GAO: SERVING THE CONGRESS AND THE NATION Performance and Accountability REPORT Fiscal 2003 UNITED STATES GENERAL ACCOUNTING OFFICE A 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 ord nu itIct 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 dollars. 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 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 v GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 vi 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 infrastructures. 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. viii GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 Contents 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 Seattle 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 Norfolk 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 offices. 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 offices. 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 1 G EWIS al oa Go FMCI l2 Goal Goal ASM PDP CASO HC 1 2 DCM HSJ IAT NRE KS HCO PI Goal ISTS 3 ARM FMA IT SI 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 MISSION GAO exists to support the Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the benefit of the American people. THEMES GOALS & OBJECTIVES Provide Timely, Quality Service to the Congress and the Security Federal Government to . . . and Preparedness Address Current and Emerging Challenges to the Well-Being and Financial Security of the American People related to . . . Health care needs and financing Effective system of justice Globalization Education and protection of children Viable communities Work opportunities and worker Natural resources use and protection environmental protection Retirement income security Physical infrastructure Changing Economy Respond to Changing Security Threats and the Challenges of Global Interdependence involving . . . Demographics Diffuse security threats Advancement of U.S. interests Military capabilities and readiness Global market forces Science Help Transform the Federal Government Government’ss Role and How It and Does Business to Meet 21st Century Challenges by assessing . . . Technology Roles in achieving federal Progress toward results-oriented, objectives accountable, and relevant government Human capital and other capacity for Fiscal position and financing of the Quality serving the public government of Life Maximize the Value of GAO by Being a Model Federal Agency and a World-Class Professional Services Organization in the areas of . . . Governance Client and customer service Process improvement Leadership and management focus Employer of choice Institutional knowledge and experience CORE VALUES Accountability Integrity Reliability Fiscal 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 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 5 6 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 www.gao.gov/sp.html. 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 8 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 Part I: Management’s Discussion and Analysis PART I 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 2003 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 PART I 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 35.4 ■ increase revenues from debt collection, asset 32.5 sales, changes in tax laws, or user fees. 30 26.4 23.2 In fiscal 2003, our work generated $35.4 billion in 20.1 20 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 (5.1%) 456 $13.9 billion 525 (43.7%) (39.3%) (50.3%) $19.7 billion (55.6%) 62 (6%) Categories 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 PART I 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 1,200 $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. 788 799 800 800 607 Other Benefits 600 Many of the benefits that flow to the American peo- 400 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- 0 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 2006. 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 PART I 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 80 implemented. At the end of fiscal 2003, 82 percent 70 of the recommendations we made in fiscal 1999 56% 60 had been implemented (see figure I.4), primarily by 50 44% executive branch agencies. It is putting those rec- 40% 40 ommendations into practice that will generate tangi- 30 ble benefits for the American people in the years 20 ahead. 10 0 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% 80 70% 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 2,500 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 500 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 300 This year, 55 percent of the 750 written products we 263 issued (excluding testimonies) included recommen- 250 229 216 dations. (See figure I.7.) This measure recognizes 189 200 180 that a report containing a single broad recommen- 151 dation may have more impact than a report contain- 150 ing a dozen specific ones. GAO also often provides 100 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 Percentage Timeliness While the vast majority of our products—97 per- 60 55% 53% cent—were completed on time for our congres- 50% 50 44% sional clients and customers in fiscal 2003, we 39% slightly missed our target of providing 98 percent of 40 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 20 because it is critical that our work be done on time 10 for it to be used by policymakers. Though our 97- 0 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 SELECTED ISSUES ON WHICH GAO TESTIFIED DURING FISCAL 2003 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 5% 80 60 40 Met 20 95% 0 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 PART I 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 strategy. 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; ple. 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 —Attrition 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 staff earned during a 2-year period Leading, recognizing, —Organizational climate —Employee responses to annual, confidential survey and listening to staff —Leadership 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 PART I 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 PART I 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 analysis. 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. 150 Figure I.11: Use of Funds by Category 100 Percentage of total net costs 50 Salaries and benefits 79.0% Building and 0 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 200 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. 50 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 PART I ■ 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. responsibilities. GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 27 PART I 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 systems. 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 PART I 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 ogy. 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 (www.gao.gov/special.pubs/01765G/). 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 PART I 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 I 34 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 Part II: Performance Information 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 Structure 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) lows: 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 Recommendations 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 Medicare. 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 PART II 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 information? 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. mented. 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 Results $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 strategies - 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 children, 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); infrastructure. ■ 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 PART II Table II.2: Annual Measures and Targets for Strategic Goal 1 2003 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 PART II 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 Met 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 workers Analyze the impact of programs designed to maintain a skilled workforce and ensure employers have the workers they need Assess the success of various enforcement strategies to protect workers while minimizing employers’ burden in the changing environment of work Identify ways to improve federal support for people with disabilities A secure retirement for older Americans Assess the implications of various Social Security reform proposals Identify opportunities to foster greater pension coverage, increase personal saving, and ensure adequate and secure retirement income Identify opportunities to improve the ability of federal agencies to administer and protect workers’ retirement benefits An effective system of justice Identify ways to improve federal agencies’ ability to prevent and respond to terrorist acts and other major crimes Assess the effectiveness of federal programs to control illegal drug use Identify ways to administer the nation’s immigration laws to better secure the nation’s borders and promote appropriate treatment of legal residents Assess the administrative efficiency and effectiveness of the federal court and prison systems GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 45 PART II Met 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 generations Assess federal strategies for managing land and water resources in a sustainable fashion for multiple uses Assess federal programs’ ability to ensure a plentiful and safe food supply, provide economic security for farmers, and minimize agricultural environmental damage Assess federal pollution prevention and control strategies Assess efforts to reduce the threats posed by hazardous and nuclear wastes A secure and effective national physical infrastructure Assess strategies for identifying, evaluating, prioritizing, financing, and implementing integrated solutions to the nation’s infrastructure needs Assess the impact of transportation and telecommunications policies and practices on competition and consumers Assess efforts to improve safety and security in all transportation modes Assess the Postal Service’s transformation efforts to ensure its viability and accomplish its mission Assess federal efforts to plan for, acquire, manage, maintain, secure, and dispose of the government’s real property assets 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 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 47 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 Results $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 Interdependence 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 and 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 PART II ■ 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 2003 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. benefits. ■ 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 averages. 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 PART II 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 Met 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 stockpile Analyze and support DOD’s efforts to improve budget analyses and performance management Assess whether DOD and the services have developed integrated procedures and systems to operate effectively together on the battlefield Assess the ability of weapon system acquisition programs and processes to achieve desired outcomes Advancing and protecting U.S. international interests Analyze the plans, strategies, costs, and results of the U.S. role in conflict interventions Analyze the effectiveness and management of foreign aid programs and the tools used to carry them out Analyze the costs and implications of changing U.S. strategic interests Evaluate the efficiency and accountability of multilateral organizations and the extent to which they are serving U.S. interests Assess the strategies and management practices for U.S. foreign affairs functions and activities Responding to the impact of global market forces on U.S. economic and security interests Analyze how trade agreements and programs serve U.S. interests Improve understanding of the effects of defense industry globalization Assess how the United States can influence improvements in the world financial system Assess the ability of the financial services industry and its regulators to maintain a stable and efficient global financial system Evaluate how prepared financial regulators are to respond to change and innovation Assess the effectiveness of regulatory programs and policies in ensuring access to financial services and deterring fraud and abuse in financial markets 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 Results $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 included GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 55 PART II Table II.8: Annual Measures and Targets for Strategic Goal 3 2003 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 PART II 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 Met 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 services 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 Results 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); requirements, ■ 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). choice. 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 goal. (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 PART II 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 Met 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 inclusiveness 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 PART II Data Quality and Procedures to Ensure Data Quality 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 recorded. 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. validation 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. 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 PART II 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 work. 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 database. 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 database. 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 PART II Testimonies 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. Timeliness 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 PART II 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 II 72 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 Part III: Financial Information 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 PART III Overview of Financial Statements 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 Statement 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 PART III Balance Sheet Financial Statements U.S. General Accounting Office Balance Sheet As of September 30, 2003 and 2002 (Dollars in thousands) 2003 2002 Assets Intragovernmental 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 Liabilities Intragovernmental 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 PART III 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 Outlays 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 PART III 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 Statements Note 1. Summary of Significant Accounting Policies Reporting Entity The accompanying financial statements present the financial position, net cost of operations, changes in net position, budgetary resources, and financing of the United States General Accounting Office (GAO). GAO, an agency in the legislative branch of the fed- eral government, supports the Congress in carrying out its constitutional responsibilities. GAO carries Basis of Presentation out its mission primarily by conducting audits, eval- GAO’s financial statements have been prepared on uations, analyses, research, and investigations and the accrual basis of accounting in conformity with providing the information from that work to the GAAP for the federal government. Accordingly, 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 PART III 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 Building 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 PART III 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. follows: 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 PART III 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 Financing 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 PART III 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 Chairman Audit Advisory Committee GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 91 PART III Independent Auditor’s Report DAVID L. COTTON, CPA, CFE, CGFM CHARLES HAYWARD, CPA, CFE, CISA MICHAEL W. GILLESPIE, CPA, CFE CATHERINE L. NOCERA, CPA, CISA MATTHEW H. JOHNSON, CPA, CGFM SAM HADLEY, CPA, CGFM COLETTE Y. WILSON, CPA ALAN ROSENTHAL, CPA LOREN SCHWARTZ, CPA, CISA 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), and 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 PART III Management’s Responsibility Management is responsible for: x Preparing the financial statements in conformity with U.S. generally accepted accounting principles; 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 III 96 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 Part IV: Appendixes PART IV 1. Accomplishments and Other Contributions 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 PART IV 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 PART IV 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 PART IV 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 PART IV 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 PART IV 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 PART IV 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 Interdependence 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 PART IV 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 PART IV 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. grams. 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 PART IV 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- 116 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 PART IV 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 action. 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 PART IV 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 118 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 PART IV 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- Interests 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 involved. 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 PART IV 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 120 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 PART IV 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 PART IV 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- tracting. 122 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 PART IV 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 PART IV 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 PART IV 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 PART IV 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 128 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 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 PART IV 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- ances. 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 PART IV Strategic Goal 4 Maximize the Value of GAO by Being a Model Federal Agency and a World-Class Professional Services Organization Sharpen GAO’s Focus on Clients’ and Customers’ Requirements 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 PART IV 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 PART IV 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 Processes 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 PART IV 2. From the Inspector General 138 GAO PERFORMANCE AND ACCOUNTABILITY REPORT 2003 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. Retirement 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- rated. 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 PART IV 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 PART IV 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 agency. 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 PART IV 5. Acronyms AGA Association of Government Accountants FEDCIR Federal Computer Incident Response Center AICPA American Institute of Certified Public Accountants FEHBP Federal Employees Health Benefit Program 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 Staff FHA Federal Housing Administration CASO Controller/Administrative Services Office FISMA Federal Information Security Management CDC Centers for Disease Control and Act Prevention 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 Administration 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 Image Sources This section contains credit and copyright information for images and graphics in this product, as appropriate, when that information was not listed adjacent to the image or graphic where presented. 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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)