements (see app. 1,
most relevant, direct evidence in response to con-           item 2.40);

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                     49

■    identified issues related to the consolidation of                  benefits and number of testimonies for goal 2 have
     public accounting firms that warrant ongoing                       remained fairly stable while documentation of other
     attention (see app. 1, item 2.41); and                             benefits derived from our work and new recom-
                                                                        mendations made related to this goal have risen.
■    provided a comprehensive overview of efforts to
     control illegal Internet gambling transactions (see
     app. 1, item 2.42).
                                                                        Financial Benefits
As shown in table II.5, we met or exceeded our fis-
cal 2003 target for all five of the strategic goal’s per-               The financial benefits reported for this goal in fiscal
formance targets. Later parts of this section analyze                   2003 totaled $7.1 billion, exceeding the target of
each of our performance measures and describe the                       $6.8 billion by roughly 4 percent. Most of the finan-
targets for fiscal 2004. This analysis is followed by a                 cial benefits (62 percent of the total) were attribut-
discussion of our 2-year qualitative performance                        able to two accomplishments valued at $500 million
measures, all of which were met for fiscal 2003.                        or more each. These accomplishments, which are
                                                                        described in detail in the goal 2 section of appendix
To help us examine trends over time, we look at 4-                      1, stemmed from engagements that helped DOD
year averages for all but one of our measures.9                         free billions of dollars for defense priorities by elim-
These 4-year averages, which are shown in                               inating waste or inefficiency. The largest of them,
table II.6, minimize the effect of an atypical result in                valued at $3.9 billion, arose from terminating the
any given year. Table II.6 indicates that financial                     Army’s Crusader artillery system, a step defense

Table II.5: Annual Measures and Targets for Strategic Goal 2
                                                   1999      2000       2001       2002                                       2004
           Performance measure                    Actual    Actual     Actual     Actual     Target        Actual    Met?   Target a

 Financial benefits (dollars in billions)           $3.0       $5.5     $10.5      $8.4b       $6.8          $7.1     Yes       $7.0

 Other benefits                                       80        129       188        218        200          273      Yes        244

 Past recommendations implemented                   65%        84%       81%        83%        77%          79%       Yes       79%

 New recommendations made                            255        376       618        618        521          846      Yes        602

 Testimonies                                          37         56          34        38        36           48      Yes         56

Source: GAO.

aOn the basis of past performance and expected future work, we revised these targets after we issued our fiscal 2004

performance plan. The original targets were financial benefits, $5.6 billion; other benefits, 200; past recommendations
implemented, 77 percent; recommendations made, 521; and testimonies, 43.

b Between      fiscal 2001 and fiscal 2002, we changed our methodology for tabulating financial benefits. See table II.12 for details.

Table II.6: Four-Year Averages for Strategic Goal 2
                    Performance measure                               1999          2000          2001              2002       2003

 Financial benefits (dollars in billions)                             $6.3           $6.0          $6.2             $6.9        $7.9

 Other benefits                                                         65             90            118            154          202

 New recommendations made                                              266           279             373            467          615

 Testimonies                                                            40             46             43             41           44

Source: GAO.

9We  do not look at averages for the percent of past recommendations implemented because the number of recommen-
dations made in each year is not constant.

50                                                                           GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                           PART II

officials took in response to our recommendation—
one that did not affect readiness but freed funds to
                                                          Additional Measures
meet other needs.                                         In addition to the benefits that accrued for the
                                                          American people in fiscal 2003 from past work
Given the large portion of the U.S. budget that           done under this goal, we recorded the following
defense spending consumes, we expect our work             results:
under this goal to continue to produce economies
and efficiencies that yield billions of dollars in        ■   Past recommendations implemented—We
financial benefits for the American people each               documented that the percent of
year. However, because financial benefits often               recommendations implemented for fiscal 2003
result from work completed in prior years, we set             was 79 percent, results that slightly exceeded the
our fiscal 2004 target at $7 billion—about the same           target of 77 percent. Because we expect that the
as fiscal 2003—based on our assessment of the                 implementation rate will be about the same
progress agencies are making in implementing our              across all goals, we are setting the target for fiscal
past recommendations that might yield financial               2004 at a 79-percent implementation rate.
                                                          ■   New recommendations made—We issued 846
                                                              new recommendations for additional
                                                              improvements to government accountability,
Other Benefits                                                operations, and services during fiscal 2003,
The other tangible benefits reported for goal 2 in            exceeding the target of 521 by about 62 percent.
fiscal 2003 included 257 actions taken by federal             We made more recommendations than expected
agencies to improve their services and operations in          for a number of reasons, including our
response to our work and another 16 in which                  recommendations related to IT issues more
information we provided to the Congress resulted              specific and making recommendations related to
in statutory or regulatory changes. This total of 273         DOD efforts that were not known when we set
other benefits exceeded our target of 200 for the             our targets for this measure. Among the
year by over 36 percent. Our success in this area             recommendations made were those to the
arose from our increased emphasis on follow-up                Secretary of Energy and the Administrator of the
efforts and increased monitoring of our progress              National Nuclear Security Administration to focus
toward the targets throughout the year. It is also the        more on certain key management and oversight
result of making recommendations that the agencies            issues, those to DOD to assess domestic military
agree with and implement. Among the most impor-               mission requirements and determine what steps
tant accomplishments under this goal were improv-             should be taken to structure U.S. forces to better
ing security measures at the nation’s nuclear                 accomplish domestic military missions while
weapons laboratories and helping combat AIDS                  maintaining proficiency for overseas combat. We
around the world. These and other accomplish-                 are raising the target for fiscal 2004 to 602 new
ments are reported in detail in the goal 2 section of         recommendations, which is lower than we
appendix 1.                                                   achieved this year, but is in line with our 4-year
Looking ahead, our assessments of the executive           ■   Testimonies—Our witnesses testified at 48
branch’s current efforts to implement our recom-              congressional hearings related to this strategic
mendations made under this goal led us to raise our           goal, exceeding by 33 percent our target of
target to 244. While this target is lower than our fis-       presenting testimony at 36 hearings. This
cal 2003 actual performance, it is well above the 4-          happened, in part, because of the increase in
year average for this measure.                                testimonies related to DOD’s proposal to lease
                                                              rather than purchase tanker aircraft—a proposal
                                                              that was not known until after we set our target—
                                                              and increased interest in size and condition of
                                                              U.S. embassies and protecting our borders.
                                                              Among other things, we testified on the
                                                              conditions of overseas diplomatic facilities,

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                       51

     chemical and biological defense systems, and
     sourcing and acquisition topics. Due to continued
                                                            Two-year Performance Goals
     interest in the efforts related to homeland security   As shown in table II.7, at the close of fiscal 2003,
     and the impact of the war in Iraq, we have             we met all 21 performance goals for this strategic
     increased our target for presenting testimony at       goal. In our fiscal 2004 performance plan, we indi-
     hearings to 56 for fiscal 2004.                        cated that we plan to use the same performance
                                                            goals for fiscal 2004 until the completion of the
                                                            update of our strategic plan in fiscal 2004. We antic-
                                                            ipate revising and publishing the 2-year perfor-
                                                            mance goals for fiscal 2004 and fiscal 2005 as part
                                                            of our fiscal 2005 performance budget.

52                                                              GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                          PART II

Table II.7: Strategic Goal 2’s Two-Year Performance Goals, Fiscal 2002 and Fiscal 2003
   Not Met     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 21 st 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

               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

Source: GAO.

Note: For a performance goal to be met, the responsible senior executive considers the amount of work conducted and/or
recommendations made for each key effort as well as any other assistance provided to the client or customer that is related to
these efforts. These senior executives then judge whether the work completed collectively for all key efforts actually achieved
the performance goal. To view the 95 key efforts for the 21 performance goals above, go to www.gao.gov/sp/spsupp.html.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                      53
              Goal 3                                                   Goal 3’s Cost: $144.9 Million             31% of GAO’s Total

                                       Goal 1                                   Goal 2                          Goal 3             Goal 4

                                                                                                           Transforming the
                                                                                                       federal government's role


                             $4.7 billion in financial benefits
                             - Identified best practices in acquiring defense services, $1.7 billion
                             - Modified funding of the Navy Marine Corps Intranet to allow implementation of management
                               controls, $779.9 million
                             - Additional financial benefits, $2.2 billion

                             553 other benefits
                             - Helped agencies improve audits of purchase card programs
                             - Assessed the risks of major weapons system acquisitions
                             - Strengthened government auditing standards
                             - Improved border security information sharing and U.S. border protection
                             - Reduced national security risks related to sales of excess DOD property
                             - 548 additional benefits

                             772 new recommendations made
                             - Contribute to congressional oversight of the administration of the income tax system
                             - Improve agency operations through human capital reforms at DOD, DHS, and across government
                             - 770 additional improvements recommended

                             56 testimonies
                             - Human capital
                             - Performance budgeting
                             - Government purchase cards
                             - Financial management weaknesses
                             - 52 additional hearings on topics of national importance

Source: See Image Sources.
                                                                                                       PART II

Goal 3 Results
Help Transform the Federal Government’s
Role and How It Does Business to Meet
21st Century Challenges

Our third strategic goal focuses on the collaborative
and integrated elements needed for the federal gov-
ernment to achieve results. The federal government
faces an array of challenges, including the national
response to terrorism, transition to a knowledge-
based economy, rapid technological advances, and
changing demographics. These challenges require a
fundamental reexamination of the government’s
priorities, processes, policies, and programs to
effectively address shifting public expectations and    ■   focusing congressional and executive branch
needs. Moreover, addressing today’s priorities must         management attention on the most significant
be balanced against the long-term fiscal pressures          challenges by issuing our performance and
of financing existing programs and operations. In           accountability series reports on the government
summary, the work under this goal highlights the            as a whole as well as the largest departments and
intergovernmental relationships that are necessary          agencies (see app. 1, item 3.27);
to achieve national goals.
                                                        ■   updating the Government Auditing Standards
                                                            (the “Yellow Book”), the guide for audits of
To ensure that we help transform the role of the
                                                            financial and program management not only in
government and how it does business to meet 21st
                                                            federal agencies, but also state and local
century challenges, we have established the follow-
                                                            governments and more than 30,000 nonprofit
ing four strategic objectives:
                                                            organizations that receive federal funds (see app.
                                                            1, item 3.38);
■   analyze the implications of the increased role of
    public and private parties in achieving federal     ■   issuing an exposure draft of an audit guide to
    objectives;                                             help auditors and fraud investigators review
                                                            government purchase card programs (see app. 1,
■   assess the government’s human capital and other
                                                            item 3.24); and
    capacity for serving the public;
                                                        ■   developing and refining innovative information
■   support congressional oversight of the federal
                                                            technology (IT) guidance and tools for federal
    government’s progress toward being more
                                                            agencies, including the IT Investment
    results-oriented, accountable, and relevant to
                                                            Management Framework, which lays out a five-
    society’s needs; and
                                                            stage model for agencies to follow as they design
■   analyze the government’s fiscal position and            and implement IT investments (see app. 1, item
    approaches for financing the government.                3.12).
To accomplish our work under these four objec-          As shown in table II.8, we exceeded all of the per-
tives, we conducted audits, evaluations, and analy-     formance targets for this strategic goal. Later parts of
ses in response to congressional requests and           this section analyze those results and describe our
through work initiated under the Comptroller Gen-       targets for fiscal 2004. This analysis is followed by a
eral’s authority. For example, work under this goal

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                   55

Table II.8: Annual Measures and Targets for Strategic Goal 3
                                             1999       2000      2001        2002                                    2004
           Performance measure              Actual     Actual    Actual      Actual   Target     Actual      Met?    Target a

 Financial benefits (dollars in billions)      $4.5       $5.1      $7.0      $5.2b      $4.6        $4.7     Yes         $4.7

 Other benefits                                 414       503        401       462        392        553      Yes         441

 Past recommendations implemented              78%       77%        85%        82%       77%         91%      Yes         79%

 New recommendations made                       335       413        549       808        366        772      Yes         570

 Testimonies                                    100       105           42       65        52         56      Yes          57

Source: GAO.

aOn the basis of past performance and expected future work, we revised these targets after we issued our fiscal 2004

performance plan. The original targets were financial benefits, $8.1 billion; other benefits, 404; past recommendations
implemented, 77 percent; recommendations made, 366; and testimonies, 60.

 bBetween fiscal 2001 and fiscal 2002, we changed our methodology for tabulating financial benefits. This change accounted

for part of the increase in the fiscal 2002 results. See table II.12 for details.

discussion of our 2-year qualitative performance
measures, all but one of which were met for fiscal
                                                                  Financial Benefits
2003.                                                             The financial benefits reported for this goal in fiscal
                                                                  2003 totaled $4.7 billion, meeting our target of $4.6
To help us examine trends over time, we look at 4-                billion. Under goal 3, we typically work on core
year averages for all but one of our measures.10                  government business processes and government-
These 4-year averages, which are shown in                         wide management reforms. While this work makes
table II.9, minimize the effect of an atypical result in          important contributions to other benefits, it less
any given year. Table II.8 indicates that financial               often yields measurable financial benefits. Nonethe-
benefits and number of testimonies for goal 3 have                less, during fiscal 2003, two accomplishments under
remained fairly stable while documentation of other               this goal were valued at $500 million or more each,
benefits derived from our work and new recom-                     accounting for just over half of the goal’s financial
mendations made related to this goal have risen.                  benefits. One resulted in about $1.7 billion in esti-
                                                                  mated financial benefits related to acquisition man-
                                                                  agement reforms and the other resulted in about
                                                                  $780 million in financial benefits related to reduced
                                                                  contract amounts for the Navy-Marine Corps intra-
                                                                  net. These and other accomplishments are reported
                                                                  in detail in the goal 3 section of appendix 1.
Table II.9: Four-Year Averages for Strategic Goal 3
 Performance measure                                             1999         2000          2001            2002          2003

 Financial benefits (dollars in billions)                        $5.7          $5.7          $5.3           $5.5          $5.5

 Other benefits                                                  274            361            407          445           480

 New recommendations made                                        355            383            439          526           636

 Testimonies                                                       79            90             86           78            67

Source: GAO.

10We  do not look at averages for the percent of past recommendations implemented because the number of recommen-
dations made in each year is not constant.

56                                                                      GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                         PART II

Our assessments of the executive branch’s current        ■   Past recommendations implemented—We
efforts to implement the recommendations we                  documented that the percent of
made in our work under this goal indicate that               recommendations implemented for fiscal 2003
financial benefits related to this goal are likely to        was 91 percent, results that exceeded the target
remain the same for fiscal 2004. Consequently, we            of 77. The target for fiscal 2004 is the same for all
kept the target for financial benefits at $4.7 billion       goals—a 79-percent implementation rate.
for fiscal 2004.
                                                         ■   New recommendations made—We issued 772
                                                             new recommendations for additional
                                                             improvements to government operations and
Other Benefits                                               services during fiscal 2003, exceeding the target
The other tangible benefits reported for goal 3 in           of 366 by nearly 111 percent. Our success in this
fiscal 2003 included 525 instances in which agen-            area was partly due to our making
cies’ core business processes were improved or               recommendations on multiple financial and
governmentwide management reforms were                       information management topics that were more
advanced as a result of our work. In addition, there         specific than in the past. Among the
were 28 instances in which information we pro-               recommendations were those to the
vided to the Congress resulted in statutory or regu-         Commissioner of Internal Revenue to enforce the
latory changes. This total of 553 other benefits             Internal Revenue Service’s (IRS) policy of a 180-
exceeded our target of 392 for the year by 41 per-           day expiration period for fingerprint check results
cent. The larger number of other benefits occurred           when an individual enters on duty, those to the
mainly in our financial management and informa-              Secretary of DHS and Director of Office
tion technology areas where we tend to make mul-             Personnel Management to ensure that the human
tiple, specific recommendations for change to more           capital management system is designed to
than one entity. Among the key accomplishments               accomplish the mission, objectives, and goals of
were increasing the information available to the             the department and to ensure that the
Congress to assist its oversight of federal informa-         communication strategy used to support the
tion security efforts and improving financial man-           human capital system maximizes opportunities
agement at DHS. These and other accomplishments              for employee involvement. We raised the target
are reported in detail in the goal 3 section of appen-       for fiscal 2004 to 570 new recommendations. This
dix 1.                                                       is lower than the actual results in recent years
                                                             because a body of work partly responsible for
Looking ahead, our assessments of the executive              the high number of recommendations made
branch’s current efforts to implement our recom-             under goal 3 since fiscal 2000 is coming to a
mendations made under this goal led us to set a fis-         close, namely, the compliance work on agencies’
cal 2004 target of 441 other benefits for goal 3.            computer security measures.
While this target is lower than our fiscal 2003 actual   ■   Testimonies—During fiscal 2003, our witnesses
performance, it is higher than our fiscal 2003 target        testified at 56 congressional hearings related to
and consistent with our 4-year average for this mea-         this strategic goal, slightly exceeding the target of
sure.                                                        52. Among the testimonies presented were
                                                             human capital improvements at DOD, and
This goal is lower than our actual results in recent         performance budgeting, and financial
years because many of our recommendations were               management among federal agencies. For fiscal
interrelated and we will document their implemen-            2004, we have set an approximate target of
tation as a smaller number of broad-based benefits.          presenting testimony at 57 hearings because we
                                                             expect the level of hearings to stay about the
                                                             same as it was in fiscal 2003.
Additional Measures
In addition to the benefits that accrued in fiscal
2003 from past work done under this goal, we
recorded the following results:

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                     57

Two-year Performance Goals                                other important work. However, we made progress
                                                          on this performance goal with our report on retire-
As shown in table II.10, at the close of fiscal 2003,     ment income gaps and a series of reports on Cen-
we had met 20 of the 21 performance goals for this        sus 2000. We plan to continue working in this area
strategic goal. We did not meet the performance           during fiscal 2004 and fiscal 2005. We anticipate
goal of assessing the effectiveness of the Federal        revising and publishing the 2-year performance
Statistical System in providing relevant, reliable, and   goals for fiscal 2004 and fiscal 2005 as part of our
timely information that meets federal program             fiscal 2005 performance budget.
needs because of the need to devote resources to

58                                                           GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                           PART II

Table II.10: Strategic Goal 3’s Two-Year Performance Goals, Fiscal 2002 and Fiscal 2003
   Not Met     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

Assess the government’s human capital and other capacity for serving the public

               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

Support congressional oversight of 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

               Develop new resources and approaches that can be used in measuring performance and progress on the
               nation’s 21 st century challenges

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 IRS’s modernization and reform efforts

               Assess the reliability of financial information on the government’s fiscal position and financing sources

Source: GAO.

Note: For a performance goal to be met, the responsible senior executive considers the amount of work conducted and/or
recommendations made for each key effort as well as any other assistance provided to the client or customer that is related to
these efforts. These senior executives then judge whether the work completed collectively for all key efforts actually achieved
the performance goal. To view the 84 key efforts for the 21 performance goals above, go to www.gao.gov/sp/spsupp.html.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                       59
             Goal 4                                              Goal 4’s Cost: $20.0 Million               4% of GAO’s Total

                                   Goal 1                                   Goal 2                         Goal 3              Goal 4

                                                                                                                            Maximize the
                                                                                                                            value of GAO


                        Sharpened focus on clients' and customers' requirements
                        - Developed agency and international protocols
                        - Developed external Web site for background material on key issues and concerns

                        Enhanced leadership and promote management excellence
                        - Increased the security of our facilities and information systems
                        - Maintained integrity in financial management
                        - Continued to provide leadership in human capital strategy and management
                        - Increased search functions on external Web site

                        Leveraged institutional knowledge and experience
                        - Improved management of agency records
                        - Continued knowledge-sharing among our organizational units
                        - Increased capacity though knowledge-sharing and collaboration

                        Continuously improved business and management processes
                        - Improved guidance and tracking for our engagements
                        - Expanded use of "highlights" page to encapsulate information from our products on a single page
                        - Donated excess computer equipment to schools

                        Enhanced our position as an employer of choice
                        - Developed new training curriculum for analysts
                        - Implemented training and learning programs to employees desktop computers through new software
                        - Launched new external employment opportunities Web site

Source: See Image Sources.
                                                                                                      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. For us, this means that
our work is driven by our external clients and inter-
nal customers, our managers exhibit the characteris-
tics of leadership and management excellence, our
employees are devoted to ensuring quality in our
work process and products through continuous
improvement, and our agency is regarded by cur-
rent and potential employees as an excellent place
to work. Our five strategic objectives are to           ■   enhanced and refined our recruitment strategy to
                                                            attract the highest-quality workforce (see app.1,
■   sharpen GAO’s focus on clients’ and customers’          item 4.11);
                                                        ■   enhanced the competency-based performance
■   enhance leadership and promote management               management system for our staff (see app.1, item
    excellence,                                             4.21);
■   leverage GAO’s institutional knowledge and          ■   hired a Chief Learning Officer to refocus and
    experience,                                             improve our training and development efforts
                                                            (see app. 1, item 4.22), and
■   continuously improve GAO’s business and
    management processes, and                           ■   continued to enhance our technology, tools, and
                                                            systems to support a mobile flexible work
■   become the professional services employer of
                                                            environment (see app. 1, item 4.24).
                                                        The annual measures used to assess our perfor-
In fiscal 2003, we undertook a wide array of efforts
                                                        mance under our external strategic goals are not
in pursuing those objectives. For example, under
                                                        applicable to this internal strategic goal, but 2-year
this goal we
                                                        performance goals do apply. As shown in
                                                        table II.11, at the close of fiscal 2003, we had met
■   expanded our Web-based client feedback survey
                                                        16 of the 19 performance goals for this strategic
    to all committees of the House and the Senate
    (see app.1, item 4.1);
■   effectively managed our IT resources to obtain      We did not meet our performance goal of develop-
    the most value from every IT dollar—resulting in    ing a framework to manage the collection, use, dis-
    our Chief Information Officer (CIO) being placed    tribution, and retention of organizational
    on the “CIO 100” list by CIO magazine, which        knowledge because organizational resources had to
    cited us for excellence in areas such as asset      be reallocated to performing higher-priority work.
    management, staffing and sourcing, and building     For example, we improved our report production
    partnerships (see app. 1, item 4.6);                and graphics processes and assessed our internal
                                                        print plant operations. We also delayed develop-
                                                        ment of short- and long-term communications stan-
                                                        dards in order to consider adopting new standards

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                   61

for electronic products. In addition, completion of      We anticipate continuing to provide resources to
the integration of our document management sys-          this performance goal in fiscal 2004 so that we may
tem with electronic record keeping capabilities has      complete these efforts.
been delayed until several pilot projects can be
completed. We made substantial progress under this       Due to delays in the area of process improvements,
performance goal by conducting the first ever agen-      we did not meet our performance goal to improve
cywide electronic files clean up effort as part of our   our job management processes. Specifically, staff
efforts to improve our records management pro-           resources intended for that key effort had to be
gram. We also increased our knowledge sharing            diverted to the higher-priority revision of our policy
and collaboration efforts by implementing two new        manual to make it reflect changes in government
training courses on Web-based knowledge services,        auditing standards. We did, however, complete our
piloting communities of practice such as the Web         work in evaluating the effectiveness of our risk
Technology Advisory Group, and implementing              management approach to designing engagements
portal technology such as the National Prepared-         and developing quality products. Our post-issuance
ness Web Portal. We anticipate continuing to pro-        reviews, second partner quality reviews of draft
vide resources to complete these efforts in fiscal       reports, client feedback surveys, and other internal
2004.                                                    reviews demonstrated that our risk-based approach
                                                         to designing and developing products is achieving
We did not meet our performance goal to improve          its intended objective of producing high-quality
our product and service lines due to a reallocation      products. The various assessments showed adher-
of resources to higher-priority work. In addition,       ence to established policies in designing, executing,
identifying appropriate media for use in communi-        and reporting engagement results and greater
cating our work results requires that we obtain cli-     involvement of specialists and other stakeholders,
ent input. As we are already asking for client input     leading to high-quality, contextually sophisticated
in many other areas, this effort was delayed to          products and greater client satisfaction. We antici-
avoid putting an additional burden on our clients.       pate providing resources in fiscal 2004 for identify-
We made progress under this performance goal in          ing and prioritizing process improvements.
the areas of assessing and improving our report
production process, and establishing a systematic        We anticipate revising and publishing the 2-year
process to make improvements to our products,            performance goals for fiscal 2004 and fiscal 2005 as
services, and processes based on client feedback.        part of our fiscal 2005 performance budget.

62                                                           GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                      PART II

Table II.11: Strategic Goal 4’s Two-Year Performance Goals, Fiscal 2002 and Fiscal 2003
   Not Met     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

               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 GAO’s institutional knowledge and experience

               Expand GAO’s use of the World Wide Web as a knowledge tool

               Develop a framework to manage the collection, use, distribution, and retention of organizational knowledge

               Strengthen relationships with other national and international accountability and professional organizations

Continuously improve GAO’s business and management processes

               Reengineer internal business and administrative processes

               Reengineer GAO’s product and service lines

               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

               Improve compensation and performance management systems

               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

Source: GAO.

Note: For a performance goal to be met, the responsible senior executive considers the amount of work conducted and/or
recommendations made for each key effort as well as any other assistance provided to the client or customer that is related to
these efforts. These senior executives then judge whether the work completed collectively for all key efforts actually achieved
the performance goal. To view the 88 key efforts for the 19 performance goals above, go to www.gao.gov/sp/spsupp.html.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                    63

Data Quality and                                         Procedures to Ensure Data
Program Evaluation                                       In verifying and validating our own performance
                                                         data, we benefit from lessons learned from our
                                                         assessments of other agencies’ performance infor-
                                                         mation. We adhere to the same professional stan-
This section describes how we ensure the com-            dards and internal policies and procedures applied
pleteness and reliability of the performance data in     to our audit, evaluation, and research work. And
this report and the program evaluations conducted        management’s routine use of our performance
during fiscal 2003 on our agency’s operations.           information further helps to ensure its quality and
                                                         validity. The data are provided to managers for use
                                                         in decision making, and their feedback on these
Completeness and Reliability                             data helps to ensure that the data are properly
Our performance data are complete because actual
data are reported for every performance measure,         This year, as an additional check on the quality of
and the data are actual results for full fiscal years    our performance indicators, GAO’s Office of
rather than projections from partial years. Our data     Inspector General (IG) independently tested the
are reliable because we followed the verification        support for annual performance measures and our
and validation procedures described in the next          2-year performance goals. As part of this effort, the
section to ensure their quality. Most of the data lim-   IG tested the teams’ compliance with our estab-
itations explained below result in conservative esti-    lished policies and procedures and found no mate-
mates of our actual performance.                         rial weaknesses involving any of the listed
                                                         performance indicators. The specific sources of our
                                                         performance data and other procedures for inde-
                                                         pendently verifying and validating the data for each
                                                         of our performance measures are shown in
                                                         table II.12. We continue to explore ways to
                                                         strengthen our procedures to ensure data integrity.

64                                                           GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                       PART II

Table II.12: How We Ensure Data Quality for the Performance Measures
Financial benefits

Background and       Our work—including our findings and recommendations—may produce measurable financial benefits
context              for the federal government when the Congress or agencies act on them to reduce annual operating
                     costs, reduce the costs of multiyear projects and entitlements, or increase revenues from asset sales
                     and changes in tax laws or user fees. The funds made available in response to our work may be used
                     to reduce government expenditures or may be reallocated to other areas.
                     Financial benefits are linked to specific recommendations or other work. To claim that financial
                     benefits have been achieved, our staff must document the cause-and-effect relationship between the
                     benefits reported and work performed. This documentation must take place within 2 years after the
                     benefit has been identified in order for it to be included in our performance results and must be based
                     on estimates obtained from independent third parties on the benefits’ monetary value. Prior to fiscal
                     2002, we limited the period over which the benefits from an accomplishment could be accrued to no
                     more than 2 years. Beginning in fiscal 2002, we extended the period to 5 years for types of
                     accomplishments known to have multiyear effects: those associated with longer-term changes
                     embodied in law, program terminations, or sales of government assets yielding multiyear financial
                     benefits. We retained the 2-year maximum for all other accomplishments. Also, in fiscal 2002, we
                     began requiring all financial 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
                     our work. As a result, the amount of financial benefits is a conservative estimate.

Data sources         Our Accomplishment Reporting System provides the data for this measure. Teams use this automated
                     system to prepare, review, and approve accomplishments and forward them to the Quality and
                     Continuous Improvement (QCI) office for its review.
                     Once accomplishment reports are approved, they are compiled by QCI, which annually tabulates total
                     benefits by goal and agencywide. All financial benefits are calculated in net present value.

Verification and     Policies and procedures guide the estimation of financial benefits and their attribution to our work.
                     The teams identify when a financial benefit has occurred as a result of our work. Teams develop
                     estimates based on independent sources such as the agency that acted on our work, a congressional
                     committee, or the Congressional Budget Office and file accomplishment reports based on those
                     estimates. The estimates are reduced by any identifiable offsetting costs. Teams develop workpapers
                     to support accomplishments with evidence that meets our evidence standard; supervisors review the
                     workpapers; an independent person within GAO reviews the accomplishment report; and the team’s
                     Managing Director or Director approves the accomplishment report. The team forwards the report to
                     QCI 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. QCI reviews all accomplishment reports and approves accomplishment reports claiming
                     benefits of $100 million or more. In fiscal 2003, QCI approved accomplishment reports covering 95
                     percent of the dollar value of financial benefits we reported.
                     GAO’s IG also reviews accomplishment reports claiming benefits of $500 million or more. In fiscal
                     2003, the IG reviewed accomplishment reports covering 79 percent of the dollar value of financial
                     benefits we claimed.
                     Additionally, during fiscal 2003, the IG independently tested compliance with our process for claiming
                     financial benefits amounting to less than $100 million and determined that we have a reasonable basis
                     for claiming these benefits.

Data limitations     Estimates are from independent third parties but are based on both objective and subjective data, and
                     as a result, professional judgment is required in reviewing accomplishment reports.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                   65

Other benefits

Background and     The other benefits that we report reflect instances in which (1) information we provided to the
context            Congress resulted in statutory or regulatory changes, (2) agencies took actions in response to our
                   findings and recommendations to improve government services and operations, or (3) our work led to
                   improvements in agencies’ core business processes or to the advancement of governmentwide
                   management reforms.
                   These benefits cannot be expressed in monetary terms, but to claim that these benefits have
                   occurred, the teams must file accomplishment reports that document the actions that have been
                   taken and the cause-and-effect relationship between the actions and our work.

Data sources       Our Accomplishment Reporting System provides the data for this measure. Teams use this automated
                   system to prepare, review, and approve accomplishments and forward them to QCI for its review.
                   Once accomplishment reports are approved, they are compiled by QCI, which annually tabulates total
                   benefits by goal and agencywide.

Verification and   Policies and procedures require accomplishment reports to record the other benefits of our findings
validation         and recommendations.
                   Staff in the teams file accomplishment reports to claim that benefits have resulted from their work.
                   Teams develop workpapers to support accomplishments with evidence that meets our evidence
                   standard; supervisors review the workpapers; an independent person within GAO reviews the
                   accomplishment report; and the team’s Managing Director or Director approves the accomplishment
                   report to ensure the appropriateness of the claimed accomplishment, including attribution to our
                   The team forwards the report to QCI where it is reviewed for appropriateness. QCI 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.
                   Additionally, during fiscal 2003, the IG independently tested compliance with our process for claiming
                   other benefits and found them to be reasonable. The IG suggested actions to strengthen
                   documentation of other benefits and we will implement these changes in fiscal 2004.

Data limitations   We cannot always document a direct cause-and-effect relationship between our work and benefits it
                   produced. As a result, the number of other benefits is underreported and is a conservative measure of
                   our overall contribution toward improving government.

Past recommendations implemented

Background and     We make recommendations designed to improve the operations of the federal government. For our
context            work to produce financial or other benefits, the Congress or other federal agencies must implement
                   these recommendations.
                   As part of our audit responsibilities under generally accepted government auditing standards, we
                   follow up on recommendations we have made and report to the Congress on their status.
                   Past experience has shown that it takes time for some recommendations to be implemented. For this
                   reason, this measure is the percentage rate of implementation of recommendations made 4 years
                   prior to a given fiscal year (e.g., the fiscal 2003 implementation rate is the percentage of
                   recommendations made in fiscal 1999 products that were implemented by the end of fiscal 2003).
                   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 our activities during the fiscal year in which the data are reported. For example, the cumulative
                   percentage of recommendations made in fiscal 1999 that were implemented in the ensuing years is as
                   follows: 40 percent by the end of the first year (fiscal 2000); 44 percent by the end of the second year;
                   56 percent by the end of the third year; and 82 percent by end of the fourth year.

Data sources       Our document database records recommendations as they are issued. The database is updated daily.
                   As our staff monitor implementation of recommendations, they submit updated information to the

66                                                                   GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                    PART II

Verification and   Through a formal process, an external contractor (currently Lockheed Martin Corporation) maintains
validation         the database of our recommendations by reviewing all of our written products as they are distributed,
                   identifying the recommendations made, entering them into the database, and verifying the information
                   through our recommendation follow-up system.
                   Policies and procedures specify that our staff must verify, with sufficient supporting documentation,
                   that an agency’s reported actions are adequately being implemented. Staff update the status of the
                   recommendations on a periodic basis. To accomplish this, our staff may interview agency officials,
                   obtain agency documents, access agency databases, or obtain information from an agency’s IG.
                   Recommendations that are reported as implemented are reviewed by the senior executive in charge
                   of the unit and by QCI.
                   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. We also report annually to the Congress on the status of recommendations that
                   have not been implemented and we maintain a publicly available database of open recommendations
                   that is updated daily.
                   Additionally, during fiscal 2003, the IG independently tested our process for calculating the
                   percentage of recommendations made in fiscal 1999 products that had been implemented and
                   determined that it was reasonable.

Data limitations   We sometimes differ with the affected agencies on a recommendation’s status. For example,
                   agencies may report actions in response to our recommendations, but we may determine that these
                   actions are insufficient or do not adequately implement our recommendations. In these cases,
                   recommendations are recorded as not implemented even though the agency has proposed or taken
                   some actions.

Recommendations made and percentage of products with recommendations

Background and     We make recommendations that specify actions that can be taken to improve federal operations or
context            programs. We strive for recommendations that are directed at resolving the cause of identified
                   problems; that are addressed to parties who have the authority to act; and that are specific, feasible,
                   and cost-effective. Some products we issue contain no recommendations and are strictly
                   informational in nautre.
                   We track the number of recommendations made in products that are issued during the fiscal year. We
                   also track the percentage of our written products that are issued during the fiscal year and contain
                   recommendations. The latter indicator recognizes that the number of recommendations alone is not
                   necessarily a predictor of effect and allows us to respond to requests for informational products. 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.

Data sources       Our document database records recommendations as they are issued. The database is updated daily.
                   As our staff monitor implementation of recommendations, they submit updated information to the

Verification and   Through a formal process, an external contractor maintains the database of our recommendations by
validation         reviewing all of our products distributed, identifying the recommendations made, entering them into
                   the database, and verifying the information through our recommendation follow-up system.
                   Our managers are provided with reports on the recommendations being tracked to help ensure that all
                   recommendations have been captured and that each recommendation has been completely and
                   accurately stated.
                   Additionally, during fiscal 2003, the IG independently tested the teams’ compliance with our policies
                   and procedures and determined that the number of recommendations and the percentage of written
                   products with recommendations are reasonable.

Data limitations   These measures are a conservative estimate of the extent to which we assist the Congress and
                   federal agencies because not all products and services we provide lead to recommendations. For
                   example, the Congress may request information on federal programs that is purely descriptive or
                   analytical and does not lend itself to recommendations.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                67


Background and     The Congress may ask us to testify at hearings on various issues. Testimony is one of our most
context            important forms of communication with the Congress, and the number of hearings at which we testify
                   reflects the importance and value of our institutional knowledge in assisting congressional decision
                   making. In cases where multiple GAO witnesses with separate testimonies appear at a single hearing,
                   we count the case as a single testimony. Also, agencies sometimes implement corrective actions
                   during the course of our work.

Data sources       The data on hearings at which we testify are compiled in our congressional hearing system.

Verification and   The units responding to requests for testimony are responsible for entering data in the congressional
validation         hearing system.
                   After a GAO witness has testified at a hearing, our Congressional Relations office verifies that the data
                   in the system are correct and records the hearing as one at which we testified.
                   Congressional Relations provides weekly status reports to unit managers, who check to make sure
                   the data are complete and accurate.
                   Additionally, during fiscal 2003, the IG independently examined the process for recording the number
                   of hearings where we testified and determined that it is reasonable.

Data limitations   The measure may be influenced by factors other than the quality of our performance in any specific
                   year. The number of hearings held each year depends on the Congress’s agenda, and the number of
                   times we are asked to testify may reflect congressional interest in work completed that year, the
                   previous year, or work in progress.


Background and     The likelihood that our products will be used is enhanced if they are delivered when needed to support
context            congressional and agency decision making. To determine whether our products are timely, we
                   measure the proportion of our products that are issued by the dates agreed to with our clients or, for
                   our research and development work, by the dates agreed to internally.

Data sources       The data supporting this measure are from our Mission and Assignment Tracking System, which is
                   used to monitor our progress on assignments.

Verification and   Our staff enter the data supporting this measure into our Mission and Assignment Tracking System.
validation         QCI monitors the data in this system, and aggregate and assignment-specific timeliness data are
                   given to units monthly, allowing them to raise and seek resolution of any anomalies.
                   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.
                   Additionally, during fiscal 2003, the IG independently examined our process for calculating product
                   timeliness and found it to be reasonable.

Data limitations   We measure the timeliness of most external products. A small percentage of our products—staff
                   studies and guidance, for example—that are not part of our main product lines are excluded.

2-year qualitative performance goals

Background and     Assessing the extent to which we achieve 2-year performance goals helps focus our efforts on issues
context            of critical importance and provides a tool for holding ourselves accountable for the resources the
                   Congress provides. They measure the extent to which we did the work we had planned to do to
                   support the Congress during a 2-year period. In this case, they cover fiscal 2002 to fiscal 2003.
                   For each performance goal, we identify the key efforts needed to achieve it. To determine whether a
                   performance goal has been met, we assess the work completed under the goal’s key efforts. In
                   making this assessment, the responsible senior executives for strategic goals 1 through 3—our
                   external goals—considers the number of reports issued and recommendations made for each key
                   effort as well as any other assistance provided the Congress related to these efforts. Senior
                   executives then judge whether the work completed collectively for all key efforts actually achieved the
                   performance goal. For strategic goal 4—our internal goal—senior executives also judge whether the
                   performance goals have been met based on the work done on the goal’s key efforts.

68                                                                   GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                  PART II

Data sources       The data supporting this measure are from our senior executives’ assessments, which are supported
                   by documentation, of work completed under performance goals’ key efforts. The supporting
                   documentation comes from our automated Mission and Assignment Tracking System and document
                   database for strategic goals 1 through 3 and from reports produced by the managers responsible for
                   each key effort for strategic goal 4.

Verification and   We consult with our congressional clients and other outside experts in setting our 2-year performance
validation         goals.
                   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. The assessment of the performance goals under strategic goal 4 is
                   supported by documentation showing the work completed under each key effort and signed by a
                   Managing Director.
                   QCI provides this information to our managers several times a year so that they can check its
                   accuracy. QCI also reviews the assessments and supporting documentation for all performance goals
                   to ensure that criteria are consistently applied and that requirements are met.
                   Additionally, during fiscal 2003, the IG independently tested our process for determining whether
                   performance goals are met and found it to be reasonable. The IG suggested actions to strengthen
                   documentation of these qualitative performance goals and we have implemented these actions.

Data limitations   Professional judgment must be applied when assessing the work done under each performance goal
                   and when reviewing those assessments.

Source: GAO.

Program Evaluation                                             nities to enhance performance and accountability
                                                               governmentwide and at federal agencies. The series
To assess our progress toward our first three strate-          also includes a companion volume, discussed in
gic goals and their objectives and to update them              Part I of this report, that provides a status report on
for our strategic plan, we evaluate actions taken by           those major government operations considered
federal agencies and the Congress in response to               “high risk” because of their greater vulnerabilities to
our recommendations. The results of these evalua-              waste, fraud, abuse, and mismanagement. The
tions are conveyed in this performance and                     series is a valuable evaluation and planning tool
accountability report as financial benefits and other          because it helps us to identify those areas where
benefits that reflect the value of our work.                   our continued efforts are needed to maintain the
                                                               focus on important policy and management issues
In addition, we actively monitor the status of our             that the nation faces.
open recommendations—those that remain valid
but have not yet been implemented—and report                   To help us assess our progress toward the strategic
our findings annually to the Congress and the pub-             objectives under goal 4, which focuses on improv-
lic (www.gao.gov/openrecs.html). We use the                    ing our internal operations, we completed a num-
results of that analysis to determine the need for             ber of studies and evaluations. Most of these
further work in particular areas. For example, if an           evaluations are related to goal 4’s strategic objec-
agency has not implemented a recommended                       tives and result in internal products or briefings that
action that we consider to be worthwhile, we may               are not available publicly.
decide to pursue further action with agency officials
or congressional committees, or we may decide to               ■   The status of our financial management. As
undertake additional work on the matter.                           part of our effort to be a model agency, in fiscal
                                                                   2003 we retained the independent audit firm,
We also use our biennial performance and account-                  Cotton & Co., LLP, to audit our financial
ability series reports (www.gao.gov/pas/2003/) to                  statements. The auditors issued an unqualified
help assess the extent to which we are achieving                   opinion. We also conducted internal reviews of
our strategic objectives under goals 1, 2, and 3. This             our compliance with requirements set forth in 31
series addresses a range of challenges and opportu-                U.S.C. 3512 (commonly referred to as the Federal

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                              69

     Managers’ Financial Integrity Act) and the Office           to our Office of Opportunity and Inclusiveness
     of Management and Budget’s Circular A-127,                  and other GAO managers. The Comptroller
     Financial Management Systems. We reviewed                   General ‘s Educators’ Advisory Panel also advised
     aspects of our Financial Management System,                 the agency on recruiting, retaining, and
     including security controls, and assessed its               developing staff and discussed strategies, best
     consistency with the Standard General Ledger.               practices, operations, and emerging issues and
     These reviews uncovered no problems and                     trends related to our human capital efforts to
     showed that we have the proper controls in place            develop a results-oriented workforce.
     and that they are being followed.
                                                             ■   Status of our IT support services. This fiscal
■    The accessibility of our products. We                       year, The Gartner Group performed an
     completed an assessment of our external Web                 independent review of our IT application support
     site’s usability in fiscal 2003. The assessment and         and development services and determined that
     a Web site customer satisfaction survey                     we are delivering excellent and cost-efficient
     developed by the American Customer Satisfaction             support and services to the agency. Gartner
     Index indicated high levels of satisfaction as well         reviewed various aspects of our fiscal 2002 IT
     as opportunities for improvement. As a result, we           operations, such as our applications development
     are redesigning our Web site to increase access             performance as well as managerial and technical
     and enhance the usability of the information.               processes. Gartner scored us “above average” in
                                                                 several categories, including productivity,
■    The status of our information security
                                                                 effectiveness, and user satisfaction, and “better
     program. To assess the status of our information
                                                                 than average” in cost-efficiency.
     security program, we considered the results of
     internal reviews by program offices and security        ■   Our asset management activities. The Gartner
     staff, independent evaluations of our major                 Group completed an assessment of our asset
     financial applications by a public accounting               management systems and processes. Their report
     firm, and testing of IT controls for our general            included process improvement
     support system by our IT auditors, who are                  recommendations, information on asset
     independent of our IT support function and                  management best practices, and guidance in
     conduct these audits on other agencies. These               developing requirements for a new automated
     reviews and evaluations identified no material              inventory system. One of our fiscal 2004 key
     weaknesses in our financial applications or                 efforts will be directed at implementing these
     general support system. They also showed that               recommendations.
     we are making substantial progress in
                                                             ■   Assessment of our compensation and
     implementing information security requirements
                                                                 performance management system for
     consistent with the Federal Information Security
                                                                 analysts. Our Human Capital Office oversaw the
     Management Act.11 This assessment is discussed
                                                                 evaluation of the performance-based
     in appendix 4.
                                                                 compensation system for analysts and specialists
■    The effectiveness of our recruiting initiatives             which was implemented in fiscal 2002. The
     and human capital practices. To determine                   Human Capital Office conducted individual
     whether our recruitment efforts are effective, we           interviews with each Managing Director, a focus
     collected data on how well we met our hiring                group consisting of representatives from our
     goals and on other people measures. An analysis             Employee Advisory Council (EAC), and compiled
     of the summary data showed that we met all of               data that the EAC collected from surveying its
     our goals for the number of staff hired in each             constituents for feedback on system
     Band and at the Senior Executive Service level,             improvements. Using these data, we identified
     had a 72 percent acceptance rate of our hiring              short- and long-term improvements to the
     offers, and had a 7.7 percent attrition rate. We            system. The short-term improvements focused on
     provided this summary data in a year-end report             areas such as (1) better understanding and

11While  we are not obligated by law to comply with this act, we are adopting its requirements to help ensure that we
establish an effective information security program and to fulfill our goal of being a model federal agency.

70                                                                GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                PART II

  application of the performance standards,           combining, eliminating, and/or weighting some
  including additional mandatory but targeted         competencies; and (4) rewriting and revalidating
  training; (2) adjusting the pay categories; (3)     performance standards to reflect changes in
  reviewing the timing of the notification of pay     banding or competencies.
  panel results; and (4) using the achievement
                                                    Finally, our IG evaluates the administration of the
  statement as a tool to break pay panel ties. We
                                                    agency. These evaluations are useful in ensuring
  implemented all of the short-term improvements
                                                    that our operations are efficient and economical. As
  and are working on implementing the long-term
                                                    mentioned previously in this report, the IG exam-
  improvements, which focused on (1) studying
                                                    ined our process for assessing our performance
  and resolving obstacles to restructuring the
                                                    measures this year and found them to be reason-
  bands; (2) sharpening distinctions in standards
                                                    able. The IG also reviewed management’s assess-
  within competencies and across bands to
                                                    ment of the agency’s management challenges and
  promote more accurate and consistent
                                                    concurred with management’s assessment.
  application of the standards; (3) exploring

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                            71

Part III:

From the Chief Financial Officer

            November 14, 2003

            I am pleased to report that, for the 17th consecutive year, GAO’s financial statements
            have received an unqualified opinion from our independent auditors. I am particu-
            larly proud of this achievement because the financial statements for fiscal 2003 were
            prepared, and the audit completed, a month earlier than last year and a year ahead of
            the accelerated schedule mandated by the Office of Management and Budget. For a
                                                            second year in a row, the Association
                                                            of Government Accountants awarded
                                                            us a certificate of excellence; this year,
                                                            the award was for the fiscal 2002
                                                            annual performance and accountabil-
                                                            ity report.

                                                            Our agency continued to make an
                                                            impact in 2003. Our reports drew
                                                            attention to problem areas across gov-
                                                            ernment and led to hundreds of
                                                            actions by the Congress and agency
                                                            heads to help government work bet-
                                                            ter. In addition to providing accurate,
                                                            timely, and useful information on day-
                                                            to-day government operations, we
                                                            alerted policymakers and the public to
            emerging and long-term issues with significant national implications. We informed
            the congressional debate on such diverse subjects as the federal government’s finan-
            cial condition and fiscal outlook, homeland security, food safety, the postal service,
            the nation’s private pension system, prescription drugs, and investor protections.

            Although the agency is significantly smaller than it was a decade ago—with just over
            3,250 employees on its payroll now—we have continued to provide the taxpayer
            with an excellent return on investment and a long list of improvements to federal
            programs and policies. In fact, we remain one of the best values in government
            today. In fiscal 2003, our work produced $35.4 billion in measurable financial
            benefits—a $78 return on every dollar invested in us.

74                                                 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                PART III

                     We made significant progress last year toward our goal of becoming a model federal
                     agency and a world-class professional services organization. We launched a host of
                     operational improvements in such key areas as strategic management, congressional
                     outreach, human capital, safety and security, and information technology. To help us
                     improve our performance and better meet the needs of our customers, we intro-
                     duced an in-house customer satisfaction survey and a balanced scorecard methodol-
                     ogy for our mission support side. We also procured a new asset management system,
                     rolled out our new e-travel system, and upgraded our online time and attendance
                     record keeping system. Initiatives such as these have kept us in the vanguard of
                     change both in government and private industry.

                     To be an effective advocate for “good government,” our internal operations must be
                     efficient, transparent, and accountable. In the coming year, we will continue to
                     explore innovative ways to do our work and to hold ourselves accountable for
                     getting results.

                     Sallyanne Harper
                     Chief Financial Officer

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                             75

Overview of Financial
Our financial statements and accompanying notes
begin on page 78. Our financial statements for the
fiscal years ended September 30, 2003 and 2002,
were audited by an independent auditor, Cotton &
Co., LLP.

Cotton & Co., LLP, rendered an unqualified opinion
on our financial statements and an unqualified
opinion on the effectiveness of our internal controls
over financial reporting and compliance with laws
and regulations. The auditor also reported that we
have substantially complied with the applicable            operations are properly recorded and accounted for
requirements of the Federal Financial Management           to enable us to prepare reliable financial reports
Improvement Act (Improvement Act) of 1996 and              and maintain accountability over our assets.
found no reportable instances of noncompliance
with certain provisions of laws and regulations            Our management assesses compliance with these
tested. In the opinion of the independent auditor,         controls through a series of comprehensive internal
the financial statements are presented fairly in all       reviews, applying the evaluation criteria in the
material respects and are in conformity with U.S.          Office of Management and Budget’s (OMB) guid-
generally accepted accounting principles.                  ance for implementing the Integrity Act. The results
                                                           of these reviews are discussed with our Audit Advi-
                                                           sory Committee, and action is taken to correct defi-
Financial Systems                                          ciencies as they are identified.
and Internal Controls                                      We assessed our internal controls as of September
We recognize the importance of strong financial            30, 2003, based on the criteria mentioned above for
systems and internal controls to ensure our                effective internal controls in the federal govern-
accountability, integrity, and reliability. To achieve a   ment. On the basis of this assessment, we believe
high level of quality, management maintains a qual-        that as of September 30, 2003, we have effective
ity control program and seeks advice and evalua-           internal controls in place and no outstanding mate-
tion from both internal and external sources.              rial weaknesses. Additionally, our independent
                                                           auditor found that we maintained effective internal
We are committed to fulfilling the internal control        controls over financial reporting and compliance
objectives of 31 U.S.C. 3512, commonly referred to         with laws and regulations. Consistent with our eval-
as the Federal Managers’ Financial Integrity Act           uation, the auditor found no material internal con-
(Integrity Act). Although we are not subject to the        trol weaknesses.
act, we comply voluntarily with its requirements.
Our internal controls are designed to provide rea-         In addition, we are committed to fulfilling the
sonable assurance that obligations and costs are in        objectives of the Improvement Act, which is also
compliance with applicable laws and regulations;           covered within 31 U.S.C. 3512. Although not subject
funds, property, and other assets are safeguarded          to the act, we voluntarily comply with its require-
against loss from unauthorized use or disposition;         ments. We believe that we have implemented and
and revenues and expenditures applicable to our            maintained financial systems that comply substan-
                                                           tially with federal financial management systems
                                                           requirements, applicable federal accounting stan-

76                                                            GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                         PART III

dards, and the United States Government Standard          with the requirements of the Chief Financial Offic-
General Ledger at the transaction level as of Sep-        ers Act, as amended (31 U.S.C. 3515). The state-
tember 30, 2003. We made this assessment based on         ments were prepared from our financial records in
criteria established under the Improvement Act and        accordance with the formats prescribed in OMB’s
guidance issued by OMB. Also, our auditor                 Bulletin 01-09, Form and Content of Agency Finan-
reported that we had substantially complied with          cial Statements. These financial statements differ
the applicable requirements of the Improvement            from the financial reports used to monitor and con-
Act as of September 30, 2003.                             trol our budgetary resources; however, both were
                                                          prepared from the same financial records.
Our Office of Inspector General (IG) also conducts
audits and investigations and functions as an inde-       Our financial statements should be read with the
pendent fact-gathering adviser to the Comptroller         understanding that, as an agency of a sovereign
General. This year, our IG tested compliance with         entity, the U.S. government, we cannot liquidate
procedures and methodologies used to calculate            our liabilities (i.e., pay our bills) without legislation
the following performance measures: financial ben-        that provides resources to do so. Although future
efits less than $100 million, number of other bene-       appropriations to fund these liabilities are likely and
fits, percentage of past recommendations                  anticipated, they are not certain.
implemented, new recommendations made, per-
centage of new products with recommendations,
number of testimonies, timeliness, and the 2-year         Purpose of Each Financial
performance goals. These performance measures
fairly represent our performance. There are nine
open recommendations and management is in                 The financial statements on the next five pages
agreement with these recommendations and plans            present the following information:
to take action on them. There are no unresolved
issues.                                                   ■   The balance sheet presents the combined
                                                              amounts we had available to use (assets) versus
Our Audit Advisory Committee assists the comptrol-            the amounts we owed (liabilities) and the
ler general in overseeing the effectiveness of our            residual amounts after liabilities were subtracted
financial reporting and audit processes, internal             from assets (net position).
controls over financial operations, and processes to
ensure compliance with laws and regulations rele-         ■   The statement of net cost presents the annual
vant to our financial operations. As of September             cost of our operations. The gross cost less any
30, 2003, the committee consisted of Sheldon S.               offsetting revenue earned from our activities is
Cohen (Chairman), Edward J. Mazur, and Charles                used to arrive at the net cost of work performed
O. Rossotti, whose relevant experience was                    under our four strategic goals.
described earlier in this report. The committee’s         ■   The statement of changes in net position presents
report follows our financial statements and accom-            the accounting items that caused the net position
panying notes.                                                section of the balance sheet to change from the
                                                              beginning to the end of the fiscal year.
                                                          ■   The statement of budgetary resources presents
Limitations on Financial                                      how budgetary resources were made available to
Statements                                                    us during the fiscal year and the status of those
                                                              resources at the end of the fiscal year.
Responsibility for the integrity and objectivity of the
financial information presented in the financial          ■   The statement of financing reconciles the
statements in this report rests with our managers.            resources available to us with the net cost of
The statements were prepared to report our finan-             operating the agency.
cial position and results of operations, consistent

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                      77
Balance Sheet

    Financial Statements
    U.S. General Accounting Office
    Balance Sheet
    As of September 30, 2003 and 2002
    (Dollars in thousands)
                                                                                               2003             2002

                       Funds with the U.S. Treasury and cash (Note 2)                       $69,382           $62,055
                       Accounts receivable (Note 1)                                             506              387
                Total Intragovernmental                                                      69,888            62,442

                Property and equipment, net (Note 3)                                         57,928            63,888
                Other (Note 1)                                                                  414               486

    Total Assets                                                                           $128,230          $126,816


                       Accounts payable (Note 1)                                             $7,789           $11,044
                       Employee benefits (Note 5)                                             1,416             1,185
                       Workers’ compensation (Note 4 and 6)                                   1,922             2,102
                       Deferred lease revenue (Note 4 and 7)                                          -         2,514
                Total Intragovernmental                                                      11,127            16,845

                Accounts payable (Note 1)                                                    11,936            13,023
                Salaries and benefits (Note 4 and 5)                                         11,347            10,204
                Accrued annual leave and other (Note 4)                                      30,415            29,357
                Workers’ compensation (Note 4 and 6)                                         11,093            12,331
                Capital leases (Note 4 and 8)                                                 9,647             9,968

    Total Liabilities                                                                        85,565            91,728

    Net Position

                Unexpended appropriations                                                    40,327           29,925
                Cumulative results of operations                                              2,338             5,163

                Total Net Position                                                           42,665            35,088

    Total Liabilities and Net Position                                                     $128,230          $126,816

    The accompanying notes are an integral part of these statements.

78                                                                      GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                             PART III
Statement of Net Cost

    Financial Statements
    U.S. General Accounting Office
    Statement of Net Cost
    For Fiscal Years Ended September 30, 2003 and 2002
    (Dollars in thousands)

                                                                                                    2003         2002
    Net Costs by Goal

                        Goal 1: Well-Being/Financial Security of American People                 $186,443    $178,455
                                       Less: reimbursable services                                      -          (74)
                                                   Net goal costs                                 186,443      178,381

                        Goal 2: Changing Security Threats/Challenges of Global Interdependence    122,031      110,692
                                       Less: reimbursable services                                    (56)        (155)
                                                   Net goal costs                                 121,975      110,537

                        Goal 3: Transforming the Federal Government’s Role                        146,509      142,204
                                       Less: reimbursable services                                 (1,648)      (1,237)
                                                   Net goal costs                                 144,861      140,967

                        Goal 4: Maximize the Value of GAO                                          19,982       25,278
                                       Less: reimbursable services                                      -               -
                                                   Net goal costs                                  19,982       25,278

                        Less: reimbursable services not attributable to goals                      (2,153)      (2,128)

                        Net Cost of Operations (Note 9)                                          $471,108    $453,035

    The accompanying notes are an integral part of these statements.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                          79
Statement of Changes in Net Position

    Financial Statements
    U.S. General Accounting Office
    Statement of Changes in Net Position
    For Fiscal Years Ended September 30, 2003 and 2002
    (Dollars in thousands)

                                                                               2003                            2002
                                                                          Cumulative             2003     Cumulative               2002
                                                                           Results of     Unexpended       Results of       Unexpended
                                                                          Operations    Appropriations    Operations      Appropriations

    Balances, Beginning of Fiscal Year                                        $5,163          $29,925        $15,349            $21,258

    Budgetary Financing Sources
                                Current year appropriations                        -          453,051               -           421,844
                                Transfers of budget authority (Note 10)             -                -              -             7,600
                                Lapsed budget authority                            -           (1,552)              -            (1,731)
                                Appropriations used                          441,097         (441,097)       419,046           (419,046)

    Other Financing Sources
                                Intragovernmental transfer of property
                                  and equipment                                  (85)                -          (222)                  -
                                Federal employee retirement benefit
                                 costs paid by OPM and imputed to
                                 GAO (Note 5)                                  24,757                -         21,007                  -
                                Amortization of deferred lease revenue
                                 (Note 7)                                       2,514                -          3,018                  -

    Total Financing Sources                                                  468,283           10,402        442,849              8,667

    Net Cost of Operations                                                  (471,108)                -       (453,035)                    -

    Balances, End of Fiscal Year                                              $2,338          $40,327          $5,163           $29,925

    The accompanying notes are an integral part of these statements.

80                                                                                        GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                 PART III
Statement of Budgetary Resources

    Financial Statements
    U.S. General Accounting Office
    Statement of Budgetary Resources
    For Fiscal Years Ended September 30, 2003 and 2002
    (Dollars in thousands)
                                                                                                         2003         2002

    Budgetary Resources (Note 10)
                                   Current year appropriations                                       $453,051    $421,844
                                   Transfers of budget authority                                            -       7,600
                                   Unobligated appropriations, beginning of fiscal year               14,198        7,512
                                   Reimbursable services (Note 9)                                       3,857        3,594
                                   Cost sharing and pass-through CPA contract reimbursements           3,243        2,093

    Total Budgetary Resources                                                                        $474,349    $442,643

    Status of Budgetary Resources
                                   Obligations incurred                                              $453,902    $426,714
                                   Unobligated appropriations, end of fiscal year                     18,895       14,198
                                   Lapsed budget authority                                              1,552       1,731

    Total Status of Budgetary Resources                                                              $474,349    $442,643

    Relationship of Obligations to Outlays
                                   Obligations incurred                                              $453,902    $426,714
                                   Obligated balance, net - beginning of fiscal year                  47,856       48,970
                                   Less: Obligated balance, net - end of fiscal year                  (50,487)     (47,856)
    Total Outlays                                                                                     451,271      427,828
                                   Less: Reimbursable services                                         (3,857)      (3,594)
                                         Cost sharing and pass-through CPA contract reimbursements
                                          (Note 10)                                                    (3,243)      (2,093)

    Net Outlays                                                                                      $444,171    $422,141

                                   Disbursements                                                     $451,271    $427,828
                                   Collections                                                         (7,100)      (5,687)

    Net Outlays                                                                                      $444,171    $422,141

    The accompanying notes are an integral part of these statements.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                              81
Statement of Financing

    Financial Statements
    U.S. General Accounting Office
    Statement of Financing
    For Fiscal Years Ended September 30, 2003 and 2002
    (Dollars in thousands)

                                                                                                               2003            2002
    Resources Used to Finance Activities
                         Budgetary Resources Obligated
                         Obligations incurred                                                              $453,902        $426,714
                         Less: Reimbursable services (Note 9)                                                (3,857)         (3,594)
                                Cost sharing and pass-through CPA contract reimbursements (Note10)           (3,243)         (2,093)
                         Net obligations                                                                    446,802         421,027

                         Other Resources
                         Intragovernmental transfer of property and equipment                                  (85)           (222)
                         Federal employee retirement benefit costs paid by OPM and
                          imputed to GAO (Note 5)                                                            24,757          21,007
                         Amortization of deferred lease revenue (Note 7)                                      2,514           3,018
                         Net other resources used to finance activities                                      27,186         23,803

                         Total resources used to finance activities                                         473,988         444,830

    Resources Used to Finance Items Not Part of the Net Cost of Operations
                         Net increase in unliquidated obligations                                            (5,705)         (1,980)
                         Costs capitalized on the balance sheet                                             (14,304)        (13,180)
                         Total resources used to finance items not part of the net cost of operations       (20,009)        (15,160)

                         Total resources used to finance the net cost of operations                         453,979         429,670

    Components That Generate/Require Resources in Future Periods
                         (Increase)/Decrease in Workers’ Compensation, Accrued Annual Leave, and
                           Other Liabilities (Note 11)                                                         (341)          6,213

    Costs That Do Not Require Resources
                         Depreciation                                                                        17,470          17,152

    Net Cost of Operations                                                                                 $471,108        $453,035

    The accompanying notes are an integral part of these statements.

82                                                                                    GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                    PART III

Notes to Financial

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, rev-
Congress and the public in a variety of forms. The       enues are recognized when earned and expenses
financial activity presented relates primarily to the    are recognized when incurred, without regard to
execution of GAO’s congressionally approved bud-         the receipt or payment of cash. The statements
get. GAO’s budget consists of an annual appropria-       were also prepared in conformity with OMB Bulle-
tion covering salaries and expenses and revenue          tin 01-09, Form and Content of Agency Financial
from reimbursable audit work and rental income.          Statements.
This revenue is included on the Statement of Bud-
getary Resources as “reimbursable services.” The         Assets
financial statements, except for federal employee        Intragovernmental assets are those assets that arise
benefit costs paid by the Office of Personnel Man-       from transactions with other federal entities. Funds
agement (OPM) and imputed to GAO, do not                 with the U.S. Treasury composed the majority of
include the effects of centrally administered assets     intragovernmental assets on GAO’s balance sheet.
and liabilities related to the federal government as a
whole, such as interest on the federal debt, which       Funds with the U.S. Treasury
may in part be attributable to GAO; they also do not     The U.S. Treasury processes GAO’s receipts and
include activity related to GAO’s trust function         disbursements. Funds with Treasury represent
described in Note 12.                                    appropriated funds Treasury will provide to pay lia-
                                                         bilities and to finance authorized purchase commit-
Basis of Accounting                                      ments.
GAO’s financial statements conform to U.S. Gener-
ally Accepted Accounting Principles (GAAP) as pro-       Accounts Receivable
mulgated by the Federal Accounting Standards             GAO’s accounts receivable are due principally from
Advisory Board (FASAB). The American Institute of        federal agencies for reimbursable services; there-
Certified Public Accountants (AICPA) recognizes          fore, GAO has not established an allowance for
FASAB Standards as GAAP for federal reporting            doubtful accounts.
entities. These principles differ from budgetary
reporting principles. The differences relate primarily   Property and Equipment
to the capitalization and depreciation of property       The GAO building qualifies as a multi-use heritage
and equipment, as well as the recognition of other       asset and is GAO’s only heritage asset. The designa-
long-term assets and liabilities.                        tion of multi-use heritage asset is a result of both
                                                         being listed in the National Register of Historic

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                  83

Places and being used in general government oper-          Dollars in thousands
ations. Maintenance of the building has been kept          Agency                                  2003      2002
on a current basis. The building is depreciated on a       General Services Administration        $6,992    $8,793
straight-line basis over 25 years.                         U.S. Army Corps of Engineers              10      3,716
                                                           Office of Personnel Management          1,106      903
For fiscal 2003, GAO increased the dollar thresholds
used to capitalize property and equipment. Prop-           Department of Labor                    2,059     2,332
erty and equipment costing more than $15,000 are           All others                               960      1,101
capitalized at cost. Building improvements and             Total Intragovernmental Liabilities   $11,127   $16,845
leasehold improvements are capitalized when the
cost is $25,000 or greater. Bulk purchases of lesser-
value items that aggregate more than $150,000 are
also capitalized at cost. During fiscal 2002, the
                                                           Accounts Payable
thresholds used were $5,000 for both build-                Accounts Payable consists of amounts owed to fed-
ing/leasehold improvements and property and                eral agencies and commercial vendors for goods,
equipment, and $100,000 for bulk purchases. Assets         services, and other expenses received but not yet
are depreciated on a straight-line basis over the esti-    paid.
mated useful life of the property as follows: build-
ing improvements, 10 years; computer equipment,            Federal Employee Benefits
software, and capital lease assets, ranging from 3 to      GAO recognizes its share of the cost of providing
6 years; leasehold improvements, 5 years; and other        future pension benefits to eligible employees over
equipment, ranging from 5 to 20 years. GAO’s               the period of time that they render services to GAO.
property and equipment have no restrictions as to          The pension expense recognized in the financial
use or convertibility except for the restrictions          statements equals the current service cost for GAO’s
related to the GAO building’s classification as a          employees for the accounting period less the
multi-use heritage asset.                                  amount contributed by the employees. OPM, the
                                                           administrator of the plan, supplies GAO with factors
Other Assets                                               to apply in the calculation of the service cost. These
The composition of Other Assets as of September            factors are derived through actuarial cost methods
30, 2003 and 2002, is as follows:                          and assumptions. The excess of the recognized
                                                           pension expense over the amount contributed by
Dollars in thousands
                                                           GAO and employees represents the amount being
                                       2003      2002      financed directly through the Civil Service Retire-
Operating supplies to be consumed                          ment and Disability Fund administered by OPM.
 in normal operations (valued at                           This amount is considered imputed financing to
 cost)                                 $363      $404
                                                           GAO (see Note 5).
Other receivables                        51           82
Total Other Assets                     $414      $486      GAO recognizes a current-period expense for the
                                                           future cost of post retirement health benefits and
                                                           life insurance for its employees while they are still
                                                           working. GAO accounts for and reports this
Liabilities                                                expense in its financial statements in a manner sim-
Liabilities represent amounts that are likely to be        ilar to that used for pensions, with the exception
paid by GAO as a result of transactions that have          that employees and GAO do not make current con-
already occurred.                                          tributions to fund these future benefits.

Intragovernmental liabilities arise from transactions      Federal employee benefit costs paid by OPM and
with other federal entities. Detail of GAO’s intragov-     imputed to GAO are reported as resources on the
ernmental liabilities by agency as of September 30,        Statements of Changes in Net Position and Financ-
2003 and 2002 is as follows:                               ing and are also included as a component of net
                                                           cost by goal on the Statement of Net Cost.

84                                                             GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                          PART III

Annual, Sick, and Other Leave                               Dollars in thousands
Annual leave is recognized as an expense and a lia-         Classes of
bility as it is earned; the liability is reduced as leave   property and      Acquisition Accumulated        Book
is taken. The accrued leave liability is principally        equipment              value depreciation        value
long-term in nature. Sick leave and other types of          Building               $15,664      $9,398      $6,266
leave are expensed as leave is taken.                       Land                      1,191           -      1,191
Contingencies                                                improvements          106,427      80,306      26,121
GAO has certain claims and lawsuits pending                 Computer and
against it. Provision has been made in GAO’s finan-          other
cial statements for losses considered probable and           equipment,
estimable. These amounts are considered by man-              and software           32,872      18,517      14,355
agement to be immaterial. Management believes               Leasehold
that losses, if any, from other claims and lawsuits          improvements             5,036      4,793         243
would not be material to the fair presentation of           Assets under
GAO’s financial statements.                                  capital lease           28,728     18,976        9,752
                                                            Total property
                                                             and equipment         $189,918   $131,990     $57,928

Note 2. Funds with the U.S.
Treasury and Cash
GAO’s funds with the U.S. Treasury consist of only          The composition of property and equipment as of
appropriated funds. GAO also maintains cash                 September 30, 2002, is as follows:
imprest funds for use in daily operations. The status
of these funds as of September 30, 2003 and 2002,           Dollars in thousands
is as follows:                                              Classes of
                                                            property and      Acquisition Accumulated        Book
Dollars in thousands                                        equipment              value depreciation        value

                                         2003      2002     Building               $15,664      $8,772      $6,892

Unobligated balance                                         Land                      1,191           -      1,191

    Available                         $10,214     $7,898    Building
                                                             improvements          102,459      72,164      30,295
    Unavailable                          8,664     6,300
                                                            Computer and
Obligated balances not yet                                   other
 disbursed                              50,487    47,821     equipment,
Total Funds with U.S. Treasury          69,365    62,019     and software           33,441      18,132      15,309
Cash                                        17        36    Leasehold
                                                             improvements             4,847      4,614         233
Total Funds with U.S. Treasury and
 Cash                                 $69,382    $62,055    Assets under
                                                             capital lease           24,660     14,692        9,968
                                                            Total property
                                                             and equipment         $182,262   $118,374     $63,888

Note 3. Property and
Equipment, Net
                                                            In fiscal 2002 a full inventory was completed result-
The composition of property and equipment as of             ing in an additional $8,200,000 in retirements of
September 30, 2003, is as follows:                          fully depreciated assets.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                       85

Note 4. Liabilities Not Covered                            the taxes they pay to the program and the benefits
                                                           they will eventually receive are not recognized in
by Budgetary Resources                                     GAO’s financial statements. However, the payments
                                                           to FICA that GAO makes are recognized as operat-
The liabilities on GAO’s Balance Sheet as of Sep-
                                                           ing expenses. During fiscal 2003 and fiscal 2002,
tember 30, 2003 and 2002, include liabilities not
                                                           these payments amounted to approximately
covered by budgetary resources, which are liabili-
                                                           $13,556,000 and $12,164,000, respectively. To the
ties for which congressional action is needed before
                                                           extent that GAO employees are covered by the
budgetary resources can be provided. Although
                                                           thrift savings component of FERS, GAO payments
future appropriations to fund these liabilities are
                                                           to the plan are recognized as operating expenses.
likely and anticipated, it is not certain that appropri-
                                                           GAO’s costs associated with the thrift savings com-
ations will be enacted to fund these liabilities. The
                                                           ponent of FERS during fiscal 2003 and fiscal 2002
composition of liabilities not covered by budgetary
                                                           amounted to approximately $7,097,000 and
resources as of September 30, 2003 and 2002, is as
                                                           $6,090,000, respectively.

Dollars in thousands
                                                           In addition, all permanent employees are eligible to
                                                           participate in the contributory Federal Employees
                                        2003      2002
                                                           Health Benefit Program (FEHBP) and Federal
Intragovernmental liabilities                              Employees Group Life Insurance Program (FEGLIP)
     Workers’ compensation            $1,922    $2,102     and may continue to participate after retirement.
     Deferred lease revenue                 -     2,514    GAO makes contributions through OPM to FEHBP
Total intragovernmental liabilities    1,922     4,616     and FEGLIP for active employees to pay for their
Salaries and benefits—Comptrollers
                                                           current benefits. GAO’s contributions for active
 General retirement plan                2,875     2,856    employees are recognized as operating expenses
Accrued annual leave and other         30,415    29,357
                                                           and, during fiscal 2003 and fiscal 2002, amounted to
                                                           approximately $13,191,000 and $11,704,000, respec-
Workers’ compensation                 11,093    12,331
                                                           tively. Using the cost factors supplied by OPM,
Capital leases                          9,647     9,968    GAO has also recognized an expense in its financial
Total liabilities not covered by                           statements for the estimated future cost of post
 budgetary resources                  $55,952   $59,128
                                                           retirement health benefits and life insurance for its
                                                           employees. These costs amounted to approximately
                                                           $10,881,000 and $9,862,000 during fiscal 2003 and
                                                           fiscal 2002, respectively, and are financed by OPM
Note 5. Federal Employee                                   and imputed to GAO.
Benefits                                                   Amounts owed to OPM and Treasury as of Septem-
All permanent employees participate in the contrib-        ber 30, 2003 and 2002 are $1,416,000 and
utory Civil Service Retirement System (CSRS) or the        $1,185,000, respectively for FEHBP, FEGLIP, FICA,
Federal Employees Retirement System (FERS). Tem-           FERS, and CSRS contributions and are shown on the
porary employees and employees participating in            Balance Sheet as an employee benefits liability.
FERS are covered under the Federal Insurance Con-
tributions Act (FICA). GAO makes contributions to          Comptrollers General and their surviving beneficia-
CSRS, FERS, and FICA and matches certain                   ries who qualify and so elect to participate are paid
employee contributions to the thrift savings compo-        retirement benefits by GAO under a separate retire-
nent of FERS. The pension expense recognized in            ment plan. These benefits are paid from current
GAO’s financial statements for fiscal 2003 and fiscal      year appropriations and amounted to approxi-
2002 amounted to approximately $39,672,000 and             mately $272,000 and $267,000 during fiscal 2003
$36,979,000, respectively. These amounts include           and fiscal 2002, respectively. Because GAO is
pension costs financed by OPM and imputed to               responsible for future payments under this plan, the
GAO of $13,876,000 and $11,145,000, respectively.          estimated present value of accumulated plan bene-
To the extent that employees are covered by FICA,          fits of $2,875,000 as of September 30, 2003, and

86                                                             GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                       PART III

$2,856,000 as of September 30, 2002, is included as       2002, COE leased additional space on the sixth floor
a component of salary and benefit liabilities on          with occupancy lasting through the original lease
GAO’s Balance Sheet.                                      term.

                                                          In addition, COE paid for the design, construction,
Note 6. Workers’ Compensation                             and renovation of one-half of the sixth floor to be
                                                          occupied by GAO. In 2000, GAO capitalized the
The Federal Employees’ Compensation Act (FECA)            renovations at a cost of $9,053,000. GAO has repaid
provides income and medical cost protection to            COE for the entire cost of the renovations in the
covered federal civilian employees injured on the         form of rental credits during the first 3 lease years.
job, employees who have incurred a work-related           Rental credits were recorded as deferred lease reve-
occupational disease, and beneficiaries of employ-        nue and were amortized over the original 3-year
ees whose death is attributable to a job-related          lease term ending in fiscal 2003. The current year
injury or occupational disease. Claims incurred for       amortization of deferred lease revenue is reported
benefits for GAO employees under FECA are                 on the Statement of Changes in Net Position as an
administered by the Department of Labor (DOL)             other financing source and on the Statement of
and are paid, ultimately, by GAO.                         Financing as an other resource.

For 2002, and again in 2003, GAO used estimates           The net amount of rental revenue due to GAO each
provided by DOL to report the FECA liability. This        year is the total revenue less the amortization of the
practice is consistent with the practices of other fed-   deferred lease revenue. Fiscal 2003 and fiscal 2002
eral agencies.                                            rents received by GAO, net of the deferred lease
                                                          revenue amortization, amounted to $1,619,000 and
GAO recorded an estimated liability for claims            $1,489,000, respectively. This amount is included in
incurred but not reported as of September 30, 2003        reimbursable services on the Statements of Budget-
and 2002, which is expected to be paid in future          ary Resources and Financing. Total rental revenue
periods. This estimated liability of $11,093,000 and      for the remaining period of the 10-year lease is as
$12,331,000 as of September 30, 2003 and 2002,            follows:
respectively, is reported on GAO’s Balance Sheet.
GAO also recorded a liability for amounts paid to         Dollars in thousands
claimants by DOL as of September 30, 2003 and                                                       Total rental
2002, of $1,922,000 and $2,102,000, respectively,          Fiscal year ending September 30            revenuea
but not yet reimbursed to DOL by GAO. The                  2004                                          $4,799
amount owed to DOL is reported on GAO’s Bal-
                                                           2005                                           4,856
ance Sheet as an intragovernmental liability.
                                                           2006                                           4,916
                                                           2007                                           4,978
Note 7. Deferred Lease Revenue                             2008                                           5,045
                                                           2009 and thereafter                           10,290
The U.S. Army Corps of Engineers (COE) entered
                                                           Total                                        $34,884
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         aIf   option years are exercised.
began August 3, 2000, for an initial period of 3
years, with options to renew on an annual basis for
7 additional years. Total rental revenue to GAO
includes a base rent, which remains constant for the      Note 8. Leases
entire 10-year period, plus operating expense reim-
bursements at a fixed amount for the first 3 years,       Capital Leases
with escalation clauses from year 4 through year 10       GAO has entered into capital leases for office and
if the option years are exercised. Beginning in fiscal    computer equipment under which the ownership of
                                                          the equipment covered under the leases transfers to

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                     87

GAO when the leases expire. When GAO enters              Dollars in thousands
into these leases, the present value of the future       Fiscal year ending September 30                   Total
lease payments is capitalized, net of imputed inter-     2004                                            $7,779
est, and recorded as a liability. The acquisition        2005                                             5,730
value and accumulated depreciation of GAO’s capi-
                                                         2006                                             4,007
tal leases are shown in Note 3, Property and Equip-
ment, Net. As of September 30, 2003 and 2002, the        2007                                             2,795
capital lease liability was $9,647,000 and $9,968,000,   2008                                             1,417
respectively.                                            2009 and thereafter                              5,163
                                                         Total Estimated Future Lease Payments          $26,891
These lease agreements are written as contracts
with a base year and option years. The option years
are subject to the availability of funds. Early termi-
nation of the leases for reasons other than default
are subject to a negotiation between the parties.        Leased property and equipment must be capitalized
These leases are lease to ownership agreements.          if certain criteria are met (see Capital Leases
GAO’s leases are short term in nature and no liabil-     description). Because property and equipment cov-
ity exists beyond the years shown in the table           ered under GAO’s operating leases do not satisfy
below. GAO’s estimated future minimum lease pay-         these criteria, GAO’s operating leases are not
ments under the terms of the leases are as follows:      reflected on the Balance Sheet. However, annual
                                                         lease costs under the operating leases are included
Dollars in thousands                                     as components of net cost by goal in the Statement
                                                         of Net Cost.
Fiscal year ending September 30                Total
2004                                          $5,682
2005                                           2,664     Note 9. Net Cost of Operations
2006                                           1,470
2007                                             551     Expenses for salaries and related benefits for fiscal
                                                         2003 and fiscal 2002 amounted to $372,060,000 and
Total Estimated Future Lease Payments         10,367
                                                         $351,088,000, respectively, which were about 79
Less: Imputed Interest                          (720)    percent and 78 percent, respectively, of GAO’s
Net Capital Lease Liability                   $9,647     annual net cost of operations. Included in the net
                                                         cost of operations are federal employee benefit
                                                         costs paid by OPM and imputed to GAO of
                                                         $24,757,000 in fiscal 2003 and $21,007,000 in fiscal
Operating Leases                                         2002.
GAO leases office space, predominately for field
offices, from GSA and has entered into various           Revenues from reimbursable services are shown as
other operating leases for office communication          an offset against the full cost of the goal to arrive at
and computer equipment. Lease costs for office           its net cost. These revenues consist primarily of bill-
space and equipment for fiscal 2003 and fiscal 2002      ings to federal government corporations for finan-
amounted to approximately $7,096,000 and                 cial statement audits performed by GAO. GAO’s
$6,880,000, respectively. GAO’s estimated future         pricing policy is to seek reimbursement for actual
minimum lease payments under the terms of the            costs incurred, including overhead costs where
leases are as follows:                                   allowed by law. Earned revenues that are insignifi-
                                                         cant or cannot be associated with a major goal are
                                                         shown in total, the largest component of which is
                                                         rental revenue from the lease of space in the GAO
                                                         building. Revenues from reimbursable services for
                                                         fiscal 2003 and fiscal 2002 amounted to $3,857,000
                                                         and $3,594,000, respectively. Of the revenues from
                                                         reimbursable services received in fiscal 2003,

88                                                           GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                 PART III

$3,746,000 were intragovernmental—substantially           accounting and auditing services from CPA firms.
from COE, $1,621,000, and Federal Deposit Insur-          The costs and reimbursements for these activities
ance Corporation (FDIC), $1,505,000. Likewise, in         are not included in the Statement of Net Cost.
fiscal 2002 the amount of revenues from reimburs-
able services from other governmental entities was
$3,399,000, of which $1,503,000 was from COE and          Note 11. Components that
$1,160,000 was from FDIC.
                                                          Generate/Require Resources in
The net cost of operations represents GAO’s operat-       Future Periods
ing costs that must be funded by financing sources
                                                          Increases/decreases in workers’ compensation,
other than revenues earned from reimbursable ser-
                                                          accrued annual leave and other liabilities are
vices. These financing sources are presented in the
                                                          reported in the Statement of Financing. These
Statement of Changes in Net Position.
                                                          changes represent the increases/decreases in liabili-
                                                          ties not covered by budgetary resources, as
                                                          reported in Note 4.
Note 10. Budgetary Resources
Budgetary resources made available to GAO                 Dollars in thousands
include current appropriations, spending authority        Fiscal year ending September 30             2003           2002
from budget transfers, unobligated appropriations,        Liabilities not covered by budgetary
and reimbursements arising from both revenues               resources, as disclosed in Note 4       $55,952 $59,128
earned by GAO from providing goods and services           Liabilities that are not components of
to other federal entities for a price (reimbursable         net cost:
services), and cost-sharing and pass-through con-             Deferred lease revenue                         -     (2,514)
tract arrangements with other federal entities.               Capital leases                         (9,647)       (9,968)
                                                          Current year liabilities not covered by
For fiscal 2002, differences exist between the appro-      budgetary resources that are
priations on the Statement of Budgetary Resources          components of net cost                   46,305        46,646
(SBR) and the appropriations amount in the Presi-         Prior year liabilities that are not
dent’s Budget. These differences are due to: 1)            components of current year net
unobligated funds available in expired accounts not        costs                                    (46,646) (40,433)
included in the President’s Budget submission, and        (Increase)/Decrease in
2) reimbursements from cost-sharing and pass-               Workers’ Compensation, Accrued
through contract arrangements that could not have           Annual Leave, and Other Liabilities,
                                                            as reported on the Statement of
been anticipated at the time the President’s Budget                                                  $(341)        $6,213
was developed. In addition, as the actual fiscal 2003
President’s Budget is not yet available, comparison
between the SBR and the President’s Budget cannot
be performed.
                                                          Note 12. Davis-Bacon Act Trust
Fiscal 2003 has no budget transfers. Fiscal 2002          Function
budget transfers consisted of budget authority trans-
ferred to cover emergency response and prepared-          GAO is responsible for administering for the federal
ness activities, including activities related to the      government the trust function of the Davis-Bacon
temporary relocation of Members of the House              Act receipts and payments and publishes separate,
Representatives and their staffs to the GAO build-        audited financial statements for this fund. GAO
ing. Reimbursements from cost-sharing and pass-           maintains this fund to pay claims relating to viola-
through contract arrangements consisted primarily         tions of the Davis-Bacon Act and Contract Work
of collections from other federal entities for the sup-   Hours and Safety Standards Act. Under these acts,
port of FASAB and collections from other federal          DOL investigates violation allegations to determine
entities that utilize GAO contracts for obtaining         if federal contractors owe additional wages to cov-
                                                          ered employees. If DOL concludes that a violation

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                              89

has occurred, GAO collects the amount owed from         assets are neither the assets of GAO nor the federal
the contracting federal agency, deposits the funds      government and are held for distribution to appro-
into an account with the U.S. Treasury, and remits      priate claimants. During fiscal 2003, receipts and
payment to the employee. GAO is accountable to          disbursements in the trust amounted to $994,000
the Congress and to the public for the proper           and $1,162,000, respectively. Because the trust
administration of the assets held in the trust. Trust   assets and related liabilities are not assets and liabil-
assets under GAO’s administration totaled approxi-      ities of GAO, they are not included in the accompa-
mately $4,524,000 as of September 30, 2003. These       nying financial statements.

90                                                          GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                   PART III

Audit Advisory Committee’s Report

                     The Audit Advisory Committee (the 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 com-
                     pliance 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 the U.S. generally accepted
                     accounting principles. The Committee reviews the findings of the internal and exter-
                     nal 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 the draft performance and accountability report, including its
                     financial statements, and provides comments to management who has primary
                     responsibility for the performance and accountability report. The Committee met
                     three times with respect to its responsibilities as described above. 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 are
                     required to be discussed by Statement on Auditing Standards No. 61, (Communica-
                     tions with Audit Committees). Based on procedures performed as outlined above, we
                     recommend that GAO’s audited statements and footnotes be included in the 2003
                     Performance and Accountability Report.

                     Sheldon S. Cohen
                     Audit Advisory Committee

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                91

Independent Auditor’s Report



                                                        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, 2003 and 2002, and the related Statements of Net Cost, Changes in Net Position, Budgetary
                  Resources, and Financing for the years then ended. We found:

                            x         The financial statements referred to above are fairly presented, in all material respects, in
                                      conformity with U.S. generally accepted accounting principles,

                            x         GAO maintained effective internal control over financial reporting (including
                                      safeguarding of assets) and compliance with laws and regulations,

                            x         GAO’s financial management systems substantially complied with the applicable
                                      requirements of the Federal Financial Management Improvement Act of 1996 (FFMIA),

                            x         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, 2003 and 2002, 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,
                  2003, based on criteria established under the Federal Managers’ Financial Integrity Act (FMFIA).

                                                                           established 1981
                                                 333 North Fairfax Street i Suite 401i Alexandria, Virginia 22314
                                      703/836/6701i FAX 703/836/0941i WWW.COTTONCPA.COM i DCOTTON@COTTONCPA.COM

92                                                                                            GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                          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, 2003.

                                              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 2003 and 2002
               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 Federal Accounting Standards Advisory Board’s
               Statement of Federal Financial Accounting Standards No. 15, Management’s Discussion and Analysis.

                       There are two types of material within GAO’s Performance and Accountability Report that are
               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 and 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.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                       93

                                                 Management’s Responsibility

                    Management is responsible for:

                    x       Preparing the financial statements in conformity with U.S. generally accepted accounting

                    x       Establishing, maintaining, and assessing internal control to provide reasonable assurance
                            that the broad control objectives of FMFIA are met;

                    x       Implementing, maintaining, and assessing financial management systems to provide
                            reasonable assurance of substantial compliance with the requirements of FFMIA; and

                    x       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 misstatement. 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, 2003, 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.

94                                                                        GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                                             PART III

                       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, 2003, 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
               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, 2003. 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
               November 3, 2003

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                                          95

Part IV:

1. Accomplishments and Other

In pursuing the General Accounting Office’s (GAO)      years because it takes time to implement recom-
strategic goals during fiscal 2003, we recorded hun-   mendations, realize benefits, and record them. We
dreds of accomplishments and made numerous             did not include some contributions that were
other contributions. This appendix provides details    achieved in early fiscal 2003 but that were included
on the most significant of these. In reporting         in our fiscal 2002 performance and accountability
accomplishments and other contributions, we are        report because the bulk of the work was performed
holding ourselves accountable for the resources we     in that year.
received to implement our strategic plan.
                                                       The other contributions, which typically refer to
The accomplishments document financial or other        work completed in fiscal 2003, describe instances in
benefits achieved through action on our findings or    which we provided information or recommenda-
recommendations. Typically, the accomplishments        tions that aided congressional decision making or
describe work that we completed in prior fiscal        informed the public debate to a significant degree.

98                                                        GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                     PART IV

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
1.1. Enhancing Quality of Care in Nursing
Homes: In a series of reports and testimonies
since 1998, we found that, too often, residents of
nursing homes were being harmed and that pro-
grams to oversee nursing home quality of care at
the Centers for Medicare & Medicaid Services (CMS)       1.3. Increasing Oversight of Federal
were not fully effective in identifying and reducing     Employees’ Pharmacy Benefits: Our review of
such problems. We assessed CMS’s progress in             the use of pharmacy benefit managers in the Fed-
addressing these weaknesses and, in a July 2003          eral Employees’ Health Benefits Program (FEHBP)
report and associated testimony for the Senate           highlighted cost savings that pharmacy benefit man-
Finance Committee, noted that, despite a decline in      agers achieve for FEHBP plans while providing
the proportion of nursing homes that harmed resi-        generally broad access to prescription drugs and
dents, the number of such homes remains unac-            pharmacies. We also identified rising prescription
ceptably high. We made numerous                          drug costs as one of the key factors in FEHBP’s
recommendations to CMS’s Administrator focusing          recent premium increases. The report generated
on further improving the mechanisms available to         increased attention to the potential for pharmacy
CMS to oversee nursing home care.                        benefit managers to achieve savings for FEHBP
                                                         plans, and the Office of Personnel Management
1.2. Eliminating Medicaid’s Upper Payment                (OPM) directed participating plans to ensure that
Limit Loophole: In a series of products, we              they were obtaining maximum savings from the use
reported on a financing scheme that was used by          of pharmacy benefit managers and announced that
some states to generate additional federal monies        it would increase its oversight of FEHBP plans’ use
under the joint federal and state funded Medicaid        of these managers.
program. Under this scheme, states took advantage
of a loophole in Medicaid’s upper payment limit          1.4. Assisting the Congress in Medicaid
requirement and created the illusion that they made      Formula Enhancements: Budget pressures have
large Medicaid payments in order to generate fed-        required many states to reduce or freeze Medicaid
eral matching payments. In reality, states made          payments, services, or eligibility and additional
these large payments to certain providers, such as       reductions have been proposed in numerous states.
local government-owned nursing homes, only to            In response to these budgetary concerns, the Con-
require the return of these payments to the states.      gress enacted the Jobs and Growth Tax Relief Rec-
Citing our work as key evidence, the Department of       onciliation Act of 2003, which provides a total of
Health and Human Services developed and pub-             $10 billion in enhanced Medicaid funding over 5
lished a regulation in 2001 that phases out this         calendar quarters beginning April 1, 2003. We pro-
loophole with resulting financial benefits to the fed-   vided technical assistance to staff of the Senate Bud-
eral government estimated at $5.9 billion over the       get Committee and the House Energy and
first 3 years of its implementation.                     Commerce Committee as they deliberated tempo-

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                 99

rary enhancements to the Medicaid formula used to          structure for monitoring and overseeing research.
provide the federal share of program costs. We then        We provided the Congress with information rele-
assisted in computing the effects of different             vant to proposed legislation that would establish an
enhancements to the Medicaid matching rate, cul-           independent office within VA to oversee compli-
minating in the passage of the aforementioned act.         ance with federal regulations for the protection of
                                                           human subjects by testifying in June 2003 that VA
1.5. Reducing Costs to Medicare of Providing               had not taken sufficient actions to strengthen its
Covered Outpatient Prescription Drugs: We                  human subject protection systems and noting the
reported that Medicare payment for covered outpa-          additional steps VA needed to take to better protect
tient prescription drugs, which is based on the aver-      veterans who participate in research.
age wholesale price reported by drug
manufacturers, is substantially higher than provid-        1.8. Avoiding Costs Associated with an
ers’ acquisition costs. A 2001 report examined pay-        Increase in the Skilled Nursing Facilities
ment for 31 drugs that were either most frequently         Rate: In 2000, the Congress—through the Medi-
billed to Medicare or that resulted in the highest         care, Medicaid, and State Children’s Health Assur-
expenditures, and a 2003 report examined payment           ance Program Benefits Improvement and Protection
for blood clotting factor, a biological used to treat      Act of 2000—increased the nursing component of
hemophilia that has unique delivery needs. CMS             Medicare’s daily rate for skilled nursing facilities by
agreed with the findings of both reports, and legis-       16.66 percent, effective April 1, 2001. The nursing
lation passed in both the House and Senate                 component increase expired on October 1, 2002,
includes provisions that would reduce Medicare’s           and the Congress considered whether to reinstate it.
payments to more closely reflect provider cost,            The act directed us to assess the impact of the
which could result in hundreds of millions of dol-         increase in the nursing component on nurse staffing
lars in federal cost reductions.                           ratios and to recommend whether the increased
                                                           payments should continue. Our analysis indicated
1.6. Promoting Effectiveness of the Smallpox               that, in the aggregate, skilled nursing facilities’ nurse
Vaccination Program: In April 2003, we                     staffing ratios changed little after the increase in the
reported that the Centers for Disease Control and          nursing component of the Medicare payment rate
Prevention (CDC) faced major challenges in imple-          took effect. We recommended that the Congress
menting the national smallpox vaccination pro-             consider the increase in the Medicare payment rate
gram––a program developed as a result of the               as ineffective in raising nurse staffing ratios when
growing concern that terrorists might use the small-       determining whether to reinstate the nursing com-
pox virus as an agent of bioterrorism. We recom-           ponent increase. During the fall 2002 through the
mended that CDC provide guidance to state and              spring 2003, the nursing facility industry sharply
local jurisdictions on estimating response capacity        criticized our report and strongly urged the Con-
needs and work with the jurisdictions to revise tar-       gress to restore the expired nursing component
gets for the initial number of individuals to be vacci-    payment increase. To date, the nursing component
nated and the time to complete this effort. CDC            increase has not been reinstated. This financial ben-
subsequently issued guidance to help jurisdictions         efit—estimated at $1 billion—represents the cost
in their efforts to identify, train, and vaccinate those   avoidance associated with not reinstating the pro-
who would respond to a smallpox attack.                    gram for fiscal 2003.

1.7. Improving Protections for the
Department of Veterans’ Affairs (VA) Human                 The Education and Protection
Research Subjects: In response to recent con-
cerns about the safety of some VA research pro-
                                                           of the Nation’s Children
grams, the Congress asked us to assess VA’s
                                                           1.9. Improving Implementation of the New
progress in implementing recommendations we
                                                           Education Law: The No Child Left Behind Act of
made in 2000 for improving protections of the
                                                           2001 increased accountability for states and school
rights and welfare of veterans who participate in
                                                           districts to improve student achievement, while also
VA’s biomedical and behavioral research programs.
                                                           providing states and school districts with additional
We also examined changes in VA’s organizational

100                                                            GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                        PART IV

flexibility to use federal funds to meet education        sion in the No Child Left Behind Act. Education offi-
needs. In two recent reports, we highlighted early        cials agreed to take steps to provide better
implementation issues related to provisions in the        information to states.
act—the cost of testing and the design of the flexi-
bility demonstration programs. In both areas, we          1.11. Improving States’ Child Welfare Agency
highlighted the Department of Education’s role and        Performance: In a series of reports beginning in
recommended that Education take actions to                2002, we have increased congressional and public
improve implementation by sharing information on          awareness of improvements key to enhancing
states’ experiences in reducing testing expenses and      states’ child welfare agency performance and the
by targeting information to states and districts in the   oversight provided by the Department of Health
best position to apply for additional flexibility. Edu-   and Human Services. Two reports focused on
cation indicated that it agreed with our recommen-        states’ implementation of significant child welfare
dations and will continue to pursue opportunities to      legislation and the data that states collect to docu-
improve the law’s implementation. Our work also           ment children’s experiences after they come into
highlighted weaknesses in Education’s efforts to          contact with the system. We found that some data
improve the performance of disadvantaged stu-             were not reliable and that key data were not being
dents, specifically those efforts focused on improv-      collected. A third report highlighted critical issues in
ing the accountability of states and districts for        recruiting and retaining highly qualified child wel-
student performance. As a result, the act included        fare social workers. All three reports recommended
provisions that strengthened the accountability of        changes in the department’s oversight to ensure that
states and districts for student performance. For         states receive appropriate assistance in overseeing
example, the law required states and districts to         and documenting the children’s experiences and
assess and report on the proficiency level of all stu-    that additional assistance is targeted to research on
dents, as well as specific subgroups of students          effective practices. The department agreed with
(e.g., students with limited English proficiency or       most of our recommendations, stating that it has
economically disadvantaged students) and delin-           established a team to review data-related issues and
eates actions that will be taken for schools and dis-     begun exploring the effectiveness of child welfare
tricts not meeting proficiency levels.                    training programs.

1.10. Increasing Accountability in Teacher                1.12. Ensuring Adequate Lender Participation
Training Programs and Ensuring Highly                     in the Student Loan Market: In September 2000,
Qualified Teachers: We found that Department              we reported that the Department of Education
of Education information on teacher quality pro-          inconsistently applied a provision of the Higher
grams was not accurate. The recommendations in            Education Act, known as the 50 percent rule, to
our report and testimony on improving the quality         lenders entering trustee arrangements in the Federal
of teacher training programs were used to draft leg-      Family Education Loan Program and that lenders
islation that could strengthen training program           were unclear as to how the provision should be
reporting requirements by increasing the accuracy         applied. As a result of our recommendations, Edu-
of information and enhancing the accountability for       cation changed the definition of “eligible lender” in
the quality of teacher training programs and the          this program to clarify the application of the 50 per-
qualifications of teachers. We also reported that         cent rule to trustees. This change can facilitate par-
states did not have sufficient information to help        ticipation by additional ineligible lenders, leading to
them determine which teachers are highly qualified.       a greater competition in the student loan market
We developed base line data on states’ efforts to         and potentially improved service and lower costs
help implement the highly qualified teacher provi-        for student borrowers.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                  101

The Promotion of Work                                      1.14. Highlighting the Role of Charitable
                                                           Contributions in Aiding Victims of September
Opportunities and the                                      11: We found that charitable aid made a major con-
Protection of Workers                                      tribution to the nation’s response to the September
                                                           11 attacks, despite very difficult circumstances.
1.13. Helping Ensure a Federal Job Training                Through the work of charities, millions of people
System That Meets National and Local                       contributed to the recovery effort, raising an esti-
Needs: Our work on the new Workforce Invest-               mated $2.7 billion. At the same time, we identified
ment Act (WIA), and its mandated one-stop system,          lessons learned that could improve future charitable
has examined issues such as how well the system is         responses in disasters, focusing needed attention on
serving the needs of special populations—including         the importance of coordination among the key pub-
at-risk youth, older workers, and dislocated work-         lic and private organizations involved in aiding vic-
ers—and how well it achieves accountability. Mem-          tims.
bers of the Congress have acknowledged our work
for its timely and thorough approach and for posi-         1.15. Protecting Today’s Workers: We identi-
tioning them for reauthorization discussions. Our          fied activities that could enhance the Department of
efforts are also having an impact on the ability of        Labor’s enforcement of protections for today’s
state and local officials to serve eligible WIA clients.   workers, including many that are the nations most
States are subject to financial penalties if they do       vulnerable. In our reviews of Labor’s Occupational
not meet negotiated performance levels for WIA-            Safety and Health Administration and the Wage and
funded programs, and we found that the Depart-             Hour Division, we found that improved data could
ment of Labor and the states lacked the historical         help better target federal inspection resources and
data needed to establish these performance levels.         measure program outcomes. Focusing on workers
State officials believed they were set too high and        under 18 years old and individuals working as day
that they did not take into account the proportion         laborers (individuals who work for different
of the population that were hard to serve. We con-         employers every day and are paid in cash), we
cluded that these levels could act as a disincentive       found that Labor could get better information about
for the programs to serve some eligible job seekers        the dangers these workers face, enhance their edu-
who needed assistance but who might keep the               cation and outreach efforts, and ensure that these
state from meeting their performance levels. Our           workers receive the protections they are afforded
recommendations that Labor expedite the release of         under federal law.
guidance for renegotiating performance levels and
that it take steps to reduce the disincentives for         1.16. Strengthening Labor’s Management of
serving certain populations may help mitigate this         the Special Minimum Wage Program: Our
concern. As a result, job seekers who are eligible         review of this program, which, under certain cir-
for and may benefit from these services may be             cumstances, permits employers to pay workers with
more likely to receive them. We also found that            disabilities less than the minimum wage, resulted in
states did not have a ready mechanism to share the         substantial improvements in its management. Spe-
unemployment insurance data with other states—             cifically, our recommendations resulted in Labor
data needed to determine if their WIA-funded pro-          taking a number of actions to more accurately mea-
grams met their performance levels. Our recom-             sure program participation and noncompliance by
mendation that Labor fully fund a data                     employers, better track and allocate staff resources,
clearinghouse system to facilitate unemployment            and more effectively prevent inappropriate pay-
insurance data-sharing among states may serve to           ment of below minimum wages to workers with
facilitate data sharing and help to produce more           disabilities.
accurate and complete performance data.
                                                           1.17. Aiding Efforts to Build a Work-Based
                                                           Welfare System: Since the landmark 1996 welfare
                                                           reform legislation, we have monitored implementa-
                                                           tion and outcomes at the state, local, and national
                                                           levels, highlighting the progress made and chal-
                                                           lenges involved. In fiscal 2003, we recommended

102                                                           GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                       PART IV

ways to strengthen federal oversight of state and          noted the importance of a comprehensive approach
local welfare contracting and improve the coordina-        to these risks to PBGC’s insurance programs. In
tion of welfare and workforce development pro-             response to our findings, congressional leaders
grams. We also identified how welfare recipients           have said they will work closely with us to develop
with disabilities fared in the new welfare environ-        legislation that will address this serious pension
ment. The Senate and House authorizing commit-             crisis.
tees have used our work in drafting reauthorization
legislation for welfare reform.                            1.20. Recovering Supplemental Security
                                                           Income Overpayments: In 1998, we identified
1.18. Containing Federal Disability Insurance              weaknesses in the Social Security Administration’s
Costs: In addition to meeting medical eligibility          (SSA) ability to recover Supplemental Security
criteria, to establish and maintain eligibility for dis-   Income (SSI) overpayments—the gap between
ability insurance benefits, blind disability insurance     what is collected and what is owed to the pro-
beneficiaries must demonstrate that they are not           gram—and found that this gap is growing. We rec-
earning above a certain amount—known as the                ommended that SSA continue efforts to use
Substantial Gainful Activity (SGA) level. Though the       additional debt collection tools to identify and col-
House and Senate had introduced legislation that           lect the overpayments. SSA subsequently imple-
would effectively eliminate the SGA level for the          mented an automated process to track
blind, we testified in March 2000 that, while elimi-       overpayments. As a result, overpayments identified
nating the SGA would allow working beneficiaries           grew from $13 million to $42 million. We estimate
to keep more of their benefits, it would increase          that this automated process will ultimately generate
disability insurance costs and fundamentally alter         about $990 million in additional overpayment col-
the purpose of the disability insurance program by         lections between 2000 and 2004. In addition, our
removing the connection between benefit eligibility        testimony and briefings influenced the passage of
and the inability to work. Since the hearing, the          legislation that gave SSA authority to recover SSI
Congress has retained the SGA level for the blind.         overpayments from any Title II social security bene-
Last year, we estimated a financial benefit for this       fits owed to former SSI recipients, even without
work for fiscal years 2001 and 2002. For fiscal 2003,      their prior consent. Since this effort began in 2002,
we estimate a $600 million financial benefit, which        SSA reports it has collected $9 million in overpay-
is a cost avoidance based on estimates from the            ments. On the basis of these recoveries, we esti-
Social Security Administration’s (SSA) Office of the       mate that SSA will collect $234 million in SSI
Chief Actuary.                                             overpayments for fiscal 2002 through fiscal 2006.

                                                           1.21. Helping the Congress Reform the
A Secure Retirement for Older                              Government Pension Offset Loophole: Individ-
                                                           uals whose last day of state or local employment is
Americans                                                  covered by both Social Security and the state or
                                                           local pension system can qualify for an exemption
1.19. Protecting the Retirement Security of
                                                           from the government pension offset. This offset
Workers: We alerted the Congress to potential
                                                           prevents workers from receiving full spousal bene-
dangers to the pensions of millions of American
                                                           fits in addition to a pension earned from govern-
workers and retirees when we placed the Pension
                                                           ment employment not covered by Social Security.
Benefit Guaranty Corporation’s (PBGC) single-
                                                           We found that in two states, thousands of workers
employer program on our high-risk list. Although
                                                           had transferred to positions covered by Social Secu-
not plagued by internal operational deficiencies, the
                                                           rity for short time periods—as little as 1 day—to
pension insurance program’s ability to insure work-
                                                           qualify for the exemption. We estimated that these
ers’ benefits is increasingly threatened by long term,
                                                           cases could increase long-term benefit payments
structural weaknesses in the private-defined benefit
                                                           from the Social Security Trust Fund by about $450
system itself. These weaknesses could ultimately
                                                           million and urged the Congress to increase the time
lead to losses exceeding PBGC’s financial resources,
                                                           period required to qualify for the exemption. Con-
resulting in the loss of billions of pension dollars by
                                                           sistent with our findings, the Social Security Protec-
workers and an expensive taxpayer bailout. We also

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                 103

tion Act of 2003 increased the time period required     views would result in negative repercussions, such
to qualify for the government pension offset            as a future denial for permanent residency. We
exemption to 60 months.                                 reported that DOJ completed less than half the
                                                        intended interviews and lacked complete informa-
1.22. Improving Access to Voting and Polling            tion on the status of the interview project, in part
Places: In October 2001, we reported that 84 per-       because there were data problems with the inter-
cent of all polling places had one or more potential    view list. We also reported that it was difficult to
impediments to access, primarily affecting individu-    measure whether the project was successful in gath-
als with mobility impairments. We also found that       ering intelligence and disrupting terrorism. Our rec-
the types and arrangement of voting equipment           ommendation for DOJ to conduct a formal review
used may also pose challenges for people with           of the project and report on lessons learned is
mobility, vision, or dexterity impairments. Subse-      expected to contribute to a knowledge base that
quently, the Congress enacted the Help America          can inform future similar efforts.
Vote Act in October 2002, requiring that, by January
2006, polling places used in federal elections have a   1.25. Ensuring Accurate Counts of Terrorist
voting system that is accessible for individuals with   Convictions: Our review of terrorism-related con-
a disability. Moreover, any voting system purchased     viction statistics for fiscal 2002 found that at least
on or after January 1, 2007, with funds from the act    132 of 288 cases were misclassified as such, and
must be fully accessible. In addition, states and       that the Executive Office for U.S. Attorneys lacked
local governments may use a large portion of the        sufficient management oversight and internal con-
$3.9 billion authorized under the act. The General      trols to ensure accuracy. Both DOJ and the Con-
Services Administration (GSA) is authorized to          gress use these data to assess terrorism-related
make payments to eligible states for activities to      performance outcomes. In response to our report,
improve the administration of elections, including      DOJ has taken steps to better ensure the accuracy
improving the accessibility and quantity of polling     of these data.
places and modifying a polling site’s path of travel,
entrances, exits, or voting area.                       1.26. Improving the Integrity and Efficiency of
                                                        Port Inspections: Immigration inspectors at 166
1.23. Improving Claims Processing for                   land border ports of entry must facilitate the move-
Veterans: VA regional offices’ inaccurate process-      ment of almost 363 million people crossing the bor-
ing of veterans’ compensation and disability claims     der, while intercepting those attempting to enter
has been the subject of longstanding concern. Our       unlawfully. We identified several vulnerabilities in
findings influenced VA’s decision to pilot the use of   the integrity of the inspections process at 15 land
specialized claims processing teams to improve the      border ports of entry. For example, inspectors did
process and increase accuracy. These and other          not always receive the training they needed and
efforts can help ensure that the correct decision can   inspections were hampered by technology and
be made the first time a claim is processed so that     equipment problems. Furthermore, there was no
veterans can avoid unnecessary appeals or delays in     structure in place to support the analysis and use of
receiving benefits.                                     intelligence information in the field, despite the
                                                        importance of intelligence in the war against terror-
                                                        ism. We made recommendations aimed at improv-
An Effective System of Justice                          ing inspector training and equipment and
                                                        developing a program to facilitate the analysis and
1.24. Building a Knowledge Base for                     use of intelligence information in the field.
Gathering Law Enforcement Information
through Alien Interviews: In response to the            1.27. Enhancing the Transformation of the
September 11 terrorist attacks, the Department of       Federal Bureau of Investigation (FBI): Since
Justice (DOJ) began interviewing aliens whose           September 11, 2001, the FBI has been reorganizing
characteristics were similar to those responsible for   to better focus on counterterrorism and counterin-
the attacks. We found that although aliens were not     telligence. In June 2003, we provided comprehen-
coerced to participate in the interviews, they were     sive testimony to the Congress on the progress the
concerned that failure to comply with the inter-        FBI has made and noted areas of concern that

104                                                         GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                        PART IV

should be addressed to achieve successful transfor-        errors and the lack of key analyses mean that con-
mation. These areas include completing a strategic         gressional decision makers are not receiving accu-
plan, developing a comprehensive human capital             rate financial data to make informed decisions
plan and a new performance management system,              about SBA’s budget and appropriations. SBA gener-
and ensuring that safeguards are in place for the          ally agreed with our findings and has been working
protection of civil liberties as broadened investiga-      to resolve the errors and improve its analyses.
tive authorities are implemented. The Congress will
periodically monitor these areas of concern as the         1.30. Improving SBA’s Operations and
FBI transformation proceeds.                               Organizational Structure: Though SBA
                                                           employs just over 4,000 people, it has over 100 field
1.28. Enhancing the District of Columbia’s                 locations in every state and the U.S. territories. We
(D.C.) Criminal Justice System Coordination:               found ineffective lines of communication; confusion
On March 30, 2001, we issued a report assessing the        over the mission of district offices; complicated,
structure of D.C.’s criminal justice system. We con-       overlapping organizational relationships; and a field
cluded that the overall success of the system              structure not consistently matched with mission
depends on effective coordination among the par-           requirements. In 2002, SBA presented to the Con-
ticipating agencies. We also concluded that the            gress a 5-year transformation plan citing our find-
Criminal Justice Coordinating Council (CJCC) had           ings as reasons why the transformation is important.
served as a useful mechanism for addressing sys-           In early 2003, SBA began implementing its transfor-
temwide coordination issues, although its success          mation plan through field office pilots that intend to
was hampered by several factors. On the basis of           focus the district office mission on marketing and
our recommendations addressing these factors,              outreach to small businesses and centralize opera-
both the federal government and D.C. provided              tions for loan processing and other loan-related
funding for the CJCC in fiscal 2003, and the CJCC          activities.
submitted its first annual report to the Congress, the
D.C. mayor, and the D.C. City Council. Also, accord-       1.31. Strengthening Foreclosure Monitoring
ing to the Executive Director, CJCC is currently           Efforts: In 2002, we found that the Department of
working to become a clearinghouse for initiatives          Agriculture’s (USDA) Rural Housing Service and the
designed to improve any aspect of the D.C. criminal        Federal Housing Administration (FHA) did not col-
justice system.                                            lect basic data on the overall time that it takes mort-
                                                           gage servicers and/or management and marketing
                                                           contractors to sell foreclosed properties. Without
The Promotion of Viable                                    such data, these agencies could not determine the
                                                           performance of their servicers and/or contractors in
Communities                                                managing the foreclosure process, which could
                                                           result in higher costs and property deterioration. As
1.29. Improving Financial Accountability: In
                                                           we recommended, the Rural Housing Service
reviewing the Small Business Administration’s (SBA)
                                                           implemented a computer system in June 2003 that
loan asset sales program, we found errors that
                                                           allows the agency to determine the time that it takes
could have significantly affected the reported results
                                                           servicers to sell foreclosed properties. We also rec-
in the budget and financial statements for fiscal
                                                           ommended that FHA collect additional data on the
2000 and fiscal 2001. SBA incorrectly calculated the
                                                           time necessary to sell foreclosed properties, and
accounting losses on the loan sales and lacked reli-
                                                           FHA plans to collect this information early in 2004.
able financial data to determine the overall financial
impact of the sales. Because SBA did not analyze
                                                           1.32. Cutting FHA and VA Title Insurance Costs:
the effect of loan sales on its remaining portfolio, its
                                                           In a 2002 report, we questioned the cost-effective-
reestimates of loan program costs for the budget
                                                           ness of FHA’s and VA’s approximately $31.5 million
and financial statements were unreliable. As a result
                                                           in annual expenditures on new title insurance poli-
of these errors, SBA’s auditor withdrew its clean
                                                           cies during the foreclosure process. We found that
audit opinions for those years and issued disclaim-
                                                           other organizations that foreclose on and sell prop-
ers of opinion. The auditor also disclaimed an opin-
                                                           erties, such as Fannie Mae and Freddie Mac, gener-
ion on SBA’s financial statements for 2002. These
                                                           ally obtain title to such properties without incurring

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                  105

the costs associated with purchasing new title poli-     enactment of the Healthy Forest Restoration Act of
cies. Consistent with our recommendation, FHA            2003. Among other things, the proposed legislation
and VA have initiated reviews, which should be           attempts to revise the appeals and litigation process
completed during fiscal 2004, to determine whether       or exempt certain fuels reduction activities from it.
more cost-effective approaches can be imple-             We provided timely, comprehensive data to assist
mented to establish title to foreclosed properties.      the Congress in its debate on the act.

1.33. Improving FHA Foreclosed Property                  1.36. Assisting the Congress on the
Sale Processes: In a 2002 report, we identified          Multibillion Dollar Everglades Restoration:
weaknesses in the FHA foreclosed property sale           Restoring the Everglades will take billions of dollars,
processes, which delayed critical property mainte-       last over 50 years, and require many federal and
nance and potentially left FHA properties in disre-      nonfederal agencies to work together to achieve a
pair and on the market for significant periods. We       healthy, restored ecosystem. In response to our
recommended that FHA streamline its property sale        reports, the Congress required the task force that
procedures, and FHA officials expect to determine        administers the initiative to develop and periodi-
the best means of implementing revised procedures        cally update a strategic plan and develop a conflict
by October 2004. By revising existing procedures,        resolution process and land acquisition plan. The
FHA could minimize its losses on foreclosed prop-        task force has since developed and updated the
erty sales and enhance the appearance of neighbor-       strategic plan and is finalizing the conflict resolution
hoods in which such properties are located.              process and the land acquisition plan. In 2003, we
                                                         made recommendations to the task force on how it
1.34. Enhancing SBA’s Oversight of Lenders:              can more effectively coordinate and prioritize scien-
In reports and testimony over several years, we          tific activities to support the restoration, made con-
noted the lack of clarity in SBA’s authority to take     tributions to a congressional appropriation hearing
enforcement action against lenders should the need       on the subject, and deliberated with the task force
arise. In 2003, SBA submitted to its oversight com-      on the science issues confronting the Everglades
mittees proposed statutory changes that would give       restoration.
it authority to issue cease and desist orders, levy
civil money penalties, and take other enforcement        1.37. Influencing Legislation to Improve
actions. We also provided technical comments on          Security of Chemical Facilities: Our 2003
the proposed legislation.                                report on the security of chemical facilities demon-
                                                         strated the need for a comprehensive national
                                                         chemical security strategy to ensure that the chemi-
Responsible Stewardship of                               cal industry has taken appropriate security mea-
                                                         sures. Across the nation, thousands of industrial
Natural Resources and the                                facilities manufacture, use, or store hazardous
Environment                                              chemicals in quantities that could potentially put
                                                         large numbers of Americans at risk of injury or
1.35. Contributing to the Debate on Healthy              death in the event of a chemical release. Yet,
Forest Initiative: The National Fire Plan is a           despite all efforts since the events of September 11,
long-term, multibillion-dollar initiative involving      2001, to protect the nation from terrorism, our
federal land management agencies, states, and local      report concluded that the extent of security pre-
governments. Much of the plan is devoted to              paredness at U.S. chemical facilities is unknown.
improving the health of national forests by reducing     While some other critical infrastructures are
the buildup of forest fuels (e.g., brush, small trees,   required to assess their security vulnerabilities, no
and other vegetation) that have accumulated over         federal requirements are in place to require chemi-
the past several decades. Controversy arose about        cal facilities to assess their vulnerabilities and take
whether the public’s ability to appeal and litigate      steps to reduce them. Our work led to several Sen-
Forest Service fuels reduction decisions unduly          ate bills calling for increased security measures and
delayed the agency’s ability to carry out reduction      assessments of vulnerabilities at chemical facilities
activities in the national forests. The administration   nationwide.
tried to address this situation by proposing the

106                                                          GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                       PART IV

1.38. Security Training for USDA Food                     been completed, but whose cost recovery settle-
Inspection Personnel: In 2003, we reported on             ments have not been negotiated. In addition, EPA
USDA’s efforts to secure the nation’s food supply         estimated that it will also recover about $30 million
from deliberate contamination. We found that              more each year until the end of the program
although USDA had issued security guidelines for          because of the new rate. This will result in a total of
food processors and placed its inspection personnel       about $210 million in recovered cost.
on heightened alert, the department had only pro-
vided security training to its field supervisory per-     1.41. Better Compliance with Seafood Safety
sonnel. Because all of USDA’s field inspection            Regulations: We reported in 2001 that when
personnel are tasked with, among other things,            Food and Drug Administration (FDA) inspectors
advising food processors on security matters, we          identify serious violations at seafood processing
recommended that USDA provide training to all of          firms, the agency does not issue warning letters in a
its field personnel to enhance their awareness of         timely manner. We reported that although FDA’s
and ability to discuss security measures with plant       regulatory procedures call for approval of warning
personnel. In response, USDA (1) issued a directive       letters within 15 days, on average 73 days elapsed
instructing field inspectors on security measures to      between the receipt of the district offices’ recom-
be taken relative to elevated national security threat    mendations to issue a warning letter and issuance
levels and (2) developed and provided a multiday          of the warning letters by headquarters. As a result,
antiterrorism training program for facilitators. USDA     three-quarters of the warning letters in fiscal 1999
hopes to deliver and complete training for all its        exceeded FDA’s own prescribed time frames by 30
field personnel by the end of fiscal 2004.                days or more. Consequently, we recommended that
                                                          FDA issue warning letters within the required time-
1.39. Helping Achieve Savings on the Oregon               frames. FDA agreed with the recommendation and
Inlet Project: As a result of our recent work on          in 2003, said that, on average, it had reduced its
the proposed Oregon Inlet, North Carolina, naviga-        review time for warning letters to about 20 days.
tion project, the White House’s Council on Environ-       Although this is 5 days short of the agency’s 15-day
mental Quality announced an agreement among               approval policy, FDA’s actions represent a step for-
the Army Corps of Engineers and the Departments           ward in ensuring better compliance with seafood
of the Interior and Commerce not to proceed with          safety regulations.
the project. The council cited our finding that the
Corps’ economic analysis was not reliable, in partic-
ular that the Corps had significantly overstated the      A Secure and Effective
benefits of the project, as a key factor in the agree-
ment not to pursue the 30-year proposed project.
                                                          National Physical
The financial benefit from this decision is estimated     Infrastructure
to total $93.7 million.
                                                          1.42. Improving Emergency Response and
1.40. Superfund Cleanup Cost Recovery:                    Disaster Assistance: We reviewed both the
Under the liability provisions of the Superfund haz-      emergency response efforts that followed the Sep-
ardous waste cleanup program, parties responsible         tember 11 terrorist attacks and the subsequent
for contaminating a site must pay for its cleanup, or     disaster assistance provided. We also continue to
the Environmental Protection Agency (EPA) can             assist the September 11th Commission and other
conduct the cleanup and subsequently recover its          entities seeking to improve the nation’s ability to
costs from the parties. We found that EPA was not         respond to disasters. Our review of the disaster
recovering billions of dollars in indirect costs, which   response efforts by the Federal Emergency Manage-
are costs EPA prorates across all sites because they      ment Agency (FEMA) and others following the ter-
cannot be attributed to a particular site. In response    rorist attacks recommended that FEMA establish an
to our recommendations, EPA adopted a new                 approach to deliver critical components of its public
method to calculate its indirect costs. EPA estimated     assistance program to avoid future delays and con-
in 2003 that it would recover at least about $100         cerns about funding approaches. For example, we
million in additional indirect costs as a result of       found that most of the $15 billion in direct federal
using the new rate from those cleanups that have          assistance provided to New York as a result of the

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                 107

terrorist attacks has been designated and over half      culminated in bankruptcies and major restructur-
had been disbursed by June 2003; however, the            ing—from flight delays and congestion, the Con-
total amount of federal assistance will never be         gress determined that the nation must find ways to
known because the Internal Revenue Service can-          build runways faster to increase capacity in the
not accurately track allowable tax benefits. In          national aviation system. The House used our 2003
response to our recommendations, the Congress            study of runway development as a basis for
and cognizant agencies have undertaken specific          addressing the challenges associated with runway
steps to better coordinate response to disasters.        construction, by including a provision increasing
                                                         the efficiency of key processes in runway develop-
1.43. Making Key Contributions to                        ment in legislation reauthorizing FAA. Our analysis
Infrastructure Safety: Drawing on an extensive           of aviation financial data—presented in a series of
body of issued and ongoing work on the safety of         reports and testimonies in fiscal 2003—was a critical
our nation’s infrastructure, we made numerous rec-       component of congressional deliberations on the
ommendations to improve safety in aviation, high-        nature and scope of development needs and how
way, rail, and pipelines. For example, in response       those needs could be financed. Both the House and
to our 1999 recommendation aimed at making air-          Senate used our information and analysis of avia-
line inspections more systematic and structured, the     tion financial data to help them develop FAA reau-
Federal Aviation Administration (FAA) took steps to      thorization legislation that authorizes $15 billion for
improve its inspection guidance, the quality of          airport development over the next 4 years. FAA has
inspection data, and the use of these data in the        also sought to help meet the anticipated growth in
identification of potential aviation safety risks. Our   air travel by implementing a new, more flexible
work also provided the backdrop for a congres-           approach for air traffic management, known as free
sional hearing on highway safety and was promi-          flight, to increase the capacity and efficiency of our
nently cited by numerous Senators and other              nation’s air space while helping to minimize delays.
witnesses as relevant to key elements of the admin-      Responding to one of our recommendations from
istration’s proposal to reauthorize the surface trans-   2001, FAA has developed a national plan to
portation law. Specifically, our work will help          improve free flight training outcomes and delivery
determine how much flexibility states should have        methods, evaluate its potential for use with other air
in spending federal safety funds, whether it is better   traffic control systems, and identify requirements
to use penalties or incentives to get states to adopt    and costs for its next phase. At the request of the
key highway safety legislation, and how the Depart-      Congress, we also evaluated the impact of new reg-
ment of Transportation (DOT) and the Congress            ulations governing the performance of airline com-
should oversee and hold states accountable for           puter reservation systems on the travel industry.
highway safety. In response to our recommenda-
tions concerning the setting of highway research         1.45. Reforming the Postal Service: The Con-
agendas and evaluating outcomes, DOT revamped            gress took both interim and comprehensive actions
its entire highway research program to incorporate       to address key postal reform issues identified in our
comments from stakeholders in deciding the direc-        past work. First, the Congress passed legislation in
tion of its research and to evaluate the outcomes of     April 2003 to reform the funding of benefits under
its research in a systematic matter. Finally, as a       the Civil Service Retirement System for employees
result of our past work on pipeline safety, DOT’s        of the Postal Service, reducing its pension liability
Office of Budget and Program Performance agreed          from $32 billion to about $5.8 billion and providing
to more closely link its performance goals for pipe-     some short-term financial relief. Second, the Postal
line safety to deaths and injuries associated with       Service has improved the content of its quarterly
pipeline accidents.                                      financial reports by providing greater detail related
                                                         to changes in its current and projected financial
1.44. Evaluating the Efficiency and Financial            condition. In addition, in response to our recom-
Condition of the Nation’s Airports and                   mendations, the Postal Service took actions to
Airlines: We reported on a number of initiatives to      improve the prevention of losses of postal assets,
address air traffic delays and congestion and relieve    such as the $6.3 million in cash and checks it lost in
financial instability in the nation’s airlines. As a     fiscal 2001, by improving its procedures and train-
result of airline financial problems—some of which       ing for the security of cash and checks. Finally, the

108                                                          GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                       PART IV

House Government Reform Committee established             and other programs and of implementation issues
a special panel on postal reform and oversight to         associated with security enhancements, such as a
work closely with the President’s Commission on           registered traveler program. Our work also alerted
the Postal Service, which issued its report with rec-     the Congress to ongoing security vulnerabilities in
ommendations for comprehensive postal reform in           such areas as the transport of dangerous goods and
July 2003. The congressional oversight committees         air cargo and the certification of pilots. In associa-
plan to use the Commission’s report to develop            tion with the National Academy of Sciences, we
comprehensive postal reform legislation and hold          also convened a panel of experts to provide input
hearings in the fall of 2003.                             to our work on the shipment of hazardous materials
                                                          by rail. Our efforts highlighted a need for better
1.46. Contributing to the Debate on Spectrum              coordination of federal research into security vul-
Management and Reform: With the dramatic                  nerabilities. In response to our finding that it had
growth in wireless technologies during the past           not fully coordinated its security vulnerabilities
decade, government users and the commercial sec-          research with its key transportation security stake-
tor are competing more intensely for access to the        holder, DOT’s Research and Special Programs
radio frequency spectrum to meet needs for                Administration agreed to hold bimonthly updates
national defense, public safety, and the general          on the progress of each vulnerability assessment
public. In 2003, we recommended that certain fed-         and to discuss program task methodologies and
eral agencies, in conjunction with other parties,         strategies. We also issued a comprehensive report
develop a plan for establishing a commission with         on transit security that educated the Congress and
wide representation to determine whether over-            others on the challenges facing federal, state, and
arching spectrum management reform is needed. In          local officials charged with the responsibility of
June 2003, President Bush signed an executive             securing the nation’s mass transit systems. Our out-
memorandum that created the Spectrum Policy Ini-          reach work with state audit organizations identified
tiative, which includes the creation of a Federal         federal actions needed to assist states and contrib-
Government Spectrum Task Force with widespread            uted to a guide to assist state officials and others
membership that will produce recommendations for          charged with reviewing transportation security risks.
improving spectrum management. We also helped             In response to our recommendations, the Congress
the National Telecommunications and Information           and cognizant agencies have undertaken specific
Administration consider alternative spectrum man-         steps to improve infrastructure security and improve
agement approaches by providing the agency with           the assessment of vulnerabilities.
information on the United Kingdom’s incentive
pricing system for the radio frequency spectrum.          1.48. Encouraging and Helping Guide Agency
We also identified factors affecting the transition to    Transformations: We highlighted federal enti-
digital television and the implications of this transi-   ties whose missions and ways of doing business
tion for spectrum management. In releasing this           require modernized approaches, among them the
report, one Representative said that he would craft       Postal Service, GSA, and the Coast Guard. In May
legislative proposals that contain the policy sugges-     2003, we followed up earlier reporting with testi-
tions that we advanced to help government jump-           mony on the key postal transformation issues that
start the digital television transition to drive eco-     resulted in their high-risk designation in 2001;
nomic growth, innovation, and job creation.               among congressional actions to deal with these, the
                                                          House Committee on Government Reform estab-
1.47. Making Key Contributions to Security:               lished a special panel on postal reform and over-
We assisted and advised transportation officials and      sight to work with the President’s Commission on
authorities as they continued to develop security         the Postal Service on recommendations for compre-
strategies to address vulnerabilities in the wake of      hensive postal reform. In 2003, GSA real property
September 11. Drawing upon an extensive body of           received the high-risk designation; our reporting
completed and ongoing work, we identified spe-            helped spur GSA’s portfolio restructuring initiative,
cific vulnerabilities and areas for improvement to        intended to realign its real property management
protect aviation and surface transportation. For          with its mission of providing quality space and ser-
example, we informed the Congress of improve-             vices to agencies at a cost competitive with the pri-
ments needed in the Federal Air Marshal Service           vate sector. GSA planned to accomplish this by

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                109

improving its real-time data on the financial and          2002 reflected the new weights. The Bureau’s
physical condition of federal properties and either        adjustments have resulted in (1) lower federal
enhancing the use of its buildings or disposing of         expenditures on programs like Social Security that
them, potentially avoiding substantial costs. We also      use the CPI to calculate benefits and (2) increased
reported this year on the Coast Guard’s ability to         federal revenues associated with lower growth in
effectively carry out critical elements of its mission,    personal exemptions on federal income taxes. The
including its homeland security responsibilities. We       amount of this financial benefit is based on the
recommended that the Coast Guard develop a blue-           Congressional Budget Office’s projections of the
print for targeting its resources to its various mission   impact of the CPI update for fiscal 2003 through fis-
responsibilities and a better reporting mechanism          cal 2006 converted to its net present value.
for informing the Congress on its effectiveness. Our
recommendations led to legislation requiring better        1.50. Reducing the Cost of Federal Housing
reporting by the Coast Guard and laid the founda-          Programs: In a September 1999 report on the
tion for key revisions the agency intended to make         Department of Housing and Urban Development’s
to its strategic plan.                                     (HUD) fiscal 2000 budget request, we determined
                                                           that the potential existed for HUD to better manage
1.49. Updating the Consumer Price Index                    unexpended balances and for some unobligated
(CPI): In October 1997, we recommended that the            funding to be used to meet other needs. We recom-
Commissioner, Bureau of Labor Statistics, update           mended that HUD review its unexpended balances
the expenditure weights of its market basket of            to ensure the expeditious obligation and expendi-
goods and services more frequently to make it              ture of these funds. In response to our recommen-
timely and more representative of consumer expen-          dation, HUD instituted a review of unexpended
ditures. In December 1998, the Bureau announced            balances in all of its programs and recaptured bil-
that it would update expenditure weights every 2           lions of dollars from its fiscal 2001 unexpended bal-
years beginning in 2002, and the CPI for January           ances.

110                                                           GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                      PART IV

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

Respond to Diffuse Threats to
National and Global Security
2.1. Improving the Reliability of the
Government’s Information on Alien
Addresses: Following the September 11 terrorist
attacks, the government was able to locate less than
half of the aliens it sought to interview about their
knowledge of terrorist activities. The government’s      tor assets. We also reported challenges that hinder
efforts were hampered by unreliable address infor-       the sharing of intelligence and incident information
mation on aliens. The fact that the Immigration and      among infrastructure sectors and the federal gov-
Naturalization Service had not publicized or             ernment, as identified by key industry sectors,
enforced the requirement for aliens to submit            including information technology, telecommunica-
change of address notifications and had not consis-      tions, energy, electricity, water supply, and financial
tently updated information in its automated data-        services. These issues are important considerations
bases contributed to the unreliability of the            for the Department of Homeland Security (DHS),
information. Because it is vitally important for law     which now incorporates key federal critical infra-
enforcement to be able to find aliens who pose a         structure protection organizations and responsibili-
national security threat or who can help with anti-      ties, including the development of a comprehensive
terrorism efforts, we made recommendations for           national plan.
improving the nation’s alien address information
system. Implementing these recommendations               2.3. Improving Congressional Oversight of
should produce better and more complete data on          Federal Information Security: Since 1996, we
alien addresses and assist the government in com-        have reported that poor information security in the
bating terrorism.                                        federal government is a widespread problem with
                                                         potentially devastating consequences. In May 2002,
2.2. Increasing Government and Private                   we reported that the Congress was not receiving the
Sector Critical Infrastructure Protection                information it needed to oversee agencies’ efforts to
Efforts: In numerous reports and testimonies             correct their identified information security weak-
beginning in April 2001, we assessed the progress        nesses and that an agency’s Office of Inspector
of federal agencies and private infrastructure sectors   General (IG) should assess its agency’s corrective
in implementing the activities required and sug-         action plans as part of its statutory annual indepen-
gested by federal critical infrastructure protection     dent evaluation of its agency’s information security
policy. In early 2003, we reported limited progress      programs. In response, the Office of Management
by key agencies, including EPA, the Department of        and Budget (OMB) authorized agencies to release
Commerce, the Department of Energy (DOE), and            information from their corrective action plans to the
the Department of Health and Human Services, in          Congress beginning in October 2002 and requested
identifying their national critical cyber and other      that IGs verify that such plans identify all known
assets and determining the operational dependen-         security weaknesses. Our analyses of these plans
cies of these assets on other public- and private-sec-   and the related IG reports now assist the Congress

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                111

in assessing both agency progress and the com-             2.6. Helping Improve Security over
pleteness of their efforts to correct their information    Radioactive Sealed Sources: There is a poten-
security weaknesses.                                       tial, serious security risk in devices known as
                                                           “radioactive sealed sources.” These devices, which
2.4. Upgrading U.S. Export Controls on                     contain plutonium-239, are used for research by
Sensitive Technologies: Our many reviews of                universities scattered throughout the United States
U.S. export control laws and programs have con-            and in some cases are poorly secured. If the devices
tributed to the congressional debate about enhanc-         were to fall into the hands of terrorists, they could
ing the current system and preventing the                  be used to make potentially dangerous radiological
proliferation of sensitive technologies to terrorists or   weapons, commonly called “dirty bombs,” or even
states supporting them. Our latest report examined         crude nuclear bombs. As a result of our 2003 report
the contribution of four key multilateral export con-      on these domestic sources, DOE is taking action to
trol regimes to the goal of nonproliferation of            recover and securely store the devices. Our sepa-
weapons of mass destruction. We reported that              rate report on foreign sources also was helpful. At
export control regimes have had some noteworthy            the request of DOE officials, we shared information
successes, but the regimes’ information-sharing            with DOE on the information we collected from
practices could be improved to make the regimes            over 30 countries in every region of the world
more relevant in today’s global economy. This              regarding the security and control of radioactive
report, as well as our other reports and testimonies       sealed sources in those countries. According to
on this issue, has informed the Congress about the         DOE, our survey results are being used in two
weaknesses of the process used to control sensitive        ways. First, DOE is comparing each country’s sealed
technology exports and the effect of proposed              source inventory data, as reported in the survey, to
changes to the Export Administration Act on the            data that it has collected through other means to
delicate balance between protecting national secu-         verify accuracy and identify differences. Second,
rity and promoting U.S. economic interests.                DOE is using the survey results to help establish
                                                           funding priorities for certain countries.
2.5. Strengthening Nuclear Nonproliferation:
Our 2002 report on U.S. efforts to help other coun-        2.7. Highlighting Fraud Vulnerabilities as
tries combat nuclear smuggling identified several          Threats to Homeland Security: In a series of
needed improvements in the program, including a            security tests performed over the last 3 years that
full accounting of the radiation detection equipment       revealed security weaknesses at federal buildings
in each country receiving U.S. assistance; assur-          and other facilities, airports, and the nation’s bor-
ances from countries receiving U.S. assistance that        ders, we created fictitious and counterfeit identifica-
information about nuclear materials detected by            tion documents, such as driver’s licenses, birth
U.S.-supplied equipment would be shared with U.S.          certificates, and Social Security cards using inexpen-
agencies on a timely basis; and consolidation of all       sive software and hardware readily available to any
Department of State border security and nuclear            purchaser. We demonstrated that (1) government
smuggling efforts under one program office. Subse-         officials generally did not recognize the documents
quently, in 2003, officials at DOE and State said that     as counterfeits, (2) some government officials failed
a comprehensive list of equipment had been com-            to follow security procedures and were not alert to
pleted and shared among all appropriate U.S. agen-         the possibility of identity fraud, and (3) identity ver-
cies; DOE said that all agreements with foreign            ification procedures are inadequate. Our investiga-
countries receiving U.S. nonproliferation assistance       tions revealed that homeland security is vulnerable
now include a provision requiring that data on             to identity fraud and that individuals who intend to
interdictions and detections be provided directly to       cause harm could easily exploit these vulnerabili-
DOE; and the program manager of State’s Office of          ties, as well as perpetrate fraud in voting, obtaining
Export Control, Cooperation, and Sanctions said            credit and federal benefits, and in many other areas.
that the major activities related to border detection
equipment within the department had been consol-           2.8. Identified Weaknesses in Screening
idated within his office as we had recommended.            Entrants into the United States: The Senate
                                                           Finance Committee asked us to test whether U.S.
                                                           officials would detect counterfeit documents used

112                                                            GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                        PART IV

by U.S. citizens to enter the United States from Can-      2.11. Improving Department of Defense Force
ada, Mexico, and a Caribbean country. We used off-         Protection Efforts at Domestic and Overseas
the-shelf computer graphic software to create coun-        Ports: In 2003, we reported on the need to
terfeit driver’s licenses and birth certificates to sup-   improve force protection for DOD deployments
port fictitious identities. Using the fictitious names     through domestic seaports and the service’s antiter-
and counterfeit documentation, we entered the              rorism efforts at installations. We recommended
United States from Canada, Mexico, and Jamaica             strengthening domestic seaport security, improving
through ports of entry in Washington, California,          DOD’s oversight and execution of force protection
and Florida. U.S. immigration and customs officials        measures at domestic ports, and establishing a
never questioned the authenticity of the counterfeit       results-oriented management framework. We also
documents, and the agents encountered no diffi-            provided the Congress and DOD with preliminary
culty in entering the country using them. After com-       observations on force protection measures being
pleting our work, we briefed officials of the U.S.         applied by the U.S. European Command and South-
Customs Service and DOJ—including DOJ’s Immi-              ern Command at commercial seaports overseas, lay-
gration and Naturalization Service.                        ing the foundation for recommendations aimed at
                                                           improving oversight of force protection measures
2.9. Helping the Congress Create DHS: With                 for in-transit forces worldwide, host nation support
the testimonies we gave, we were able to identify          to U.S. forces, and the reduction of specific vulnera-
major issues that the Congress reviewed in its delib-      bilities. On the basis of our prior analysis, the 2003
erations in consideration of creating a new cabinet        Defense Authorization Act required that DOD
department. The result helped the passage of the           develop a comprehensive plan to improve the pre-
Homeland Security Act of 2002. For example, we             paredness of military installations for terrorist
identified (1) the need for reorganization and the         attacks involving the use of weapons of mass
principles and criteria to help evaluate what agen-        destruction and that we assess that plan.
cies should be included in or left out of the new
department and (2) the transition, cost, and imple-        2.12. Sharpened Congressional Focus on
mentation challenges of the new department.                Risks Associated with F/A-22 Fighter
                                                           Program: In a March 2003 congressionally man-
                                                           dated report, we recommended limiting aircraft pro-
Ensure Military Capabilities                               duction on the Air Force’s F/A-22 aircraft program
                                                           until operational testing is completed to minimize
and Readiness                                              the risks of producing large quantities of aircraft
                                                           that may require costly modifications. We reported
2.10. Key Assistance to the Congress
                                                           that development testing had been delayed prima-
Regarding the Defense Transformation Act:
                                                           rily due to software integration, which resulted in
In April 2003, the Department of Defense (DOD)
                                                           software instability problems. Our analysis helped
submitted to the Congress a proposed Defense
                                                           the House Authorization Committee include lan-
Transformation for the 21st Century Act. DOD’s pro-
                                                           guage in the Fiscal Year 2004 Defense Authorization
posal envisioned far reaching changes in its author-
                                                           Act that fences $136 million in procurement funding
ity to manage civilian and military personnel and
                                                           for F/A-22 aircraft until DOD certifies that the latest
major systems acquisitions and DOD’s organiza-
                                                           software version installed in the F/A-22 performs
tional structure, and additional changes in installa-
                                                           for at least 20 hours without incurring an instability
tions and funds transfers. We provided key
                                                           event. The Senate Authorization Committee, citing
assistance by testifying and briefing several congres-
                                                           similar rationale, recommended reducing the F/A-
sional committees on issues related to DOD’s pro-
                                                           22 program’s fiscal 2004 procurement request by
posal, which enabled them to conduct better
                                                           $217 million and further recommended reducing
informed deliberations on this complex proposal in
                                                           the number of aircraft procured in fiscal 2004 from
time for consideration during the defense authoriza-
                                                           22 to 20 aircraft.
tion process.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                  113

2.13. Reducing Total Ownership Costs of                  lowing year we reported that (1) the Army’s efforts
DOD’s Weapons Programs: In February 2003,                to reduce the Crusader’s size and weight to make it
we reported that DOD asked for about $185 billion        more deployable would likely result in only mar-
to develop, procure, operate, and maintain its           ginal improvements and (2) its plans to field test
weapon systems (total ownership costs)—an                during the same year the Future Combat Systems—
increase of 18 percent since 2001. The high cost of      a lighter-weight weapons component intended to
maintaining systems has limited DOD’s ability to         replace the Crusader—would result in large expen-
modernize and invest in new weapons. We found            ditures for duplicative systems designed to fulfill the
that even though DOD has implemented several             same missions. In May 2002, the Secretary of
initiatives to reduce total ownership costs, these       Defense announced the termination of the Army’s
steps do not incorporate many of the practices used      Crusader program. During the period from fiscal
by commercial companies during requirements              2003 to fiscal 2007, the termination of the Crusader
determination, product development, and fielding.        program will make available funds for other pro-
As a result of our recommendations, DOD revised          grams, resulting in about $4 billion in costs avoided.
its acquisition policy in May 2003 to include a
requirement to establish an estimate of system reli-     2.16. Assessing the Risk of Major Weapon
ability based on demonstrated reliability rates in       System Acquisitions: In May 2003, we issued a
order to proceed with development beyond the             unique report that provides a snapshot of program
design readiness review. Consequently, DOD               performance and risk for 26 major DOD weapon
should be better able to control the continuous          systems. Each individual assessment is summarized
growth in total ownership costs.                         in an easy to read, visually descriptive 2-page for-
                                                         mat that provides a fact-based analysis of each pro-
2.14. Improving the Army’s Management of                 gram’s cost, schedule, and development progress in
Future Combat Systems Development: In 2003,              relation to best practices. These assessments pro-
we reviewed the Army’s Future Combat Systems             vide decision makers with a means to quickly
(FCS) program, which is a major Army transforma-         gauge the progress of individual programs and offer
tional effort, comprised of 18 networked, warfight-      the opportunity for action when a program’s pro-
ing systems that are intended to be more lethal,         jected attainment of knowledge diverges from the
survivable, deployable, and sustainable than exist-      best practice. This report is being used extensively
ing heavy combat systems. The Army has allocated         by the Congress, DOD, and the defense industry. In
about $22 billion for the FCS program during fiscal      addition, several countries are planning to replicate
2004 through fiscal 2009 and several billions more       our approach into their own defense reviews.
for non-FCS programs that the FCS will need to
become fully capable. We briefed congressional           2.17. Improving Outcomes of DOD Weapon
and high-level Army staff on our observations and        System Programs: Our work on major weapons
concerns that system of systems like FCS poses           systems under development helped focus the atten-
challenges for the acquisition process in terms of       tion of the Congress on the importance of following
analyzing alternatives, estimating and tracking costs,   an effective knowledge-based acquisition approach.
and conducting oversight. We also identified several     We found, for example, that weapons system devel-
ways to facilitate the realization of FCS capabilities   opers have often failed to address spectrum sup-
without taking undue risks. Subsequently, the Army       portability needs during the early stages of
took a number of actions that address these and          acquisition and, as a result, some programs experi-
other risks that, if successfully implemented, should    ence significant delays and reduced operational
improve management of and potentially reduce             capabilities. Similarly, we found that the Joint Tacti-
costs in the multibillion dollar FCS program.            cal Radio System and FCS programs had not
                                                         acquired sufficient knowledge during the early
2.15. Making Funds Available for Lighter-                stages of acquisition on several key aspects of prod-
Weight Weapons Systems: In May 2001, we                  uct development, such as technology maturity and
reported that the Army’s efforts to transform itself     requirements determination, which could affect a
into a light-weight combat force faced funding chal-     successful outcome. As a result of our work, Senate
lenges partly because of funds required to develop       and House versions of the Fiscal Year 2004 Defense
and field test the Crusader artillery system. The fol-   Authorization Act contain provisions to strengthen

114                                                          GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                        PART IV

both the enforcement of spectrum supportability in          directed the Secretary of Defense to report on how
weapon system acquisitions and the implementa-              the department intends to address these issues by
tion of the Joint Tactical Radio System and FCS Pro-        December 2003.
                                                            2.20. Assisting Congressional Decisions on
2.18. Improved Safeguards and Security in                   Funding for Military Needs: In fiscal 2003, the
Nuclear Weapons Program: Over the past                      Congress provided DOD with $365 billion for its
decade, others and we have raised concerns about            annual appropriation and an additional $76 billion
the adequacy of security at nuclear weapons facili-         for the war on terrorism, including military opera-
ties within DOE’s National Nuclear Security Admin-          tions in Iraq. To support the Congress in determin-
istration (NNSA). We addressed many of these                ing DOD’s funding needs, we reviewed the
matters in its 2003 report on the subject, leading to       reasonableness of DOD’s fiscal 2003 budget
several NNSA improvements. In response to our               request, its use of budgeted funds in prior years,
recommendation aimed at overcoming ill-defined              and the status of its war on terrorism expenditures.
roles and some attendant confusion in NNSA site             We also reviewed DOD’s ability to manage and
offices concerning safeguards and security matters,         track the use of obligated funds. We identified mil-
NNSA officials agreed to formally establish safe-           lions of dollars in potential costs avoided and
guards and security responsibilities, and did so by         opportunities for DOD to improve its internal over-
issuing its Safeguards and Security Functions,              sight of fund use and tracking. The information we
Responsibilities, and Authorities manual. Respond-          provided contributed to congressional decisions to
ing to our concerns about the adequacy of contrac-          adjust DOD’s fiscal 2003 budget request by almost
tors’ analyses underlying their action plans to             $1.5 billion. Our work also prompted DOD to
address identified safeguards and security weak-            reevaluate certain funding requirements, adjust
nesses, NNSA issued guidance to contractors                 financial records, and take other actions that are
designed to strengthen those analyses. And finally,         expected to result in $119 million in cost reduc-
to address shortfalls that we identified in staffing        tions.
numbers and expertise in offices overseeing con-
tractor safeguards and security, NNSA announced             2.21. Evaluating Federal Preparedness for
that it would assign additional federal and contrac-        Homeland Security Missions: We found that
tor security experts to expedite action on security         the threat of terrorism has altered some military mis-
issues at its national laboratories. It also announced      sions and that DOD has established new organiza-
the establishment of a panel to develop recommen-           tional structures, including U.S. Northern
dations for recruiting and retaining sufficient secu-       Command, and developed a new campaign plan
rity experts to effectively oversee safeguards and          for domestic missions. At the same time, DOD has
security in the NNSA complex.                               not reevaluated the structure of U.S. forces to
                                                            ensure they are well structured for these missions,
2.19. Improving Maintenance of DOD’s                        has relied on forces that were not well matched to
Deteriorated Facilities: Contributing to the                their domestic missions, and has risked erosion of
debate on how to improve the condition of DOD               military skills because the missions offer limited
facilities, we issued two reports during fiscal 2003        opportunities to practice the varied skills needed for
on the funding and condition of the active services’        combat. Consequently, we recommended that DOD
and reserve components’ facilities. We found that           evaluate the need to restructure forces to better
funding for facility maintenance and recapitalization       match them to their domestic missions to ensure
has been inadequate, resulting in deteriorated facili-      that the missions could be effectively carried out
ties that negatively affect the quality of life for mili-   while maintaining military readiness of participating
tary and civilian personnel and, in some cases,             forces.
hindered the performance of their mission. We rec-
ommended that the services and reserve compo-               2.22. Contributing to the Debate Over DOD’s
nents periodically review and reevaluate the                Proposal to Revamp the Civilian Personnel
priorities to sustain and improve the condition of          System: We issued a report and testified four times
facilities. DOD agreed with our recommendations             before House and Senate committees on DOD’s
and the House Committee on Armed Services                   need to improve its human capital strategic plan-

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                  115

ning. For example, we recommended that DOD              cated that actions were under way or that they
align its strategic human capital plan with its over-   planned to implement them. These steps should
arching mission and that the plan should include        result in better ship designs and reduce the total
results-oriented performance measures and focus         ownership costs of the fleet by billions of dollars.
on future workforce requirements. Citing our
report’s conclusions and recommendations, some          2.25. Improving Military Readiness by
members of the Congress, during hearings on             Overcoming Spare Parts Shortages: While
DOD’s proposal to revamp its civilian personnel         DOD has made some progress in applying business
system, expressed concern about DOD’s readiness         practices to improve its logistics support, long-
to move forward on its proposal. On the basis of        standing problems continue with regard to the
our report and testimonies, the Senate Committee        acquisition, management, and distribution of spare
on Governmental Affairs drafted legislation that        parts—an area that we have designated as high risk
scaled back DOD’s proposal and added numerous           since 1990. We made recommendations aimed at
safeguards and protections for DOD’s civilian fed-      ensuring there is a clear focus on overcoming short-
eral employees.                                         ages of critical spare parts in DOD’s strategic plans,
                                                        initiatives, and funding priorities. As part of its
2.23. Estimating the Exposure of U.S. Troops            recent logistics transformation effort, the Office of
to Chemical Plume During the Gulf War: Con-             the Secretary of Defense promulgated strategic
gressional questions about extending benefits to        plans to guide the Defense Logistics Agency’s and
U.S. troops who were not directly exposed to            the services’ efforts for improving logistical support
chemical warfare agents led to our examining the        to the war fighter. In turn, the Defense Logistics
basis of DOD conclusions regarding the extent of        Agency and the services have started adopting a
exposure to chemical plume during the Gulf War.         variety of best business practices, such as setting
We found that DOD and the Central Intelligence          performance goals and using performance based
Agency used flawed methodology and unreliable           contracts, to provide needed supply support to their
and inaccurate information to determine that U.S.       customers. According to the Deputy Under Secre-
troops’ exposure was minimal. Given the uncertain-      tary for Logistics and Materiel Readiness, DOD is
ties in the modeling data and who was exposed, we       transforming logistics by measuring performance
recommended that the Secretary of Veterans Affairs      and balancing requirements, investments, and risk
presume exposure, since many more veterans              using a balanced scorecard.
could have been exposed than first estimated. As a
result of our testimony, a Veterans Affairs Research
Advisory Committee on Gulf War Veterans Illnesses       Advance and Protect U.S.
agreed that the Secretary of Veterans Affairs should
implement our recommendation to give presump-
                                                        International Interests
tive benefits to all Gulf War veterans.
                                                        2.26. Strengthening the U.S. Visa Process as
                                                        an Antiterrorism Tool: Our analysis of the U.S.
2.24. Controlling Personnel Costs and
                                                        visa-issuing process showed that the Department of
Minimizing Ownership Costs of Navy Ships:
                                                        State’s visa operations prior to September 11, were
We identified several actions the Navy should take
                                                        focused on screening applicants to determine
to optimize ship crew sizes. We concluded that the
                                                        whether they intended to work or reside illegally in
Navy could significantly lower personnel costs by
                                                        the United States, rather than on screening for
using a human systems integration approach at the
                                                        potential terrorists. We recommended that State
earliest stages of a ship’s design and recommended
                                                        should develop clear and comprehensive policies
that the Navy (1) require that ship programs use
                                                        for agencies on how consular officers should use
human systems integration to establish crew size
                                                        the visa process as a screen against potential terror-
goals and help achieve them, (2) clearly define the
                                                        ists and that State should reassess its consular staff-
human systems integration certification standards
                                                        ing requirements and revamp its training program.
for new ships, and (3) formally establish a policy
                                                        State indicated that it would use our recommenda-
evaluation function to examine and facilitate the
                                                        tions as a roadmap for improvement in consular
adoption of cost-saving technologies and best prac-
                                                        sections around the world. State reports that it has
tices across Navy systems. DOD agreed and indi-

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already taken steps to adjust its policies and regula-   Department of the Treasury announced a world-
tions concerning the screening of visa applicants        wide effort to recover the former regime’s assets
and its staffing and training for consular officers.     and cited our report as part of the basis for this
2.27. Assessing the Conditions of Overseas
Diplomatic Facilities: We evaluated the condi-           2.30. Improving the Delivery of Disaster
tion of nearly 250 overseas diplomatic facilities with   Recovery Assistance: We are concurrently moni-
respect to physical security, maintenance, and office    toring and evaluating $159 million in disaster recov-
space. Our analysis demonstrated that most primary       ery funding to assist El Salvador in recovering from
office buildings were in poor condition and suf-         two severe earthquakes that struck in early 2001.
fered serious security vulnerabilities. For example,     Our monitoring effort has led to improvements in
only 12 posts had a primary office building that met     key aspects of the U.S. Agency for International
all five of the Department of State’s security stan-     Development’s (USAID) program. In response to
dards, and 232 posts did not meet one or more of         our recommendations, USAID improved its method-
State’s key security standards. Consequently, these      ology for sampling and inspecting completed
posts may be more vulnerable to terrorist attacks.       houses and took action to help low-income housing
We concluded that State had taken positive steps to      beneficiaries obtain water and electricity. The May
improve facility conditions by replacing existing        2003 report further recommended that USAID
buildings with new and secure embassy com-               establish benchmarks and milestones to accelerate
pounds and recommended in congressional testi-           the pace of housing construction and consider
mony that such a large-scale building program            reducing the number of houses to be built by the
receive extensive oversight due to the cost and          Salvadoran government housing authority if it is
importance of the program. The Senate Committee          unable to meet its construction schedule. USAID
on Foreign Relations noted that our analysis on          agreed with these recommendations and is cur-
embassy security was an indispensable resource in        rently working to address them.
the effort to ensure the safety of U.S. government
personnel overseas.                                      2.31. Assessing United Nations’s Renovation
                                                         Plans and the Potential U.S. Financial
2.28. Overseeing the Rebuilding of Iraq: In              Impact: We reported on the United Nations’s
May 2003, we reported that our many prior reviews        efforts to renovate its headquarters and calculated
showed that rebuilding countries is both difficult       the potential financial impact on the United States
and costly and that congressional oversight is           should it provide a $1.2 billion interest-free loan to
extremely important. According to our work, the          fund this project. We found that the United Nations
rebuilding of Iraq should include oversight of U.S.      followed a reasonable process consistent with lead-
efforts to provide security, reconstruct basic infra-    ing practices in developing the headquarters reno-
structure, create accountable government institu-        vation plan—the first of a five-phase process. The
tions, foster conditions for democracy, and build a      United Nations agreed with our recommendation
free market economy. Based in part on our report,        that its oversight bodies be given the resources nec-
congressional committees said that their oversight       essary to conduct effective oversight of the project.
of Iraq’s reconstruction is a priority and requested     We are the only entity that has provided an estimate
our help in this effort.                                 to the federal government of the financial impact of
                                                         the United Nations’s renovation, which includes
2.29. Recovering the Former Iraqi Regime’s               providing the $1.2 billion interest-free loan and
Illicit Assets: In May 2002, we reported that the        repaying a share of the loan—estimated at over
former Iraqi regime had illegally obtained $6.6 bil-     $700 million—as a member of the United Nations.
lion by smuggling oil and arranging kickbacks on
oil and commodity contracts related to the United        2.32. Assessing the United Nations
Nations’s Oil for Food program. Our work has been        Educational, Scientific, and Cultural
cited more than 700 times by the press, other stud-      Organization’s (UNESCO) Reform Efforts
ies, and reports, particularly in considering the        Since U.S. Departure: We reported on UNESCO’s
potential amount that could be recovered from Sad-       efforts to reform its management practices to help
dam Hussein’s illicit activities. In March 2003, the     shape U.S.-planned reentry into the organization in

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                117

2003. The United States left the organization in         staffing of a renovated, $80 million facility in Frank-
1984, contending that it was poorly managed.             furt, Germany—which will be the largest U.S. over-
Because the executive branch is interested in hav-       seas diplomatic post—would optimize its use and
ing the United States rejoin the organization, we        improve security for personnel relocated from other
reviewed the costs of doing so as well as UNESCO’s       embassies in Europe and other regions that have
reform actions. We found that while UNESCO has           serious security vulnerabilities. In response to our
tried several times to restructure its management        analyses, State has restarted a process to identify
practices, these reforms are in their early phases,      staff from posts outside Germany who could be
are not yet complete, and will succeed only with         relocated to the Frankfurt facility.
the sustained efforts of management and member
states.                                                  2.35. Maximizing the Impact of U.S.
                                                         International Broadcasting: Our July 2003
2.33. Filling Major Gaps in the Visa                     report on U.S. international broadcasting led the
Revocation Process: We assessed the effective-           Broadcasting Board of Governors to fundamentally
ness of the visa revocation process, specifically for    revise its 5-year strategic plan to focus on areas of
individuals whose visas were revoked for terrorism       strategic importance in the war on terrorism. In
concerns. We concluded that the U.S. government          addition, the board is revising its plan to incorpo-
lacked comprehensive policies to guide the process       rate more meaningful performance indicators as
and that there were major gaps in the policies’          suggested in our report. For example, audience size
implementation. We also concluded that neither the       measures will now be included in the plan as a key
Immigration and Naturalization Service nor the FBI       performance measure. In line with another report
were routinely investigating or attempting to locate     recommendation, the Board is conducting an in-
individuals whose visas were revoked for terrorism       depth review of the need for and utility of integrat-
concerns. DHS agreed with our recommendation             ing overlapping language services (a 55-percent
that the visa revocation process should be strength-     overlap currently exists between Voice of America
ened as an antiterrorism tool. And, in testimony fol-    and other broadcast language services) and expects
lowing the issuance of our report, the Department        to include the results of this review in its fiscal 2005
of State said that it had already improved its coordi-   budget submission. Such changes will allow the
nation with DHS and its information-sharing on visa      board and external groups such as OMB and the
revocations.                                             Congress to allocate resources more effectively.

2.34. Assessing the U.S. Government’s Staffing           2.36. Using Private Sector Techniques to
Needs at Embassies and Consulates: Our                   Improve U.S. Public Diplomacy: Nearly 2 years
work on rightsizing the U.S. government’s overseas       after the terrorist attacks of September 11, 2001, the
staffing has helped push forward the rightsizing ini-    Department of State still lacked an overall strategy
tiative included in the President’s Management           to integrate its diverse public diplomacy activities
Agenda. We developed a framework that calls for          toward improving the image of the United States
consideration of security, mission, and costs when       overseas. In August 2003, State began implementing
determining the appropriate size of the overseas         our recommendation that it develop such a strategy
workforce. OMB supported the framework and               and that it consider the techniques of private sector
established an interagency working group to help         public relations firms in integrating all of State’s
structure and guide the rightsizing process. State       public diplomacy efforts and directing them toward
agreed that our framework provided a good foun-          achieving common and measurable objectives. To
dation for improving the overseas staffing process.      assist State, we gave officials a list of high-level pri-
In April 2003, we recommended that State develop         vate sector contacts that we consulted in the course
formal, standard, and comprehensive guidance on          of our work. State plans to collaborate with these
developing staffing projections for new embassy          and other private sector leaders in developing its
construction projects, so that it constructs buildings   strategy and improving its methods of measuring
that are the right size. In June 2003, State issued      the effectiveness of its programs. State also estab-
such a guide, which specifically requires that posts     lished a new office of strategic planning for public
use our rightsizing framework questionnaire when         diplomacy activities to support this effort.
establishing projections. We also found that greater

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2.37. Improved Accountability Over U.S. Funds
Provided to Two Micronesian Nations: We
                                                        Respond to the Impact of
found that the United States, the Federated States of   Global Market Forces on U.S.
Micronesia, and the Republic of the Marshall Islands    Economic and Security
had taken little action to ensure accountability over
and the effectiveness of U.S. funds—about $1.6 bil-
lion for fiscal 1987 through fiscal 1998—provided to
                                                        2.39. Reassessing the Advisory Committee
the two Pacific island nations via a Compact of Free
                                                        System: As a result of our assessment of how the
Association. The Department of State Compact
                                                        private sector advisory committee system on U.S.
Negotiator incorporated several of our recommen-
                                                        trade policy could make its consultation process
dations into the amended compacts during negotia-
                                                        with the government more meaningful and reliable,
tions with the two Pacific island nations that were
                                                        the United States Trade Representative and other
completed in the spring of 2003. For example, U.S.
                                                        managing agencies have changed their approach to
funds will be provided through specific grants that
                                                        this process. The United States Trade Representative
are subject to grant terms and conditions, capital
                                                        has taken a series of steps to improve the timeliness
(public infrastructure) projects will be defined in
                                                        of consultations, such as instituting monthly confer-
detail and funds made available for maintaining
                                                        ence calls with committee chairs and developing a
these projects, and annual reporting and consulting
                                                        secure Web site to disseminate materials before
requirements will be expanded.
                                                        meetings. In addition, USDA and the Department of
                                                        Commerce have made efforts to improve the quality
2.38. Increasing Knowledge of Acquired
                                                        of the committee meetings and fill gaps in commit-
Immune Deficiency Syndrome (AIDS) in
                                                        tee representation. Moreover, the Department of
Africa and Other Parts of the World: In a
                                                        Commerce has proposed a reorganization of its 21
series of reports since 2001, we reported on the
                                                        committees into 15 committees that more closely
impact and challenges of measuring efforts to con-
                                                        align the system’s structure and composition with
trol the spread of AIDS. As a result, we recom-
                                                        the current U.S. economy and negotiating demands.
mended (1) that behavior surveys be developed
                                                        Streamlining the system should also better match
and administered to the United Nations peacekeep-
                                                        agency resources to the management tasks
ing contingents to improve available data related to
transmitting or contracting sexually transmitted
infections, including AIDS; (2) that efforts be made
                                                        2.40. Making Trade Agreements More
to integrate AIDS into the work of the United
                                                        Accessible: As part of our ongoing work for the
Nations and to hold country level staff accountable
                                                        Congress on China trade issues, we created an elec-
for participation in efforts to help host countries
                                                        tronic database to analyze China’s World Trade
combat AIDS; and (3) that all missions and regional
                                                        Organization accession agreement. We issued the
offices in USAID, which conducts AIDS prevention
                                                        searchable database to provide a tool for policy-
activities, select standard indicators to measure the
                                                        makers, analysts, lawyers, and businessmen inter-
progress of AIDS programs and gather indicators
                                                        ested in examining the numerous commitments
that are based on performance data. In response,
                                                        China undertook to join the World Trade Organiza-
both the United Nations and USAID took the neces-
                                                        tion. Given the complexity and length of the agree-
sary steps to address our recommendations.
                                                        ment, the database can help them both identify the
                                                        opportunities that the agreement creates and moni-
                                                        tor China’s implementation.

                                                        2.41. Future Implications of Public
                                                        Accounting Firm Consolidation Are
                                                        Unknown: The audit market is in the midst of
                                                        unprecedented change, including increased con-
                                                        centration among the largest firms. We identified a
                                                        number of issues that warrant ongoing attention,
                                                        including (1) monitoring whether firms will begin

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                             119

to exercise significant market power in the future      of the fees they charge investors. To improve inves-
through, for example, higher fees; (2) studying         tor awareness of these fees and increase price com-
whether anything should be done to prevent further      petitions among funds, we identified alternatives for
consolidation among firms, such as some form of         regulators to increase the usefulness of fee informa-
government intervention; (3) continuing to target       tion disclosed to investors. In late 2002, the Securi-
sanctions by balancing the individuals’ and firms’      ties and Exchange Commission (SEC) issued
responsibilities while managing the potential moral     proposed rules to enhance mutual fund fee disclo-
hazard created by firms’ believing they are “too few    sures using one of our recommended alternatives.
to fail;” (4) monitoring the effect of concentration
on auditor choice in particularly concentrated          2.45. Improving the SEC’s Public Company
industries; and (5) evaluating whether addressing       Accounting Oversight Board Selection
existing barriers to entry into the large public com-   Process: The Sarbanes-Oxley Act of 2002 required
pany audit market, such as capital formation, could     that SEC appoint members to the newly created
prevent further consolidation among the existing        Public Company Accounting Oversight Board,
four large public accounting firms.                     which is responsible for the oversight of the audits
                                                        of public companies in the wake of numerous cor-
2.42. Blocking Internet Gambling: We provided           porate and accounting scandals. Given 90 days to
a comprehensive overview of the efforts under way       appoint the five members to this board, SEC failed
by credit card companies and banks to block the         to establish a nomination and vetting process to
use of credit cards to pay for illegal Internet gam-    ensure that the Commission had the information
bling transactions. Our work was used in the debate     necessary to make informed selection decisions.
over legislation to ban the use of credit cards and     SEC conducted the vetting process after the
other payment mechanisms to pay for illegal Inter-      appointment. As a result, SEC appointed an over-
net gambling transactions. The House passed the         sight board Chairman that resigned within weeks
bill in June 2003.                                      amid controversy involving his role as chairman of
                                                        an audit committee of a small technology company.
2.43. Full Financial Markets Recovery from              In response to our work, SEC developed a new
Terrorist Attacks: In reports issued in 2003, we        nomination and vetting process that clearly articu-
described how financial market participants and         lates the process and requires that all nominees be
regulators responded to the September 11 terrorist      vetted prior to appointment to the board. The new
attacks. We found many factors that caused the          process also articulates selection criteria and addi-
longest closure of the U.S. stock markets since the     tional criteria that may be considered in the selec-
1930s, including the need for many market partici-      tion process.
pants to reestablish operations and communications
capabilities at new locations outside the affected      2.46. Reducing the Risks in International
area. We reported that regulators had begun efforts     Weapon Development Programs: Our June
to ensure that market participants involved in the      1998 report addressing DOD’s international agree-
transfer of funds and securities take steps to ensure   ment with Germany and Italy to acquire the
that they can recover their operations after a disas-   Medium Extended Air Defense System found that
ter. However, our reports recommended that regu-        DOD did not fully assess technology transfer issues
lators also develop recovery strategies and sound       before initiating the program and allies became
business continuity practices to better ensure that     unhappy with DOD’s reluctance to share valuable
vital trading activities will also be able to resume    technology. We recommended that DOD, prior to
when appropriate.                                       initiating future international efforts, complete an
                                                        in-depth assessment of technology transfer issues.
2.44. Improving Mutual Fund Disclosures: In             DOD concurred with the recommendation and,
2000, we reported the fees charged by mutual funds      beginning with the third-quarter of fiscal 2004, will
had generally declined during the 1990s for the         implement a modified technology transfer
average large fund. However, not all funds whose        approach. This action should help DOD enter into
assets had grown and thus had the opportunity to        more successful joint cooperative efforts with U.S.
reduce their fees had done so. We also reported         allies.
mutual funds do not generally compete on the basis

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2.47. Efficiency Improvements in the                     2.48. Ensuring Defense Emergency Response
Department of State’s Export Licensing                   Funds are Better Targeted: We briefed the Sen-
Process: In December 2001, we reported that              ate and House Appropriations Defense Subcommit-
license applications for the sale of defense articles    tees in June and July 2002 on DOD’s use of the
and services take a significant amount of time to        Defense Emergency Response Fund. We reported
review because of the complexity of the application      that DOD managed about $15 billion in emergency
and the need to consider different points of view.       funds that it received from the Emergency Response
Our report also highlighted several conditions that      Supplementals for fiscal 2001 and fiscal 2002, but
reduce the efficiency of the application review pro-     had not obligated about $3.7 billion of the funds.
cess and resulted in hundreds of applications that       We also reported that of the unobligated amount,
were lost and thousands that were delayed while          over $535 million had not been allocated to the
no substantive review occurred. In response to our       Fund’s 10 categories and consequently were not
recommendations, the Department of State devel-          connected with specific requirements. The Con-
oped detailed guidelines to assist licensing officers    gress subsequently rescinded $224 million from the
in deciding if license applications should be            Fund because funds were not used quickly enough
referred to other offices and agencies; established a    and were for relatively lower-priority activities. The
system of highlighting license applications that may     Congress also directed DOD to realign $276 million
be stalled in the licensing process; and established a   in the Fund to address other funding requirements.
mechanism that tracks license applications as they
move through the process.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                               121

Strategic Goal 3
Help Transform the Federal Government’s
Role and How It Does Business to Meet
21st Century Challenges

The Implications of the
Increased Role of Public and
Private Parties in Achieving
Federal Objectives
3.1. Adjustment of Civil Penalties for
Inflation: In a series of reports, we determined
that a number of federal agencies had not adjusted
their civil penalties for inflation in a manner consis-
tent with the Federal Civil Penalties Inflation Adjust-
                                                          The Government’s Human
ment Act, as amended, and we recommended that             Capital and Other Capacity for
the agencies make those adjustments. Subse-               Serving the Public
quently, consistent with our recommendation,
seven agencies have published Federal Register            3.3. Injecting Factual Information into the
notices adjusting their penalties for inflation or oth-   Public Debate on Small Business
erwise taking action to comply with the statute.          Contracting: In several reports and testimonies,
                                                          we highlighted concerns about federal contracting
3.2. Affecting the Legislative Debate on                  opportunities for small businesses and presented
Federal Involvement with the District of                  recommendations for improvement. Our contribu-
Columbia: Our report has already informed the             tion to the public debate on small business procure-
debate over the fiscal relationship between the Dis-      ment has been to cut through the rhetoric and
trict of Columbia and the federal government and          opinions, presenting factual evidence to show that
will likely set the tone for any future legislation or    information on small business contracting is often
appropriations decisions regarding the District of        missing or misleading. We have also demonstrated
Columbia. The report led to a House/Senate joint          that agencies have sometimes paid insufficient
press conference and briefings with key Members           attention to ensuring that small businesses are get-
and committees involved in District of Columbia           ting their fair share of government contracting dol-
issues, thereby bringing renewed attention and            lars. For example, in May 2003, we disclosed that
focus to these issues. Congressional staff, District of   large companies had received billions of dollars of
Columbia officials, and other experts said that the       federal contracts that were reported as going to
report would serve as a significant document shap-        small businesses. Our disclosure spurred congres-
ing the future fiscal relationship between the Dis-       sional hearings and a series of actions by GSA and
trict of Columbia and its congressional                   SBA to correct the problem and ensure that national
appropriations and oversight committees. District of      small business goals are achieved. As a result of this
Columbia officials also agreed to focus more atten-       body of work, the Congress and several executive
tion on addressing the management problems out-           branch agencies have taken steps to improve infor-
lined in our report.                                      mation and accountability for small business con-

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3.4. Reforming DOD’s Services Contracting:                example, we recommended that DOD implement
DOD is historically the government’s largest pur-         key modernization management controls—such as
chaser of services—nearly $100 billion in contract        investing in new and existing systems within the
actions in fiscal 2003—but the highly decentralized       context of a corporate blueprint, commonly called
DOD contracting environment has resulted in wide-         an enterprise architecture—using an incremental or
spread problems complying with basic contract             modular investment management approach, to
requirements, such as pursuing adequate competi-          ensure that value commensurate with costs is being
tion and overseeing contractors’ performance. In          realized and that investment selection decision-
response to our work, the Congress enacted 2002           making follows a portfolio-based approach that
Defense authorization and appropriations legisla-         considers the relative merits and risks of competing
tion directing DOD to institute reforms of its ser-       investment options along with resource constraints.
vices contracting and cutting DOD’s 2002                  Additionally, we recommended that DOD establish
appropriations by $1.65 billion based on the              and implement rigorous and disciplined acquisition
expected costs avoided. DOD’s reforms are to be           management processes for its business system
guided on private sector best practices we describe       investments. DOD said that it is committed to
as an overall strategic framework for purchasing. A       addressing these recommendations. Toward that
number of changes are expected to DOD’s current           end, DOD has, for example, implemented some
organizational structure, processes, and roles to         key architecture management capabilities, such as
support a more strategic approach, such as cross-         assigning a chief architect and creating a program
functional buying teams to coordinate and manage          office, as well as issuing the first version of its busi-
contracting of key services.                              ness enterprise architecture in May 2003. In addi-
                                                          tion, DOD has revised its system acquisition
3.5. Improving Governmentwide Decisions to                guidance. By implementing our recommendations,
Compete Commercial Activities: Our work on                DOD can increase the likelihood that its systems
competitive sourcing improved governmentwide              investments will support effective and efficient busi-
policy governing decisions in two areas. First, on        ness operations and provide for timely and reliable
the basis of our recommendation, OMB’s new guid-          information for decision making.
ance incorporates a provision encouraging agencies
to explore innovative alternatives to competitive         3.7. Helping to Advance Major Information
sourcing such as High Performing Organizations            Technology Modernizations: Our ongoing
and partnerships. This action makes the govern-           work has helped to strengthen the management of
ment’s sourcing policy more strategic in that it          the complex, multibillion-dollar information tech-
broadens the choices agencies have for achieving          nology modernization program at the Internal Reve-
efficiencies in their commercial activities. Second,      nue Service (IRS) to improve operations, promote
on the basis of our work emphasizing the use of           better service, and reduce costs. For example, IRS
competitive sourcing goals that are based on con-         implemented several of our recommendations to
sidered sound analysis and research, the Congress         improve software acquisition, enterprise architec-
passed legislation that prohibits agencies from using     ture definition and implementation, and risk man-
funds to establish, apply, or enforce any numerical       agement and to better balance the pace and scope
goal, target, or quota for their competitive sourcing     of the program with its capacity to effectively man-
activities “…unless it is based on considered             age it.
research and analysis of past activities and is consis-
tent with the stated mission of the agency.”              3.8. Identifying Savings through Developing
                                                          VA’s Enterprise Architecture: Responding to
3.6. Helping DOD Recognize and Address                    our recommendation that VA effectively develop,
Business Modernization Challenges: Since                  implement, and manage its enterprise architecture,
1995, we reported and testified on the challenges         VA identified duplicative business functions, and an
DOD faces in trying to successfully modernize             inefficient, ineffective, and unsecured “as-is” infra-
about 2,300 business systems, and we made a series        structure in actions taken to develop its architecture.
of recommendations aimed at establishing the mod-         For example, they identified more than 30 indepen-
ernization management capabilities needed to be           dently designed and operated data networks, over
successful in transforming the department. For            200 independent external network connections and

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                   123

over 1,000 remote access system modem connec-            Service) strengthening its ability to manage its multi-
tions, and 57 implementations of Veterans Benefits       billion-dollar information technology modernization
Administration claims processing software. To            program. Our recommendations have focused on
address the “as is” network infrastructure, VA’s Tele-   the need for the Bureau to develop and implement
communications Modernization Project is expected         key system acquisition practices, address human
to eliminate many of the networks and external net-      capital management weaknesses, and establish an
work connections, thereby generating almost $8           independent review function to oversee the mod-
million in estimated costs avoided for fiscal 2002       ernization contractor. The Bureau’s adoption of
through fiscal 2005.                                     these and earlier recommendations related to enter-
                                                         prise architecture, cost estimating, and the elimina-
3.9. Managing Investment in Overseas                     tion of duplication between two planned systems
Agencies’ Information Technology (IT)                    has improved its acquisition management capabil-
Capabilities: In November 2001, we recom-                ity, resulted in reduced exposure to risk, and saved
mended that the Department of State limit invest-        tens of millions of taxpayer dollars.
ment in a common overseas knowledge
management system used to facilitate unclassified        3.12. Improving Agency IT Investment
information/knowledge sharing among foreign              Management Capability: In May 2002, we issued
affairs agencies until it had, at a minimum, secured     our IT Investment Management (ITIM) Framework,
stakeholder involvement and buy-in. Otherwise,           which lays out a five-stage model for agencies to
State risked investing in a system that would not be     follow as they implement investment management
used by the other agencies and/or that failed to         process improvements. The ITIM provides a widely
meet these agencies’ needs. State spent $18 million      accepted standard for organizations to reference as
on prototyping and pilot testing efforts in an unsuc-    they develop their own approach to investment
cessful attempt to achieve stakeholder buy in and        management. Since its release, the ITIM has been
subsequently canceled the program in 2003. By fol-       adopted by many agencies as either the basis for
lowing our recommendation, State did not spend           process redesign or a framework for evaluating
the remainder of the $235 million estimated to           progress in process improvement to guide change.
acquire and deploy a system that may not have            In addition, IGs from several agencies have used
been used by all foreign affairs agencies.               the ITIM for the independent assessment of invest-
                                                         ment management practices. Internationally, the
3.10. Reducing DOD’s Implementation Risks                ITIM has been adopted and adapted by several
and Purchase Costs for the Navy-Marine                   national audit organizations for their use. The
Corp Intranet: As part of our fiscal 2001 and fis-       National Association of State Chief Information
cal 2002 DOD information technology budget anal-         Offices has also referenced the ITIM.
yses work for congressional defense committees,
we identified risks to the effective and efficient       3.13. Improving Federal Management and
acquisition and implementation of the Navy-Marine        Sharing of Terrorist Watch Lists: Watch lists
Corps intranet. We noted the need for various man-       are important tools used by federal agencies to help
agement controls. DOD officials took actions to          secure our nation’s borders. In reviewing the fed-
address issues we raised, and as a result, modified      eral government’s approach to developing, using,
the Navy-Marine Corps intranet contract and              and sharing watch lists in performing the border
reduced contract amounts by $400 million in fiscal       security mission, we found that the federal
2002 and $366.3 million in fiscal 2003. By modifying     approach was decentralized, fragmented, and non-
the contract, DOD reduced program risks and              standard. We also found that the number and vari-
increased the likelihood that the program will be        ability of watch lists, combined with their
acquired and implemented successfully.                   commonality of purpose, pointed to opportunities
                                                         for improvement. As a result of our recommenda-
3.11. Helping Customs and Border Protection              tions, the Secretary of DHS, in collaboration with
Improve its Information Technology                       the heads of other departments and agencies, initi-
Modernization Program: Our prior and ongo-               ated a watch list consolidation initiative as part of
ing work has resulted in DHS’s Bureau of Customs         an effort to develop a border and transportation
and Border Protection (formerly the U.S. Customs         security blueprint to strengthen border protection

124                                                          GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                        PART IV

and information sharing in the wake of September         payments, develop and implement actions to
11. After our report was issued, DHS’s Chief Infor-      reduce those payments, and report the status and
mation Officer said in testimony before the Con-         impact of the corrective actions taken to the admin-
gress that the responsibility for watch list             istration and the Congress in a publicly available
consolidation had been transferred to the newly          report. As a result of the Improper Payments Infor-
established Terrorist Threat Integration Center.         mation Act of 2002, OMB has issued guidance on
                                                         how federal agencies should implement the act. It
3.14. Promoting the Effective Use of                     expects that, when implemented, the guidance
Enterprise Architectures: An enterprise archi-           should improve the integrity of the government’s
tecture is an essential tool for effectively and effi-   payments and the efficiency of its programs and
ciently engineering business processes and for           activities. OMB recently estimated annual improper
implementing and evolving supporting information         payments at about $35 billion. Federal agencies are
technology systems, thus optimizing mission perfor-      in the process of developing and taking actions to
mance. Over the past decade, our work has shown          implement the guidance.
that the lack of such architectures has resulted in
inefficiencies and duplication associated with the       3.17. Improving Internal Controls and
lack of integrated business operations and support-      Accountability over Agency Purchases: Our
ing information technology. To help guide agencies       work examining purchasing and property manage-
in their enterprise architecture management efforts,     ment practices at FAA identified several weaknesses
we developed and published a maturity framework,         in the specific controls and overall control environ-
which provides federal agencies, including OMB,          ment that allowed millions of dollars of improper
with a common benchmarking tool for planning             and wasteful purchases to occur. Such weaknesses
and measuring their efforts to improve enterprise        also contributed to many instances of property
architecture management. The maturity model has          items not being recorded in FAA’s property man-
been widely accepted across the federal govern-          agement system, which allowed hundreds of lost or
ment, with some agencies adopting the framework          missing property items to go undetected. Acting on
as a de facto standard for measuring enterprise          our findings, FAA established key positions to
architecture management maturity.                        improve management oversight of certain purchas-
                                                         ing and monitoring functions, revised its guidance
3.15. Improving Defense Software                         to strengthen areas of weakness and to limit the
Development and Acquisition Capabilities:                allowability of certain expenditures, and recorded
Since 1997, we have reported on weaknesses in            assets into its property management system that we
DOD’s ability to manage software-intensive system        identified as unrecorded. FAA has additional actions
development and acquisition programs and made            in progress to further tighten controls and improve
recommendations to correct weaknesses on specific        operations.
programs. In 2001, we reported that while some
DOD component organizations were systematically          3.18. Contributing to Auditing and Ethics
and proactively addressing software process              Standards: Serving as a catalyst for prudent
improvement, DOD did not have a corporate                reform in the auditing profession, we contributed
approach to accomplishing this. Accordingly, we          comments on draft professional auditing and ethics
made a series of recommendations aimed at lever-         standards of the American Institute of Certified Pub-
aging software process improvement efforts across        lic Accountants (AICPA) and the Institute of Internal
DOD. In the fiscal 2003 Defense Authorization Act,       Auditors (IIA). We analyzed and commented on
the Congress used our recommendations in direct-         four AICPA exposure drafts, covering (1) audit risk
ing DOD to establish and implement a program for         assessment and the audit model, (2) reporting on
improving its software management process con-           internal control over financial reporting, (3) ethics
trols.                                                   rulings and interpretations, and (4) peer review
                                                         within the profession. We also commented on IIA’s
3.16. Governmentwide Actions to Identify and             exposure draft of amended standards for the profes-
Report Improper Payments: Over the past sev-             sional practice of internal auditing. Our comments
eral years, we recommended that federal agencies         to both the AICPA and IIA also provided guidance
review their programs and activities for improper        for clarifying the role of internal auditors as a critical

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                   125

component of the corporate governance system.           tory guidance to include key information and all
Through our continuing contributions to other pro-      types of training ranges, and developing and imple-
fessional audit organizations, we are leading by        menting a standard cost methodology. With these
example and hope to lead the way in reestablishing      improvements, DOD’s reported liability should pro-
transparency and trust in auditing.                     vide the Congress with a reasonable estimate of the
                                                        long-term budget implications of cleaning up
3.19. Improving the Cost-Effectiveness of the           DOD’s training ranges.
Decennial Census: Our continuing series of con-
gressionally requested reviews of the decennial         3.21. Reducing National Security Risks
census has made the Census Bureau more account-         Related to Sales of Excess DOD Property: In
able and results oriented and identified significant    testimony before the Subcommittee on National
cost reductions. For example, our report on the les-    Security, Veterans Affairs, and International Rela-
sons learned in planning a more cost-effective cen-     tions, House Committee on Government Reform,
sus, among others, recommended actions to help          we reported that DOD did not have systems and
control the cost of the 2010 enumeration (now esti-     processes in place to maintain visibility and control
mated at around $11 billion) and promote better         over 1.2 million chemical and biological protective
financial management at the Census Bureau. Simi-        suits. The lack of visibility over these sensitive items
larly, as a result of our reports on the Bureau’s       resulted in unused chem-bio suits being declared
efforts to count the homeless and Hispanics, the        excess and sold to the public over the Internet for
Bureau took steps to improve its procedures for         pennies on the dollar. As a result of our work, DOD
counting and reporting data on these two popula-        has taken action to restrict the chem-bio suits to
tion groups. Another review found that the Census       DOD use only and has discontinued their sale to
Bureau overstated its estimate of the life-cycle cost   the public—steps that should eliminate the national
of the 2010 Census by $300 million. Consequently,       security risk associated with sales of these sensitive
when the Bureau reissues its estimate of the cost of    military items.
the 2010 Census, it plans to reduce the life-cycle
cost by this amount.                                    3.22. Improving Accountability over Sensitive
                                                        DOD Munitions: In a series of reports and testi-
                                                        monies beginning in 2000, we reported on prob-
Support Congressional                                   lems in tracking in-transit ammunition shipments,
                                                        including highly sensitive items. In response to our
Oversight of the Federal                                findings and recommendations, DOD now has pro-
Government’s Progress Toward                            cedures in place to maintain “cradle to grave”
Being More Results-Oriented,                            accountability of its most sensitive munitions. Fur-
                                                        ther, the Congress acted on the conditions we
Accountable, and Relevant to                            reported and required the Secretary of Defense to
Society’s Needs                                         report to congressional defense committees on six
                                                        key areas in relation to the transportation of muni-
3.20. Improving DOD’s Environmental                     tions using commercial trucking companies.
Liabilities Estimate: In April 2001, we reported        Accountability over these items was also strength-
that DOD did not have complete and accurate data        ened when, in light of our findings and recommen-
needed to reliably estimate and report to the Con-      dations regarding commercial motor carriers, DOD
gress the environmental cleanup costs associated        took action to improve security for munitions ship-
with its training ranges, which were reported at $14    ments by rail, sea, and air.
billion for fiscal 2000 even though other DOD esti-
mates showed that the amount could exceed $100          3.23. Informing the Congress about Data
billion. In response to our recommendations, DOD        Mining Technology: In March 2003, we were
has now taken numerous actions to improve the           asked to testify at an oversight hearing on data min-
cleanup estimate, including designating a focal         ing technology. Our expertise gained in data min-
point to oversee and manage the reporting of train-     ing work as part of audits and investigations of
ing range liabilities, validating the cost model used   federal credit card and other programs provided the
to estimate the cleanup costs, implementing inven-      basis for our testimony. We testified that while data

126                                                         GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                     PART IV

mining alone is generally not sufficient to identify     addition, SBA suspended its loan sales activity until
systemic breakdowns in controls and provide spe-         corrective measures could be taken. SBA’s correc-
cific recommendations, it serves to “put a face” on      tive actions underway include the development of a
the control breakdowns and provides managers             new process to evaluate the cost of its disaster loan
with examples of the real and costly consequences        program, which will improve the reliability of infor-
of failing to properly control these large programs.     mation it provides to decision makers in future bud-
Our analysis helped the Congress understand that         get requests and financial statements.
data mining—with the right mix of technology,
human capital expertise, and data security mea-          3.26. Improving Controls Over DOD’s Credit
sures—can be an important oversight tool.                Cards: In a series of reports and testimonies
                                                         beginning in 2001, we highlighted pervasive weak-
3.24. Helping Agencies Improve Audits of                 nesses in the overall control environment, including
Purchase Card Programs: In response to a                 the proliferation of cards, and specific controls over
congressional request, we issued an exposure draft       DOD’s multibillion-dollar purchase and travel card
of an audit guide intended to help auditors and          programs. We used data mining to identify suspi-
fraud investigators as they review government pur-       cious transactions and followed up using forensic
chase card programs. With governmentwide pur-            auditing techniques to identify numerous cases of
chase card spending at about $15 billion annually,       fraud, waste, and abuse, including the purchase of
federal agencies are accountable for how purchase        a wide variety of goods and services that were
cards are used and how the funds are spent. The          unrelated to official business. Since we began this
guide—based primarily on our experiences in              work, DOD has substantially lowered its vulnerabil-
auditing and investigating purchase card programs        ity by reducing the number of purchase and travel
at various agencies—focuses on audits of internal        cards by over 900,000. Our continued focus in this
control activities designed to prevent or detect sig-    area has generated nearly $200 million in avoided
nificant instances of fraud, waste, or abuse. The        costs and 174 recommendations to improve DOD’s
guide provides a sound basis for program manage-         program operations.
ment oversight as well as detailed audit and investi-
gative techniques for purchase card programs             3.27. Increasing Focus on Addressing High-
throughout government.                                   Risk Areas and Management Challenges: We
                                                         updated our high-risk list in 2003, which now con-
3.25. Improving Financial Accountability for             sists of 26 areas. Our audits and evaluations con-
SBA’s Credit Programs: In a report issued in             tinue to identify federal programs and operations
early 2003, we cited numerous accounting and bud-        that are high risk, in some cases, because of their
geting deficiencies at SBA that affected the reliabil-   greater vulnerabilities to fraud, waste, abuse, and
ity of information it reported on the results of its     mismanagement. We also identified high-risk areas
loan sales and the cost of its disaster loan program.    to focus on major economy, efficiency, or effective-
Specifically, we found that SBA incorrectly calcu-       ness challenges, and have increasingly used the
lated losses it reported on its loan sales, did not      high-risk designation to draw attention to the chal-
properly consider the effect of loan sales on the        lenges faced by government programs and opera-
estimated cost of its remaining loans, and signifi-      tions in need of broad-based transformation. OMB
cantly overstated the reported value of its remaining    has begun working with agencies to develop spe-
loans. Our analysis alerted the Congress to a lack of    cific goals and target dates to address the areas that
financial accountability at SBA and, as a result of      we have designated as high risk. The companion
this work, SBA’s auditors withdrew their previously      performance and accountability series contains sep-
issued “clean” audit opinions on SBA’s fiscal 2000       arate reports covering management challenges at
and fiscal 2001 financial statements and found           each cabinet department, most major independent
SBA’s fiscal 2002 financial statements to be unreli-     agencies, and the U.S. Postal Service, as well as a
able. SBA agreed with our findings and recommen-         summary report that gives a governmentwide per-
dations and immediately took steps to correct the        spective. These efforts contribute to a continuing
deficiencies, including hiring an independent con-       focus and sustained attention on implementing our
sultant to thoroughly assess its accounting and bud-     recommendations and bringing about lasting solu-
geting procedures for its credit programs. In            tions in these areas.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                               127

3.28. Improving Agency Capacity to Evaluate             3.30. Improving the District of Columbia’s
Federal Programs: We noted that agencies have           Performance Report: Over the past 4 years, in
had difficulty explaining in their performance          mandated reviews of the District of Columbia’s
reports how their program activities help achieve       annual performance report, we made recommenda-
agency goals, in part, because of agencies’ limited     tions for expanding the report coverage to include
use of the rigorous program evaluation methods          goals and measures for all major activities as well as
needed to establish a causal connection between         related expenditure. In response, the District of
program activities and outcomes. In 2002, we            Columbia’s fiscal 2002 report provided a more com-
described how five diverse agencies relied on exist-    prehensive review of the city’s performance than
ing research to design their program strategies and     prior reports, included performance results for sig-
link them to agency goals, and some developed           nificant activities that had not previously been
program logic models to identify their expected         included, and established criteria for reporting on
knowledge, attitude, and behavioral outcomes. One       court orders. The District has also undertaken initia-
particular challenge is for information dissemination   tives, such as implementing performance based
programs that do not act directly but inform and        budgeting, creating a performance management
persuade others to act to achieve their social or       council, and developing data collection standards,
environmental goals. In 2003, we encouraged sev-        that could assist in improving overall management.
eral agencies with information campaigns to adopt       In addition, the District of Columbia agreed with
logic models to articulate their program strategy and   the recommendations in our May 2003 report to
identify appropriate outcome measures. We also          move beyond the requirements of the mandate to
described how diverse agencies successfully pro-        improve the usefulness of the performance reports
duced credible program evaluations through estab-       as a management tool by addressing issues of data
lishing an evaluation culture, acquiring or             quality, including additional analysis in future years.
developing quality data and analytic expertise, and
leveraging resources through collaborative partner-     3.31. Forestalling Increase in Postage Rates
ships. Our work provides concrete examples of           until 2006: In May 2002, concerned that the Postal
strategies that, with leadership commitment, other      Service may be over funding its pension fund, we
agencies could adopt to build their evaluation          requested that OPM determine the extent to which
capacity and produce credible information on their      the U.S. Postal Service had funded and was pro-
programs’ effectiveness.                                jected to have funded the pension benefits of its
                                                        employees who participate in the Civil Service
3.29. Exploring the Need for a System of Key            Retirement System. OPM reported that the Service
National Indicators: To help decisionmakers             was projected to over fund its obligations by almost
address critical challenges facing the nation, more     $78 billion for the period over which pension bene-
and better information than now exists may be           fits are expected to be paid. Our request and subse-
needed. A comprehensive national indicator system       quent review of OPM’s analysis culminated in the
could provide the information to help assess the        enactment of the Postal Civil Service Retirement
nation’s position and progress in such key areas as     System Funding Reform Act of 2003, which reduced
business and markets, education, health, and natu-      the Service’s pension costs by an average of $3 bil-
ral resources. In cooperation with the National         lion per year over the next 5 fiscal years. The Con-
Academies, we hosted, in February 2003, a forum         gress directed that the cost reduction attributable to
on the topic with national leaders and experts. The     the first 3 fiscal years be used to reduce the Postal
participants agreed on the need for such an enter-      Service’s debt and hold postage rates unchanged
prise and this event catalyzed several important fol-   until at least fiscal 2006, 2 years beyond its planned
low-on initiatives: (1) strong interest from the        fiscal 2004 rate increase.
Congress; (2) formation of a national coordinating
committee to pursue the goal of creating a key          3.32. Revising DOD’s Working Capital Fund
national indicator system; and (3) a global indica-     Workload Estimates: Our recent series of reports
tors forum to be led by the Organisation for Eco-       on excessive amounts of unfinished work at fiscal
nomic Co-operation and Development.                     year end—referred to as carryover—for DOD’s
                                                        working capital funds resulted in the Congress
                                                        reducing DOD’s appropriations in these areas by

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                                                                                                      PART IV

$514.1 million. In addition, DOD has acted to           Capital Management—focused on reductions in
implement our recommendation that it revise the         NASA’s shuttle workforce, the loss of critical skills in
formula used to calculate the value of work on-         that workforce, and the agency’s efforts to address
hand at year-end. If implemented appropriately, the     them. We were asked to appear before a public
new formula should eliminate the misleading and         hearing of the Columbia Accident Investigation
inconsistent carryover data previously reported to      Board to discuss these challenges. The board’s final
the Congress.                                           report cited our work, including our review of
                                                        NASA’s implementation of lessons learned. The
3.33. Measures to Improve Security at the Los           maintenance of both good and bad experiences in
Alamos National Laboratory: Since DOE began             corporate memory was identified by the Board as a
its contract reform efforts in 1994, we have reported   best practice in safety organizations.
on numerous occasions that the department should
consider competing all of its major site contracts,     3.35. Interpreting Federal Procurement Laws
especially when there are performance problems          and Regulations: The Procurement Law Division
with the incumbent contractor. In 2001, we              of the Office of General Counsel resolved 1,244 bid
reported that despite glaring performance problems      protests in fiscal 2003, 290 of which were decided
at certain DOE laboratories, the department             by written decisions. These decisions provided
excluded its largest laboratories—those operated by     guidance to the procurement community by inter-
the University of California—from full and open         preting the federal procurement laws and regula-
competition. In 2002, we again reported that DOE        tions. A number of these decisions (50) resulted in
continued to extend the contract with the university    specific recommendations to the agency to correct
to operate the Los Alamos National Laboratory, a        irregularities in the agency’s conduct of its procure-
contract that has never been competed since its         ment.
inception in 1943. The decision to extend this con-
tract was not without controversy given the history     3.36. Bogus School and Fictitious Students
of safety and security problems at the laboratory.      Lead to Strengthened Controls: The Senate Per-
DOE decided that these problems could be                manent Subcommittee on Investigations asked us to
addressed using contract provisions instead of com-     investigate control weaknesses in the administration
petitive bidding. In our report, we stated that it      of student loans for postsecondary education under
remained to be seen whether DOE would be suc-           the Federal Family Education Loan Program. In an
cessful in improving contractor performance using       undercover investigation to expose vulnerabilities,
contract mechanisms, adding that if the university      investigators set up a fictitious school and obtained
did not make significant improvements in perfor-        approval for student loans totaling $55,500 on
mance, DOE may need to reconsider its decision          behalf of three fictitious students purportedly
not to compete this contract. In 2003, DOE released     attending the school. On the basis of our work, the
a report on management problems at the Los Ala-         Department of Education retrained its staff on insti-
mos National Laboratory, and the report identified      tutional eligibility requirements and certification
ineffective supervision by the university, inadequate   procedures, revised its internal certification check-
federal oversight, and cultural factors as causes of    list (the document used to document that certifica-
the problems. The Secretary of Energy, citing “sys-     tion information was validated), ordered 100
temic management failures” subsequently                 percent validation of country approvals for all par-
announced that DOE has changed its position and         ticipating schools in 41 foreign countries, and disal-
would open the Los Alamos contract for competi-         lowed use of a post office box address as the
tion when the current contract term expires in 2005.    official location of a school or a third-party servicer
                                                        of a school. These measures were in addition to
3.34. Contributing to Improved Understanding            others taken by Education to strengthen controls
of Space Shuttle Safety: Days prior to the tragic       over the program’s administration.
loss of Shuttle Columbia and its crew on February
1, 2003, we identified management challenges fac-       3.37. Contract Fraud in delivery of VA Health
ing the National Aeronautics and Space Administra-      Benefits: On the basis of information received
tion (NASA) in our performance and accountability       through our FraudNET, we investigated alleged
series report. One of those challenges—Human            irregularities in administration of a contract between

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                129

the VA Medical Center and an optical services pro-       information, (2) the financial statement audits per-
vider in Louisville, Kentucky. Our investigation         formed by the agencies’ IGs, and (3) addressing
identified improper billing practices for open mar-      one of the major impediments to an opinion on the
ket items by the contractor and poor oversight by        consolidated financial statements related to
the government of the $20 million in annual              accounting for billions of dollars of transactions
charges against the contract. This was a joint inves-    between federal government entities (intragovern-
tigation with VA’s IG, who will present the matter to    mental activities and balances). For example, to
the U.S. Attorney’s Office for prosecution.              address one of our suggestions, Treasury developed
                                                         a system to help agencies better perform reconcilia-
                                                         tions of intragovernmental activity and balances. In
The Government’s Fiscal                                  addition, OMB has established a set of standard
                                                         business rules for governmentwide transactions
Position and Approaches for                              among agencies and is now requiring quarterly rec-
Financing the Government                                 onciliations of intragovernmental activity and bal-
3.38. Strengthening Government Auditing
Standards: Our publication of the Government             3.40. Ensuring DOD Justifies Its Investment in
Auditing Standards in June 2003 provides a frame-        Accounting Systems: In a 2003 report, we deter-
work for audits of federal programs and monies.          mined that DOD had not effectively managed its
This comes at a time of urgent need for integrity in     planned investment of over $1 billion in four
the auditing profession and for transparency and         accounting system modernization efforts. Although
accountability in the management of scarce               the Secretary of Defense has identified the modern-
resources in the government sector. This fourth          ization of DOD’s financial management and busi-
major revision since the standards were first pub-       ness operations as one of the agency’s top 10
lished in 1972 will guide audits of financial and pro-   priorities, we found that long-standing problems
gram management not only in federal agencies, but        persist. During our review, DOD terminated one of
also more than 30,000 state and local governments        the four systems after spending over $126 million,
and nonprofit organizations that spent federal           citing poor program performance and increasing
funds. After an extensive process of consultation        costs. Cost reductions in the current fiscal year
with auditors and stakeholders, we have modern-          related to the canceled system totaled $40 million.
ized the 1994 edition and incorporated previous,         In concurring with our recommendations, DOD
significant amendments on auditor independence,          agreed to review the remaining three systems and
computer-based information systems, and auditor          to evaluate all accounting system investments to
communication. The new revision of the standards         ensure that they are being implemented at accept-
strengthens audit requirements for identifying fraud,    able cost and within reasonable time frames. DOD’s
illegal acts, and noncompliance; redefines the types     inability to efficiently and effectively implement sys-
of audits and services covered; provides consistency     tems is a longstanding congressional concern. In
of requirements across types of audits; and gives        deliberations on the fiscal year 2003 budget, the
clear guidance to auditors as they contribute to gov-    Congress expressed the need to control cost growth
ernment that is efficient, effective, and accountable    in DOD’s IT development efforts and reduced its
to the people.                                           appropriations by $400 million.

3.39. Auditing the U.S. Government’s Financial           3.41. Contributing to Congressional Oversight
Statements: As in the 5 previous fiscal years, we        of IRS: In the Internal Revenue Service Reform
have been unable to express an opinion on the U.S.       and Restructuring Act, the Congress set an ambi-
government’s consolidated financial statements for       tious agenda to transform IRS and oversee this
fiscal 2002 because of ongoing material weaknesses       transformation. We supported the Congress’s
in internal control and accounting and reporting         increased oversight of IRS to help ensure that IRS
issues. However, our efforts are paying dividends in     provides quality service to taxpayers while continu-
the form of significant improvements in (1) financial    ing to enforce the tax laws. In our fiscal 2003 testi-
reporting to facilitate the public’s understanding of    monies, we concluded that consistent, sustained
the financial statements and accompanying financial      focus on management fundamentals is beginning to

130                                                          GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                 PART IV

achieve results as evidenced by IRS’s increased        ties obligate the government to or create an expec-
capabilities to manage and its improved service to     tation for future spending. We developed the
taxpayers.                                             concept of “fiscal exposures” to describe these
                                                       activities and have called for new metrics and
3.42. Raising the Visibility of Long-Term              mechanisms to help consider their long-term impli-
Commitments in the Federal Budget: The                 cations. Through our outreach and reporting, we
United States faces large and growing long-term fis-   have helped draw attention to the federal govern-
cal challenges. For a number of years, we have         ment’s multitrillion-dollar fiscal exposures and
used our long-term budget simulations to call atten-   increase congressional and public awareness of the
tion to the need for structural change in the Social   potential long-term fiscal consequences of the
Security and Medicare programs. But, these are not     nation’s policy choices.
the only areas in which federal programs or activi-

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                          131

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’
4.1. Increasing Outreach and Service to GAO’s
Congressional Clients: To enhance understand-
ing of our congressional clients’ needs, teams met
with key committee leaders and staff directors to
develop a comprehensive governmentwide audit,         4.3. Automating a Weapons Systems Review
evaluation, and investigation agenda. We also         Process: We developed and released a system to
expanded our Web-based client feedback survey to      automate an existing data collection and analysis
include all committees of the House and Senate.       process, greatly expanding our annual capacity to
The feedback, which has been overwhelmingly           review DOD weapons systems programs. As a
positive thus far, is used to analyze how well our    result, we were able to increase staff productivity
published products meet our clients’ needs and        and efficiency and enhance the information and
identify opportunities for improvements. To clarify   services provided to the Congress. We expect the
how we accept work from congressional leaders         number of weapons systems reviewed to increase
and committees, we have drafted revisions to our      to 80 per year (from a baseline of 8 systems
congressional protocols, which provide guidance       reviewed per year), making multiyear reporting on
on interacting with the Congress, and are in the      individual systems readily available for the first
process of briefing bipartisan, bicameral congres-    time.
sional leadership and committees on those proto-
cols. We plan to implement these revisions in early   4.4. Developing Agency and International
calendar year 2004.                                   Protocols: In pursuit of our goal to provide
                                                      clearly defined, consistently applied, well-docu-
4.2. Providing Emergency Relocation                   mented, and transparent policies for our work with
Support: We have worked to identify and imple-        federal agencies, we drafted agency protocols and
ment relocation support provisions for the House in   piloted them in fiscal 2003. We expect to finalize
case of future emergencies that would require an      the agency protocols after revisions to the congres-
evacuation of House facilities. In fiscal 2003, we    sional protocols are completed in early calendar
completed preparations of the GAO building as a       year 2004. The draft of our international protocols
backup site for the House and updated our network     was provided to the cognizant agencies and organi-
and telephone systems to provide the House with       zations for review and comment in fiscal 2003. We
emergency access to their own systems within 48       expect to finalize the international protocols in
hours.                                                2004.

                                                      4.5. Making GAO’s Work Accessible to the
                                                      American People: We continued our policy of
                                                      proactive outreach to our congressional clients, the
                                                      press, and the public to enhance the visibility of our

132                                                       GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                       PART IV

products. On a daily basis we compile and publish          plans for achieving our fiscal 2003 performance
a list of our current reports, “Today’s Reports,” on       goals and includes our fiscal 2002 financial state-
our external Web site. This feature has more than          ments and the unqualified audit opinion rendered
18,000 subscribers, up 3,000 from this time last year.     by an independent auditor. This report earned a
We also produced an update of our video on GAO,            Certificate of Excellence in Accountability Reporting
“Impact 2003.” Our external Web site continues to          from the Association of Government Accountants.
grow in popularity, having increased the number of         To provide a more balanced performance measure-
hits in fiscal 2003 to an average 3.4 million per          ment system in the future, we completed in fiscal
month, 1 million more per month than in fiscal             2003 an effort to produce baseline information for
2002. In addition, visitors to the site are download-      measures related to our relationship with our pri-
ing an average of 1.1 million files per month. We          mary client—the Congress—and our most impor-
completed an assessment of our external Web site’s         tant asset—our people. To inform our strategic and
usability in fiscal 2003. On the basis of the results of   annual performance planning efforts, we gather
this assessment and a Web site customer satisfaction       information and perspectives through several vehi-
survey developed by the American Customer Satis-           cles to enhance our understanding of emerging
faction Index, we are redesigning our Web site to          issues that might influence future work. For exam-
increase access and enhance the usability of the           ple, we held forums on corporate governance, key
information. Finally, to inform news editors and           national indicators, and national and regional inter-
editorial page writers of our value as a news source,      governmental audit issues; established a new
we continued our outreach to the Washington and            speakers’ series called “Conversations on 21st Cen-
national press corps, arranging more than two              tury Challenges;” held our annual meeting of the
dozen editorial board meetings featuring the Comp-         Comptroller General’s Advisory Board; and worked
troller General with major newspapers, magazines,          with a number of issue-specific and technical pan-
and news services in the United States.                    els to improve our strategic and work planning.

                                                           4.8. Improving Our Planning Process: In fis-
Enhance Leadership and                                     cal 2003, we continued to better align our strategic
                                                           plan, performance and accountability efforts, and
Promote Management                                         the budget process. A task force was formed to
Excellence                                                 implement an accelerated schedule for the perfor-
                                                           mance and accountability report to enable us to
4.6. Recognizing Resourceful Management:                   meet the accelerated deadline in fiscal 2003, a year
We were named a “CIO (Chief Information Officer)           earlier than the date that OMB has set for executive
100” by CIO Magazine, recognizing excellence in            branch agencies. The task force implemented a
managing our IT resource through “creativity com-          detailed timeline, modified internal processes, and
bined with a commitment to wring the most value            coordinated with our outside auditor. During fiscal
from every IT dollar.” We were one of 3 federal            2003, we fully implemented our workforce plan-
agencies named, selected from over 400 applicants,         ning process, addressing size, deployment, and pro-
largely representing private sector firms. In particu-     file of our staff to ensure we have the appropriate
lar, we were cited for excellence in asset manage-         resources strategically placed to pursue our goals
ment, staffing and sourcing, and building                  and objectives now and in the future. The strategic
partnerships, and for implementing a “best prac-           plan and workforce planning results serve as the
tice”—staffing new projects through internal “help         foundation for our fiscal 2004 operating plan and
wanted” ads.                                               fiscal 2005 budget request.

4.7. Improving Strategic Management: A num-                4.9. Maintaining Integrity in Financial
ber of efforts completed in fiscal 2003 contributed        Management: As part of our effort to be a model
to improving our strategic management efforts. In          agency, in fiscal 2003 we retained the independent
January 2003, we issued our fiscal 2002 perfor-            audit firm, Cotton & Co., LLP, to audit our financial
mance and accountability report, which combines            statements. The auditors issued an unqualified
information on our past year’s accomplishments             opinion. We also conducted internal reviews of our
and progress in meeting our strategic goals with our       compliance with requirements set forth in the

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                133

Financial Integrity Act and OMB Circular A-127,          and conducted interviews and in our recruiting
Federal Managers’ Financial Management Systems.          materials, and we worked with internal employee
We reviewed aspects of our Financial Management          groups representing different minorities to benefit
System, including security controls, and assessed its    from their knowledge and experience. We also
consistency with the Standard General Ledger. No         institutionalized an annual recruiter training pro-
material weaknesses were identified as a result of       gram designed to provide our recruiters with the
these reviews which support management’s asser-          knowledge and information needed to recruit and
tion that our internal controls are proper and func-     attain a high-quality workforce. To determine
tioning well. In conformance with the e-                 whether our recruitment efforts are effective, we
government initiative, we are bringing electronic        collected and analyzed data that we reported to our
travel to GAO, beginning with the completion of          Office of Opportunity and Inclusiveness and other
the fiscal 2003 agencywide rollout of Travel Man-        managers. The Comptroller General’s Educators’
ager. Travel Manager allows our travelers to create      Advisory Panel met in June 2003 to provide advice
and submit travel authorizations and vouchers elec-      on recruiting, retaining, and developing staff as well
tronically for approval and reimbursement, stream-       as on strategic planning matters. Continuing our
lining the administrative travel processes.              efforts to promote the retention of staff with critical
                                                         skills, we offered student loan repayments of
4.10. Continuing to Provide Leadership in                between $4,000 and $6,000—which are made
Strategic Human Capital Management                       directly to lending institutions—to 247 employees
Planning and Execution: The Human Capital                with 1 to 3 years of GAO experience in exchange
Office (HCO) drafted our first comprehensive stra-       for their signed agreement to continue working at
tegic plan for human capital, working with repre-        GAO for at least 3 years.
sentatives from the Strategic Issues team. The
purpose of the plan is to communicate both inter-        4.12. Acquiring and Applying Information
nally and externally our strategy for enhancing our      Technology to Support GAO’s Strategic
standing as a model professional services organiza-      Objectives and Business Plans: We have
tion, including how we plan to attract, retain, moti-    expanded and enhanced the IT Enterprise Architec-
vate, and reward a high-performing and top-quality       ture program we began in fiscal 2002. Specifically,
workforce. We expect to publish the plan in early        we formally established an Enterprise Architecture
fiscal 2004 and make it available on our Web site.       oversight group and steering committee to prioritize
The Human Capital Office established the HCO             our IT business needs, provide strategic direction,
Partnership Board to gather opinions of a cross sec-     and ensure linkage between our IT Enterprise
tion of our employees about upcoming HCO initia-         Architecture and our capital investment process. In
tives and ongoing programs. The 15-member Board          addition, we have adopted an Enterprise Architec-
will assist HCO in hearing and understanding per-        ture Shared Business Model to ensure that the
spectives of customers.                                  agency’s business needs are driving our IT plan and
                                                         to identify IT gaps. We implemented a number of
4.11. Aligning GAO’s Workforce and Mission               user friendly, Web-based systems to improve our
Needs: In fiscal 2003, we expanded the scope of          ability to obtain feedback from our congressional
our college recruiting and hiring program to focus       clients, facilitate access to our information for the
on gaps identified during our workforce planning         external customer, and enhance productivity for the
effort. The HCO worked with teams to help identify       internal customer. Among the new and enhanced
and reach prospective graduates with the required        Web-based systems were (1) an application to track
skill sets and focused the intern program on attract-    and access General Counsel work by goal, team,
ing student interns with the skill sets needed for our   and attorney; provide links to information in the
analyst positions. We continued to emphasize the         Engagement Reporting System; enhance system
need for diversity in college recruiting, expanding      security and functionality; provide a wide variety of
our list of target universities to include a number of   summary and detailed reports; and significantly
campuses that matriculate a diverse student body,        improve the staffs’ ability to search and share infor-
and establishing on-going college relations activities   mation; (2) a Regional Environmental Scan Web site
with these schools. We ensured that our diversity        to provide context for our teams and offices as they
was reflected in the recruiters who visited campuses     consult with the Congress, update our strategic

134                                                          GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                       PART IV

plan, track issues, and identify emerging trends; (3)      employees entering the building. To ensure our
an automated tracking application for our staff to         continuity of operations should we have to vacate
monitor the status of products to be published; and        our headquarters due to an emergency, we made
(4) a system to generate records of meetings               arrangements for an alternate facility to house a
between teams and Members of the Congress or               core capability. Finally, we completed a study of
their staffs, allow for virtual storage and for staff to   personal protective equipment and, on the basis of
search these contact records and perform various           the resulting decision paper, have purchased escape
content analyses to help better support our clients.       hoods, bottled water, and glow sticks for our staff.

4.13. Increasing Information Security: We rec-
ognize the ongoing, ever present threat to our             Leverage GAO’s Institutional
shared IT systems and information assets and con-
tinue to promote awareness of this threat, maintain
                                                           Knowledge and Experience
vigilance, and develop practices that protect infor-
                                                           4.15. Increasing Capacity through
mation assets, systems, and services. As part of our
                                                           Knowledge-Sharing and Collaboration: By
continuing emergency preparedness plan, we
                                                           collaborating with numerous organizations and
upgraded the level of telecommunications services
                                                           individuals, we have strengthened professional
between our Disaster Recovery Site and headquar-
                                                           standards, provided technical assistance, leveraged
ters, expanding our remote connectivity capability
                                                           resources, and developed best practices. In fiscal
and improving response time and transmission
                                                           2003, we conducted our international fellows train-
speed. To further protect our data and resources,
                                                           ing program to build audit capacity in national audit
we drafted an update to our Information Systems
                                                           offices around the world. We also collaborated with
Security Policy, issued network user policy state-
                                                           the Joint Financial Management Improvement Pro-
ments, hardened our internal network security,
                                                           gram, the Federal Accounting Standards Advisory
expanded our intrusion detection capability, and
                                                           Board, and the President’s Council on Integrity and
addressed concerns raised during the most recent
                                                           Efficiency to foster reforms in federal financial man-
network vulnerability assessment. Further, we
                                                           agement and establish or strengthen audit and
deployed computer software to senior managers
                                                           accounting standards and principles. We also col-
that provides authoritative and timely assurance that
                                                           laborated with the Private Sector Council to exam-
critical email has been received intact – without
                                                           ine private sector companies’ best practices in
changes or modifications.
                                                           preparing for disastrous events, while maintaining
                                                           operations; the office of the State Auditor of Louisi-
4.14. Providing a Safe and Secure
                                                           ana to develop a guide for evaluating the nation’s
Workplace: On the basis of recommendations
                                                           transportation security efforts; auditors from 11
resulting from our physical security evaluation and
                                                           states to develop a report containing recommenda-
threat assessment, we continue to implement initia-
                                                           tions for improving the security of the food system;
tives in fiscal 2003 to improve the security and
                                                           and VA’s IG to conduct a joint investigation of bill-
safety of our building and personnel. In terms of
                                                           ing practices and oversight efforts. To leverage our
physical plant improvements, we upgraded the
                                                           internal knowledge resources, we more fully inte-
headquarters fire alarm system and installed a paral-
                                                           grated our internal technical specialists’ knowledge
lel emergency notification system. We are making
                                                           into engagements. Our specialists contributed to
great progress in enhancing our communication
                                                           more than 60 percent of our published products
with staff, completing the Shelter in Place plan and
                                                           and were named as key contributors in over 40 per-
the Emergency Response Handbook for headquar-
                                                           cent of these products.
ters occupants, providing Emergency Preparedness
briefings for staff, and conducting the third annual
                                                           4.16. Enhancing Information Sharing: We
Security Fair to disseminate information on security
                                                           greatly expanded our Web site capability to
at the workplace and at home. To further increase
                                                           enhance knowledge-sharing, search capability, and
the security of the headquarters building, we have
                                                           usability for our customers. We enhanced our exter-
obtained access to the National Crime Information
                                                           nal Web site in fiscal 2003, organizing our products
Center Database to conduct minimal investigations
                                                           by agency to provide fast, user friendly, and flexible
on visitors, vendors, couriers, and non-GAO

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                 135

search defaults and options such as the capability to    ness, an automated database payment system, and
search on subcollections. To reduce the response         an automated Web-based recruitment and applica-
time for client information needs and promote inter-     tion process. We also implemented WebTA, an off-
agency knowledge-sharing, we deployed several            the-shelf Web-based system designed to maintain
Web sites, including those for National Performance      effective internal controls over employees’ time and
Indicators, the Performance and Accountability           attendance reporting and eliminate the current
Series, and USAuditNet. We also deployed new and         error-prone, redundant data entry process. A team
enhanced internal Web sites, such as those for           consisting of employees from a number of organi-
Knowledge Services, General Counsel, the Applied         zational units collaborated in developing a com-
Research and Methods team, the Office of Opportu-        puter program to create summary information in
nity and Inclusiveness, and the Personnel Appeals        tables (known as an “e-supplement”) for Web sur-
Board, for staff to share and disseminate informa-       veys. From May to September 2003, we deployed
tion in a more timely manner. To increase user           approximately 10 such Web surveys using this pro-
friendliness and improve search efficiency, we cre-      gram in support of our engagements, resulting in
ated the GAO Publications Search Engine, used by         substantial savings in staff days. Finally, the Gartner
our staff to search for our reports, testimony, deci-    Group completed its assessment of our asset man-
sions, and other products. We completed a study of       agement practices, reported on asset management
portal technology as an avenue to deliver informa-       best practices, and provided recommendations to
tion to analysts and specialists and, on the basis of    improve the process and guidance in developing
the study’s findings, adopted the concept of “tar-       requirements for a new automated inventory sys-
geted portals” to collect, use, distribute, and retain   tem.
organizational knowledge. In addition, we have
established communities of practice, including a         4.19. Realizing Efficiencies and Savings: We
Web Technology Advisory Group and “results               continued our outstanding on-time delivery perfor-
areas” in contracting, industrial base, NASA, and        mance during the fourth quarter of fiscal 2003,
systems acquisition. Finally, to increase staff aware-   delivering 100 percent of the orders from the Con-
ness and use of Web-based services, we developed         gress and the press and 99 percent of the orders
and offered courses on Basic Internet Explorer and       from our staff within 8 hrs and delivering nearly 100
Evaluating Information on the Internet.                  percent of the orders from the public within 3 days.
                                                         Also, we selected an aggregate electrical contract to
                                                         provide electrical power for the GAO building—a
Continuously Improve GAO’s                               move that we estimate will reduce our costs by over
                                                         $11,000 each quarter.
Business and Management
                                                         Become the Professional
4.17. Measuring the Value of Our Applications
Development Process: An independent review               Services Employer of Choice
determined that we are delivering superb and cost-
efficient IT application support and development         4.20. Maintaining a Fair, Unbiased, Family
services to its business units. Compared with our        Friendly Environment: We drafted updates to
peers, we scored “above average” in productivity,        our orders to formalize agency policy on family
effectiveness, technology and organizational man-        friendly leave policies and procedures relating to
agement, process maturity, and user satisfaction,        the Family and Medical Leave Act and on alterna-
and “better than average” in cost-efficiency.            tive workplace arrangements.

4.18. Improving GAO’s Products and Business              4.21. Leading the Way in Performance
Processes: To provide more efficient and effec-          Management: In fiscal 2003, we evaluated the
tive means for staff to do their work, we automated      compensation and performance management sys-
a number of processes in fiscal 2003 such as imple-      tem for analysts that was rolled out in fiscal 2002.
menting a new complaint tracking and reporting           As a result, we identified and implemented several
system for our Office of Opportunity and Inclusive-      improvements, including conducting mandatory tar-

136                                                          GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                       PART IV

geted training for over 1900 staff and managers on       development of managerial, leadership, and execu-
how to better understand and apply the perfor-           tive skills, human capital training, and personal
mance standards, adjusting pay categories and per-       growth. In order to better align learning with the
centage guidelines, reviewing the timing of              strategic goal for workforce development, we com-
notifying staff of pay panel results, and using          pleted several key steps to improve the structure of
achievements to break panel ties. In addition, ses-      our learning organization. In May 2003, we created
sions on documenting achievements and how to             the position of Chief Learning Officer and
apply for promotions were available through our          appointed an experienced training executive to that
video broadcasts that are accessible through each        position. In July 2003, we established the GAO
employee’s desktop computer. We also imple-              Learning Board to guide our learning policy, to set
mented the competency-based performance system           specific learning priorities, and to oversee the
for attorneys. To keep our staff apprised of the lat-    implementation of a new training and development
est developments in compensation and perfor-             curriculum. The board held its first meeting in
mance management, we redesigned the                      August 2003 and meets monthly to set policy, iden-
Performance Management Systems Web site,                 tify priorities, and integrate curricula into broader
streamlining existing information and adding infor-      organizational efforts.
mation about the proposals for the Administrative,
Professional, and Support Staff (APSS) system. To        4.23. Modernizing the GAO Headquarters
prepare for the APSS banding and pay for perfor-         Building: As our workforce composition and orga-
mance system, scheduled for implementation in fis-       nization evolves over time, the space we occupy
cal 2004, we completed 338 position reviews of our       must evolve as well. We completed several projects
APSS employees. We also identified eight job fami-       that increased the efficient and effective utilization
lies and competency models in support of the new         of available space in the GAO building. We con-
competency-based performance system for APSS             verted space on the first and second floors to con-
staff. In addition, we analyzed our Office of Special    solidate staff and make use of formerly unused or
Investigations investigator positions and identified a   little used space. We also began similar projects on
strategy to begin an appraisal and pay for perfor-       the fourth and fifth floors. The sixth floor modern-
mance system for those positions.                        ization project was completed, including construc-
                                                         tion of a new electronic security laboratory.
4.22. Training Staff to Meet the New
Competencies: The outline for a new compe-               4.24. IT Hardware and Software
tency-based and role- and task-driven learning and       Enhancements: We are continually enhancing our
development curriculum was completed and                 IT hardware, software, and tools to help attract and
approved by our Executive Committee. The curricu-        retain staff and enable staff to do their jobs. For
lum structure identifies needed core and elective        example, in fiscal 2003, we completed the distribu-
courses and other learning resources and provides        tion of flat panel monitors to all staff to improve vis-
course descriptions with specific learning objec-        ibility for users and decrease desktop space
tives. To address the need for managerial and lead-      required; provided an international wireless tele-
ership training, we funded 66 external training          phone pool to allow our out of country travelers a
opportunities. Requests were approved on the basis       means of communication; and deployed a Web-
of how well the opportunities served the organiza-       based video conferencing reservation system to
tion as a whole, enhanced current skills of staff to     allow headquarters and field staff to schedule a vid-
prepare for future leadership roles, and reflected       eoconference within or outside of the GAO build-
agency diversity. Appropriate opportunities include      ing.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                 137

2. From the Inspector General

                                                                                                        PART IV

3. GAO’s Report on Personnel
   Flexibilities (Pub. L. No. 106-303)

As required by Section 6a of Public Law 106-303,         Use of our early out authority supports our efforts
the GAO Personnel Flexibilities Act of 2000, we are      to address workforce imbalances. Vacancies created
providing a review of the actions taken by the           by voluntary early retirees have enabled us to target
agency in fiscal 2003 pursuant to Sections 1 through     resources to reducing skill gaps and addressing suc-
3 of the Act.                                            cession concerns, including the hiring of additional
                                                         entry-level staff. This has contributed to reshaping
                                                         our human capital profile and acquiring critical
Section 1. Voluntary Early                               skills needed to carry out our mission now and in
                                                         the future.
The Comptroller General is authorized by the act to
offer voluntary early retirement opportunities to        Section 2. Voluntary
agency employees when such action would serve            Separation Incentive Payments
to realign our workforce to meet budgetary con-
straints or mission needs, correct skill imbalances,     In addition to authorizing voluntary early retirement
or reduce high-graded positions.                         for our employees, Public Law 106-303 permits the
                                                         Comptroller General to offer voluntary separation
In fiscal 2003, we offered two voluntary early retire-   incentive payments – buyouts – to realign the work-
ment opportunities. The first opportunity was open       force to meet budgetary constraints or mission
for applications from November 4, 2002, to Decem-        needs; correct skill imbalances; or reduce high-
ber 20, 2002. Approved applicants were required to       graded positions. Under the act, up to 5 percent of
retire between February 1, 2003, and March 14,           the agency’s employees could be offered such an
2003. Of the 39 individuals who applied, 37 were         incentive in any given year.
approved and 2 were disapproved. In total, 25
employees separated as 12 approved applicants            Given the many demands on limited agency
withdrew their requests after approval. An addi-         resources, the high costs associated with offering
tional voluntary early retirement opportunity was        buyouts present a strong financial disincentive to
opened on June 26, 2003, with applications being         the use of this provision. Therefore, we anticipate
accepted until August 12, 2003. Approved appli-          little, if any, exercise of this authority. For this rea-
cants were required to retire between September 1,       son, as well as to avoid creating unrealistic
2003, and October 31, 2003. Of the 16 applications       employee expectations, we have not developed or
that were received, 15 were approved, 1 was disap-       issued agency regulations to implement this section
proved, and 4 were later withdrawn after approval.       of the act.
As of September 30, 2003, 2 applicants had sepa-
                                                         Section 3. Reduction in Force
In summary, a total of 28 employees, including one
special approval that was not part of either of the      Section 3 authorizes the issuance of revised regula-
cycles, took voluntary early retirement from the         tions regarding the separation of employees during
agency in fiscal 2003. Since we first received this      a reduction or other adjustment in force. The
authority in October 2000, a total of 82 employees       Comptroller General may conduct a reduction or
have retired, 82 percent of who were high-graded,        adjustment in force because of budgetary con-
supervisory, or managerial employees.                    straints or when needed to realign our workforce;
                                                         to correct skill imbalances; or to reduce high-grade,

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                  139

supervisory, or managerial positions. Retention dur-      resources for alternate uses, enabling us to open
ing a reduction or other adjustment in force in GAO       and fill new entry-level positions, as well as posi-
will be based on the following factors in descend-        tions that have reduced skill gaps or addressed
ing order of priority: tenure, veterans’ and military     other succession concerns. For this reason, the
preference, performance, length of service, and           agency is currently seeking legislation as a subsec-
other objective factors, such as skill and knowledge.     tion of the “GAO Human Capital Reform Act of
                                                          2003” to make this voluntary early retirement provi-
We developed draft regulations to implement this          sion a permanent authority.
provision that were made available to all employees
for comment on September 26, 2002. The com-               The Comptroller General is also seeking legislation
ments received were reviewed, analyzed for appli-         to make Section 2 of Public Law 106-303— authori-
cability, and incorporated where appropriate. Final       zation for the payment of voluntary separation
regulations, Workforce Restructuring Procedures for       incentives—a permanent flexibility. Although we
the General Accounting Office, Order 2351.1, were         have not yet utilized this buyout authority and have
issued on January 21, 2003.                               no immediate plans to do so, the agency is seeking
                                                          to retain this flexibility. The continuation of this
We are required to report any reduction or adjust-        provision is prudent as it maximizes the options
ment in force action and to assess the resulting          available to the agency to deal with unanticipated
impact of such actions on employees eligible for          future workforce planning challenges.
veterans’ preference. We did not conduct any
reduction or adjustment in force in fiscal 2003. Con-     Beyond the institutionalization of these two authori-
sequently, there was no impact on the agency’s vet-       ties, the GAO Human Capital Reform Act of 2003
erans.                                                    requests additional human capital flexibilities in
                                                          order to support the agency’s strategic plan, while
                                                          maintaining the resources necessary to deliver qual-
Overall Assessment                                        ity service to the Congress; continue leading by
                                                          example in both government transformation and
In addition to describing the specific actions taken      human capital reform; and attract, retain, motivate,
during the fiscal year under Sections 1 through 3 of      and reward a quality and high-performing work-
Public Law 106-303, Section 6a requires us to annu-       force. The provisions of such legislation will allow
ally assess the effectiveness and usefulness of the       the agency to continue to invest in both people and
authorized personnel flexibilities in contributing to     institutional capacity, as well as modernize and
the agency’s ability to carry out its mission, meet its   update human capital policies and systems to
performance goals, and fulfill its strategic plan and     respond to the changing environment and chal-
to recommend any legislation which the Comptrol-          lenges that lie ahead.
ler General considers appropriate. Overall, we have
used these authorities responsibly and found them         Specifically, we are requesting that the Congress (1)
to be effective in achieving their stated goals. In our   make permanent our 3-year authority to offer early
3-year assessment of the act’s effectiveness required     outs and buyouts, (2) allow us to set our own
by Section 6b: Assessment of Public Law 106-303—          annual pay adjustment system separate from the
The Role of Personnel Flexibilities in Strengthening      executive branch, (3) permit us to retain the basic
GAO’s Human Capital (GAO-03-954SP), June                  pay of an employee demoted as a result of work-
2003—we described our use of the flexibilities, their     force restructuring or reclassification but to set
effectiveness, and our recommendation to make             future increases consistent with the new position’s
them permanent.                                           pay parameters, (4) provide authority to reimburse
                                                          employees for some relocation expenses when that
While the overall number of employees electing            transfer benefits GAO but does not meet the legal
voluntary early retirement has been relatively small      requirements for the reimbursement, (5) provide
in comparison to the agency’s overall size, we            authority to place upper-level hires with fewer than
believe that careful use of this authority has been an    3 years of federal service in the 6-hour leave cate-
important tool in incrementally improving its overall     gory, (6) authorize an executive exchange program
human capital profile. Each separation has freed          with the private sector, and (7) change GAO’s legal

140                                                           GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                              PART IV

name from the General Accounting Office to the       ing and updating our human capital policies and
Government Accountability Office. It is vitally      system in light of the changing environment and
important to our future that we continue moderniz-   anticipated challenges ahead.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                         141

4. GAO’s Federal Information Security
   Management Act Efforts

We are implementing an information security pro-         ■   develop and implement an enterprise disaster
gram, consistent with requirements delineated in             recovery solution.
the Federal Information Security Management Act
                                                         We continue to provide funding for IT security initi-
(FISMA) provisions enacted under the E Govern-
                                                         atives and training to upgrade the skills of our IT
ment Act of 2002, Public Law 107-347. While we are
                                                         security staff and augment our security staff through
not obligated by law to comply with FISMA, we are
                                                         contractor support, as necessary.
adopting the requirements to help ensure that we
establish an effective information security program
                                                         Reviews and evaluations of our IT security program
and to fulfill our goal of being a model federal
                                                         have also identified areas where improvements
                                                         could be made. We are currently taking corrective
                                                         action in these areas and have undertaken several
To assess the status of our information security pro-
                                                         projects that will significantly improve our informa-
gram, we considered the results of internal reviews
                                                         tion security program during fiscal 2004. Among
by program offices and security staff, independent
                                                         these projects are the following:
evaluations of our major financial applications by a
public accounting firm, and testing of IT controls
                                                         ■   Intrusion detection—Having completed the
for our general support system by our IT auditors,
                                                             process of applying host-based intrusion
who are independent of our IT support function.
                                                             detection software to our external servers, we
These reviews and evaluations identified no mate-
                                                             have begun to apply this software to our internal
rial weaknesses in our financial applications or gen-
                                                             servers and plan to expand this effort during
eral support system. They also showed that we are
                                                             fiscal 2004 to add complementary tools. These
making substantial progress in implementing infor-
                                                             tools will facilitate the early detection of and
mation security requirements consistent with FISMA
                                                             response to any suspicious activity and identify
through its efforts to:
                                                             trends that can help us to enhance our security
                                                             architecture. We have installed network intrusion
■   implement an agencywide information security
                                                             detection systems throughout our network.
    program that will impact over 3,600 users;
                                                         ■   Strong user authentication—We have
■   develop and implement a risk-based approach
                                                             delivered a strong (two-factor) authentication
    for all investment plans;
                                                             system to all staff. The system requires staff
■   develop essential policies and reporting                 accessing our general support system to combine
    mechanisms to ensure that our program                    a personal identification number they select with
    managers, the Chief Information Officer, and the         a six-digit pass code generated randomly every
    Comptroller General implement and maintain               60 seconds by each person’s unique
    security requirements;                                   authentication device. This process provides a
                                                             high degree of certainty that each user accessing
■   provide security training and awareness;
                                                             our general support system is legitimate. We have
■   enhance the agency’s capability to respond to            completed the implementation plan for securing
    computer security incidents;                             internal wireless links and Virtual Private
■   identify our critical assets within our enterprise       Networks with two-factor authentication. During
    architecture;                                            fiscal 2004, we expect to extend the
                                                             authentication system to all of our remote access
■   ensure the security of services provided by a            options. We have implemented a password
    contractor or another agency; and                        management device to securely store and

142                                                           GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                                       PART IV

    transmit users’ credentials on mission-critical       ■   Vulnerability assessment—We have instituted
    systems and applications under the control of our         a process consistent with the requirements cited
    administrative staff.                                     in the FISMA to scan the General Support System
                                                              for vulnerabilities and potential exploits. We
■   IT disaster recovery—We are refining the
                                                              utilized the patch authentication and distribution
    disaster recovery plan we developed last year
                                                              process through the Federal Computer Incident
    and have conducted limited testing exercises to
                                                              Response Center to maintain up-to-date patches
    ensure the viability of the plan. We have worked
                                                              to stabilize our network.
    directly with the vendor of our disaster recovery
    site to strategically position critical backup        ■   Security test and evaluation—We plan to
    computing assets and established essential                acquire contract support in conducting
    telecommunications links for our client-server-           independent security test and evaluations of all
    based systems. We are implementing a new                  major applications and the general support
    network storage technology that we expect to              system during the next fiscal budget. The test and
    integrate into our disaster recovery infrastructure       evaluation is a critical component of the
    during fiscal 2004. In addition, we are exploring         certification and accreditation process that will
    the feasibility of implementing secure Web-based          require us to perform periodic testing and
    technology for user access via the network.               evaluation of the effectiveness of information
                                                              security policies, procedures, and material
                                                              weaknesses, including testing operational and
                                                              technical controls.

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                                143

5. Acronyms

AGA        Association of Government Accountants       FEDCIR Federal Computer Incident Response
AICPA      American Institute of Certified Public
           Accountants                                 FEHBP      Federal Employees Health Benefit
AIDS       Acquired Immune Deficiency Syndrome
                                                       FEGLIP     Federal Employees Group Life Insurance
ARM        Applied Research and Methods                           Program
APSS       Administrative, Professional, and Support   FEMA       Federal Emergency Management Agency
                                                       FHA        Federal Housing Administration
CASO       Controller/Administrative Services Office
                                                       FISMA      Federal Information Security Management
CDC        Centers for Disease Control and                        Act
                                                       FMA        Financial Management and Assurance
CFO        Chief Financial Officer
                                                       FMCI       Financial Markets and Community
CIO        Chief Information Officer                              Investment
CJCC       Criminal Justice Coordinating Council       FTE        Full-Time Equivalent
CMS        Centers for Medicare & Medicaid Services    GAAP       Generally Accepted Accounting Principles
CPI        Consumer Price Index                        GAO        General Accounting Office
DCM        Defense Capabilities and Management         GSA        General Service Administration
DHS        Department of Homeland Security             HCO        Human Capital Office
DOD        Department of Defense                       HC         Health Care
DOE        Department of Energy                        HSJ        Homeland Security and Justice
DOJ        Department of Justice                       HUD        Department of Housing and Urban
DOT        Department of Transportation                           Development

EAC        Employee Advisory Council                   IAT        International Affairs and Trade

EPA        Environmental Protection Agency             IG         Office of Inspector General

EWIS       Education, Workforce, and Income            IIA        Institute of Internal Auditors
           Security                                    INTOSAI International Organization of Supreme
FAA        Federal Aviation Administration                     Audit Institutions

FASAB      Federal Accounting Standards Advisory       ISTS       Information Systems and Technology
           Board                                                  Services

FBI        Federal Bureau of Investigation             IT         information technology

FCS        Future Combat System (Army)                 ITIM       IT Investment Management

FDA        Food and Drug Administration                IRS        Internal Revenue Service

144                                                          GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003
                                                                                               PART IV

KS       Knowledge Services                         SBA      Small Business Administration
NASA     National Aeronautics and Space             SEC      Securities and Exchange Commission
                                                    SGA      substantial gainful activity
NNSA     National Nuclear Security Administration
                                                    SI       Strategic Issues
NRE      Natural Resources and Environment
                                                    SSA      Social Security Administration
OMB      Office of Management and Budget
                                                    SSI      Supplemental Security Income
OPM      Office of Personnel Management
                                                    UNESCO United Nations Educational, Scientific,
PBGC     Pension Benefit Guaranty Corporation              and Cultural Organization
PCIE     President’s Council on Integrity and       USAID    United States Agency for International
         Efficiency                                          Development
PDP      Professional Development                   USDA     United States Department of Agriculture
PI       Physical Infrastructure                    VA       Department of Veterans’ Affairs
QCI      Quality and Continuous Improvement         WIA      Workforce Investment Act
SARS     Severe Acute Respiratory Syndrome

GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                         145
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              ACCOUNTABILITY                             INTEGRITY                            RELIABILITY

   GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003                                                             149
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                          A          GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003