oversight

Major Management Challenges and Program Risks: A Governmentwide Perspective

Published by the Government Accountability Office on 1999-01-01.

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

               United States General Accounting Office

GAO            Performance and Accountability
               Series




January 1999
               Major Management
               Challenges and Program
               Risks
               A Governmentwide
               Perspective




GAO/OCG-99-1
GAO   United States
      General Accounting Office
      Washington, D.C. 20548

      Comptroller General
      of the United States



      January 1999
      The President of the Senate
      The Speaker of the House of Representatives

      This report, which is part of a special series of reports
      entitled the Performance and Accountability Series:
      Major Management Challenges and Program Risks,
      discusses governmentwide challenges that must be
      addressed to improve the performance, management, and
      accountability of federal agencies. The other reports in
      this special series focus on the challenges confronting
      individual agencies. They collectively show that federal
      agencies face daunting, often long-standing challenges for
      achieving economy, efficiency, and effectiveness in the
      federal government’s operations. The series also
      underscores the critical role that the principles of
      performance-based management can play in successfully
      providing the products, services, and results that
      taxpayers expect. These principles are contained in the
      Chief Financial Officers Act and related financial
      management legislation; the Government Performance
      and Results Act; and information technology reform
      legislation, including the Clinger-Cohen Act and
      Paperwork Reduction Act.

      The performance and accountability series was done at
      the request of the Majority Leader of the House of
      Representatives, Dick Armey; the Chairman of the House
      Government Reform Committee, Dan Burton; the
      Chairman of the House Budget Committee, John Kasich;
the Chairman of the Senate Committee on Governmental
Affairs, Fred Thompson; the Chairman of the Senate
Budget Committee, Pete Domenici; and Senator Larry
Craig. The series was subsequently cosponsored by the
Ranking Minority Member of the House Government
Reform Committee, Henry A. Waxman; the Ranking
Minority Member, Subcommittee on Government
Management, Information and Technology, House
Government Reform Committee, Dennis J. Kucinich;
Senator Joseph I. Lieberman; and Senator Carl Levin.

The performance and accountability series contains
separate reports on 20 agencies—one on each of the
cabinet departments and one each on most of the major
independent agencies as well as the U.S. Postal Service.
The challenges discussed in each of these reports are
drawn from work that GAO has done in recent years at the
request of the Congress. As a result, these reports are
based on historical work; other management challenges
and program risks may exist within the respective
agencies. In addition, GAO is not issuing reports on
independent agencies where it has not done sufficient
recent work to assess major performance and
management challenges. As a result, the reports are not
intended to include all major management challenges and
program risks within the federal government.

As a companion volume to this series, GAO is issuing a
summary update to the list of government operations that
its work has identified as “high risk” because of their
greater vulnerabilities to waste, fraud, abuse, and



            Page 2    GAO/OCG-99-1 A Governmentwide Perspective
mismanagement. High-risk government operations are
also identified and discussed in detail in the appropriate
performance and accountability series agency reports.

This new performance and accountability series
represents a complement to GAO’s high-risk series, which
began in 1990. An increasing amount of information is
becoming available through the implementation of the
performance-based management legislation that the
Congress has enacted. This information makes it both
possible and appropriate for GAO to periodically reassess
the methodologies and criteria it uses to determine which
operations, functions, and entities should be included in
the performance and accountability series reports and
those which should be identified as “high risk.”

GAO  plans to undertake a comprehensive review and
reassessment of this area during 1999, employing matrix
management and other concepts for use in our next
report series, which is scheduled for 2001. In conducting
this review and assessment, and consistent with our
normal practices, we will consult with key stakeholders,
including selected congressional and agency
representatives, before completing our approach to the
2001 series.

Our review effort likely will result in new ways of
determining and presenting major management
challenges and program risks, especially in connection
with selected functions (e.g., strategic planning,
organizational alignment, human capital strategies, and



             Page 3     GAO/OCG-99-1 A Governmentwide Perspective
contract management) as well as at the overall
department and agency level. This reassessment may also
result in the consolidation of GAO’s current high-risk
series as an important component of an expanded
performance and accountability series. The ultimate
determination of what should be included in this series
and what should be deemed to be “high risk” will
continue to involve the independent, professional, and
objective judgment of GAO professionals.

Copies of this report series are being sent to the
President, the congressional leadership, all other
Members of Congress, the Director of the Office of
Management and Budget, and the heads of other major
departments and agencies.




David M. Walker
Comptroller General
of the United States




            Page 4     GAO/OCG-99-1 A Governmentwide Perspective
Page 5   GAO/OCG-99-1 A Governmentwide Perspective
Contents



Overview                                                           8

Major                                                             28
Performance and
Management
Challenges
Related GAO                                                     119
Products
Performance and                                                 128
Accountability
Series
Tables            Table 1: Areas of Fragmentation                 13
                    and Overlap Discussed in GAO
                    Products
                  Table 2: The 24 CFO Act Agencies’               21
                    Fiscal Year 1997 Financial
                    Statement Audit Opinions




                  Page 6    GAO/OCG-99-1 A Governmentwide Perspective
Page 7   GAO/OCG-99-1 A Governmentwide Perspective
Overview



           As we approach the 21st century, American
           citizens are increasingly demanding
           improved government services and better
           stewardship of public resources. Responding
           to these demands will require government
           decisionmakers to adopt new ways of
           thinking, consider different ways of
           achieving goals, and use new types of
           information to guide decisions. The federal
           government is adopting the principles of
           performance-based management in an effort
           to address these demands.

           Performance-based management seeks to
           shift the focus of government performance
           and accountability away from a
           preoccupation with activities—such as
           grants or inspections—to a focus on the
           results or outcomes of those activities—such
           as real gains in safety, health, and living
           standards. Performance-based management
           systematically integrates thinking about
           organizational structures, program and
           service delivery strategies, the use of
           technology, and human capital practices into
           decisions about the results the government
           intends to achieve.

           The Congress has put in place a statutory
           framework to instill performance-based
           management into federal agencies. This


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Overview




framework includes the Chief Financial
Officers (CFO) Act and related financial
management legislation; information
technology reform legislation, including the
Clinger-Cohen Act of 1996 and the
Paperwork Reduction Act of 1995; and the
Government Performance and Results Act of
1993—commonly known as the “Results
Act.” In developing this framework, the
Congress sought to create a more focused
and performance-based management and
decisionmaking process within the federal
government.

At the request of selected members of the
congressional leadership, we are issuing this
special report series, entitled Performance
and Accountability Series: Major
Management Challenges and Program Risks.
The series includes separate reports on the
challenges confronting 20 individual
agencies. This report draws from those
individual agency reports to discuss the
governmentwide challenges to
performance-based management and the
status of efforts needed to overcome those
challenges.




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                     Overview




The Challenges



Adopting a Results   Our work on federal performance and
Orientation          accountability issues, including our
                     assessments of progress in implementing the
                     Results Act, has found that many agencies
                     continue to struggle with the basic tenets of
                     performance-based management. The
                     uneven pace of progress across the federal
                     government is not surprising, because
                     agencies still are in the early years of
                     undertaking the changes that
                     performance-based management entails. The
                     challenges for federal agencies include
                     (1) defining appropriate results-oriented
                     goals and measures, (2) aligning
                     organizations and programs in response to
                     current and emerging demands,
                     (3) rationalizing crosscutting federal
                     program efforts, (4) creating
                     performance-based intergovernmental
                     partnerships, and (5) developing the
                     capability to gather and use program
                     performance information to make decisions.

                     Too often, the federal government’s
                     performance has been limited by a failure to
                     manage on the basis of a clear understanding


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Overview




of the results that agencies are to achieve
and how performance will be gauged. The
challenges at the Immigration and
Naturalization Service (INS), the Internal
Revenue Service (IRS), the Social Security
Administration (SSA), and the Department of
Veterans Affairs (VA) illustrate the
importance of establishing results-oriented
goals and performance measures and
management and accountability systems to
ensure that those goals and measures are
used to make decisions.

Our work also has found that agencies’
effectiveness has been undermined by
outmoded organizational and program
structures. Agencies such as the Department
of Energy (DOE) need clearer lines of
authority and accountability to better ensure
public health and safety, and agencies such
as the Department of Agriculture (USDA) and
the Department of Defense (DOD) need to
streamline organizational structures to
better meet agency missions and conserve
resources. For example, the end of the Cold
War provides DOD with the opportunity to
reduce the size and cost of its infrastructure
and thereby free up resources for other
priorities, including modernizing its forces
and maintaining high levels of readiness.
Through the base closure process, DOD has


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Overview




been able to identify and reduce excess
capacity. While these actions have been
taken, the majority of them have been within
the separate military services and
considerable duplicative capacity remains
across DOD.

Organizational issues also are of concern in
program areas where responsibilities are
shared among two or more agencies. As
shown in table 1, our work involving over 30
program areas across the government has
repeatedly shown that mission
fragmentation and program overlap are
widespread and that crosscutting federal
program efforts are not well coordinated. In
program area after program area, we have
found that unfocused and uncoordinated
crosscutting programs waste scarce funds,
confuse and frustrate taxpayers and other
program customers, and limit overall
program effectiveness.




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                          Overview




Table 1: Areas of Fragmentation and Overlap Discussed in GAO Products
Mission areas                 Programs
Agriculture                  • Food safety

Commerce and housing         • Financial institution regulation
credit

Community and regional       • Community development
development                  • Economic development
                             • Emergency preparedness
                             • Housing
                             • Rural development

Education, training,         • Early childhood programs
employment                   • Employment training
and social services          • Student aid

General science, space,      • High performance computing
and technology               • National laboratories
                             • Research and development facilities
                             • Small business innovation research

General government           • Federal statistical agencies

Health                       • Long-term care
                             • Substance abuse
                             • Nuclear health and safety
                             • Telemedicine

Income security              • Child care
                             • Welfare and related programs
                             • Youth programs

International affairs        • Educational programs
                             • Policy formulation and implementation
                                                                       (continued)




                          Page 13        GAO/OCG-99-1 A Governmentwide Perspective
                        Overview




Mission areas             Programs
Law enforcement           • Border inspections
                          • Drug control
                          • Investigative authority
                          • Drug trafficking
                          • Combating terrorism

Natural resources and     • Federal land management
environment               • International environmental programs
                          • Hazardous waste cleanup
                          • Water quality

                        Crosscutting programs in food safety,
                        combating terrorism, and federal land
                        management are but three examples of the
                        many crosscutting areas where better
                        coordination among federal agencies is
                        clearly needed. For example, the fragmented
                        federal approach to ensure the safety and
                        quality of the nation’s food—where as many
                        as 12 different agencies administer over 35
                        different laws overseeing food safety—is
                        inefficient and hinders the government’s
                        efforts to efficiently and effectively protect
                        consumers from unsafe food. Estimates of
                        foodborne illness range widely, from
                        6.5 million to 81 million cases annually, and
                        cause between 500 to 9,100 related deaths
                        each year. Also, estimates of the cost of
                        medical treatment and productivity losses
                        associated with these illnesses and deaths
                        range from $6.6 billion to $37.1 billion.




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Overview




Another aspect of performance-based
management involves having federal
agencies work with their state partners to
instill similar approaches in the management
of intergovernmental programs. Under these
efforts, the federal government and the
states seek agreement on the results to be
achieved, focus accountability within the
intergovernmental system on those
agreed-upon results, and provide states with
the flexibility needed to achieve their results.
These partnerships can be particularly
important today when services traditionally
provided by the federal government are
increasingly being provided by state and
local governments in partnership with the
federal government. The Environmental
Protection Agency (EPA) and the Department
of Health and Human Services (HHS) are two
examples of agencies that have such
partnership efforts under way.

As federal agencies become increasingly
performance-based, they will need new types
of information—results-oriented
information—that is different from that
which has traditionally been collected by
federal agencies. The challenge confronting
federal agencies is to obtain timely and
reliable results-oriented performance
information and to ensure that program
evaluations are undertaken that allow for the
Page 15    GAO/OCG-99-1 A Governmentwide Perspective
                    Overview




                    informed use of that information. The
                    situations at EPA, HHS, INS, and the
                    Department of Labor represent typical
                    examples of the challenges in developing
                    results-oriented information that the
                    government as a whole confronts.

                    For example, state water quality reports
                    required by the Clean Water Act are a key
                    source of information for measuring
                    progress in cleaning up the nation’s lakes,
                    rivers, and streams. However, EPA has found
                    that the wealth of environmental data EPA
                    and states collect are often difficult to
                    compile in a meaningful way.
                    Inconsistencies in water quality assessments
                    that are due to states using methodologies
                    that differ make it difficult for EPA to
                    aggregate the data. Therefore, using
                    information from various sources presents a
                    challenge when attempting to conclusively
                    determine whether the quality of rivers,
                    lakes, and streams is getting better or worse
                    over time.


Effectively Using   Like most organizations, federal agencies
Information         increasingly depend on information
Technology to       technology to improve their performance
Achieve Program     and meet mission goals. As detailed in our
Results
                    High-Risk Series: An Update report that is


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Overview




accompanying the performance and
accountability series, satisfactorily resolving
the Year 2000 date conversion problem and
information security concerns pose
enormous challenges for agencies. More
generally, the federal government spends
billions of dollars each year on information
technology. The return on investment from
much of this spending has been
disappointing—in some cases, virtually
nonexistent—and has often resulted in
projects with huge cost overruns and limited
improvements in performance.

The challenge for agencies, therefore, is to
ensure that modern information technology
management practices are consistently
defined and properly implemented. These
practices help to ensure that information
technology dollars are directed toward
prudent investments that achieve cost
savings, increase productivity, and improve
the timeliness and quality of service delivery.
Constructive changes are occurring in this
regard. For example, federal policies and
guidance are being updated to align with the
information technology management
principles established in the Clinger-Cohen
Act. In addition, several agencies are
implementing new information technology



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    Overview




    management approaches that are in line with
    legislative reforms.

    While progress is being made in designing
    and implementing information technology
    investment management strategies, current
    federal practices fall short of the statutory
    expectations. Recent reviews we have
    conducted in numerous federal agencies
    raise particular concerns about

•   fundamental weaknesses in the way
    information technology investment decisions
    are made, including (1) a lack of clarity
    about how these investments are being or
    will be used to improve performance or help
    achieve specific agency goals and
    (2) incomplete data on which to base
    informed decisions;
•   slow progress in designing and implementing
    information technology architectures before
    proceeding with massive system
    modernization efforts;
•   inadequate or immature software
    development, cost estimation, and systems
    acquisition practices; and
•   the need to build effective chief information
    officer leadership and organizations.




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                      Overview




Establishing          Federal decisionmakers must have reliable
Financial             and timely performance and financial
Management            information to ensure adequate
Capabilities That     accountability, manage for results, and make
Effectively Support
                      timely and well-informed judgments.
Decisionmaking and
Accountability        However, historically such information has
                      not been routinely available across
                      government. The combination of reforms
                      ushered in by the Results Act and the CFO
                      Act will, if successfully implemented,
                      systematically fill this void and generate the
                      necessary foundation to effectively manage
                      and run performance-based organizations.

                      The CFO Act sets expectations for agencies to
                      develop and deploy more modern financial
                      management systems, to routinely produce
                      sound cost and performance information,
                      and to develop results-oriented reports on
                      the government’s financial condition by
                      integrating budget, accounting, and program
                      information. The challenge for agencies is to
                      fully meet the ambitious yet important
                      expectations set by the CFO Act. Toward that
                      end, all 24 agencies covered by the CFO Act
                      have been preparing annual audited financial
                      statements beginning with fiscal year 1996.
                      Eleven of these agencies received
                      unqualified audit opinions for fiscal year
                      1997—up from 6 for fiscal year 1996. Table 2



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Overview




shows the audit opinions received by all 24
CFO Act agencies for fiscal year 1997.




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                             Overview




Table 2: The 24 CFO Act Agencies’ Fiscal Year 1997 Financial Statement Audit
Opinions
Opinions                    Agencies
Unqualified audit opinions   • Department of Education
                             • Department of Energy
                             • Department of Interior
                             • Department of Labor
                             • Department of State
                             • Environmental Protection Agency
                             • General Services Administration
                             • National Aeronautics & Space Administration
                             • Nuclear Regulatory Commission
                             • Small Business Administration
                             • Social Security Administration

Qualified audit opinions     • Health & Human Services
                             • Housing & Urban Development
                             • Veterans Affairs
                             • National Science Foundation

Disclaimers                  • Department of Agriculture
                             • Department of Commerce
                             • Department of Defense
                             • Department of Justice
                             • Department of Transportation
                             • Agency for International Development

Other                        • Treasury received an unqualified opinion on
                             its administrative financial statements and a
                             qualified opinion on its custodial schedules.

                             • Federal Emergency Management Agency
                             received an unqualified opinion on a
                             financial statement for a part of the agency.
                             Financial statements were not prepared for
                             the whole agency.

                             • Office of Personnel Management’s Retirement
                             Fund and Life Insurance Fund received
                             unqualified opinions; revolving funds, health
                             benefits, and salaries and expenses received
                             disclaimers.


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Overview




At the same time, major challenges must be
overcome, both at the agency level and for
the U.S. government as a whole in preparing
reliable financial statements. The most
serious challenges are framed by the results
of our first-ever audit of the government’s
consolidated financial statements for fiscal
year 1997; deficiencies in the statements
prevented us from being able to form an
opinion on their reliability. In summary,
these deficiencies were significant:
widespread financial system weaknesses;
problems with fundamental recordkeeping;
incomplete documentation; and weak
internal controls—including computer
controls. These deficiencies prevented the
government from accurately reporting a
large portion of its assets, liabilities, and
costs. These deficiencies also affected the
reliability of the consolidated financial
statements and undermined agencies’ ability
to (1) accurately measure the full cost and
financial performance of programs and
(2) effectively and efficiently oversee and
safeguard federal assets and manage
operations.




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                    Overview




Building,           Leading performance-based organizations
Maintaining, and    understand that effectively managing the
Marshaling the      organization’s employees—or human
Human Capital       capital—is essential to achieving results.
Needed to Achieve
                    Only when the right employees are on board
Results
                    and provided the training, tools, structure,
                    incentives, and accountability to work
                    effectively is organizational success
                    possible. Thus, human capital planning must
                    be an integral part of an organization’s
                    strategic and program planning; human
                    capital itself should be thought of not as a
                    cost to be minimized but as an asset to be
                    enhanced.

                    The challenge—and
                    opportunity—confronting federal agencies
                    as they seek to become more
                    performance-based is to align their human
                    capital policies and practices with their
                    program goals and strategies. For example,
                    the continuing difficulties that the
                    Department of Housing and Urban
                    Development (HUD) has had in planning for
                    and effectively using its human capital are
                    among the most pressing challenges the
                    agency faces. One of HUD’s 2020 Management
                    Reform Plan’s goals was to reduce staffing
                    from about 10,500 to 7,500 by 2002.
                    However, we found that HUD’s target levels
                    were not based on a systematic analysis of


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Overview




how many staff it needed to carry out a given
responsibility or function. This weakness in
HUD’s human capital planning is particularly
troubling because, in the past, not having
enough staff with the necessary skills has
limited HUD’s ability to perform essential
functions, such as monitoring multibillion
dollar federal programs.

Human capital will become an increasingly
prominent issue for the federal government
as agencies implement the
performance-based management agenda
established by the Congress in the 1990s.
Whereas financial management, information
technology management, and
results-oriented goal setting and
performance measurement have all been the
subject of major reform legislation this
decade, no consensus has emerged on the
fundamental structural or policy changes
that may be needed to better align the
federal government’s human capital
approaches with the new performance-based
management and accountability framework.

This is especially true in connection with
linking agencies’ strategic plans with their
performance measurement and individual
reward systems. Ultimately, human capital
reforms (for example, changes to the civil


Page 24    GAO/OCG-99-1 A Governmentwide Perspective
               Overview




               service system) will be necessary in order to
               fully realize the benefits which can be gained
               through a well-defined performance-based
               management and accountability framework.
               In that regard, we will collaborate with the
               Congress to develop a body of work that
               helps to define the guiding principles and
               best practices for federal human capital
               issues.


Progress and
Next Steps



               Across the federal government, agencies
               have been making real, although difficult,
               progress over the last few years in
               implementing performance-based
               management. These efforts have confirmed
               that fundamental improvements in
               management and results are possible when
               an organization undertakes a disciplined
               approach to implementing the
               performance-based management principles
               embodied in the congressional framework.
               While every agency we have examined has
               made progress in becoming more
               performance-based, the pace and degree of


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Overview




that progress has been uneven across
agencies. A primary difference in the rate of
progress is the degree of attention, visibility,
and commitment that top agency leadership
gives this area. As the reports included in
our performance and accountability series
demonstrate, a great deal of hard and
sustained work remains to be done. The
steps that individual agencies need to take in
response to their particular challenges are
detailed in the respective individual agency
reports.

On a governmentwide basis, agencies must
ensure that the statutory framework the
Congress established is effectively
implemented. More generally, agencies need
to recognize that implementing
performance-based management is not a
one-time occurrence but must become the
routine basis for how agencies do business
and respond to current and emerging
challenges. Ultimately, performance-based
management should become an integral part
of an agency’s culture. The transition
process must include proven “change
management” approaches to be successful
and sustained. Top management within
agencies must provide the consistent
leadership necessary to direct the needed
management changes and to ensure that


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Overview




momentum is maintained. The Office of
Management and Budget (OMB) can build on
the initiatives it already has taken and
continue to reinforce agencies’ efforts by
using program performance and cost
information to help guide its decisions and
by assisting and overseeing agencies’ efforts.

We have long advocated that congressional
committees of jurisdiction hold augmented
oversight hearings on each of the major
agencies at least once each Congress and
preferably on an annual basis. Information
on the linkages among plans, programs,
budgets, and performance results—which
should become available as agencies’
implementation of performance-based
management moves forward—could provide
a consistent starting point for each of these
hearings. Congressional use of
results-oriented program performance and
cost information in its decisionmaking about
federal policies and programs will also spur
agencies’ efforts to implement the statutory
framework by sending the unmistakable
message to the agencies that the Congress
remains serious about performance-based
management and accountability.




Page 27    GAO/OCG-99-1 A Governmentwide Perspective
Major Performance and Management
Challenges


            As we approach the 21st century,
            government decisionmakers and managers
            in various democracies around the world are
            confronting strikingly similar challenges to
            public management and service delivery.
            Although the specific circumstances vary,
            these governments are responding to
            citizens who expect public sector
            organizations to be significantly more
            effective without increases in spending.

            At the same time, decisionmakers and
            managers are finding that achieving results
            on public issues, such as promoting
            economic development, ensuring economic
            security, protecting the environment, and
            securing their nation’s borders, increasingly
            requires coordinated responses from
            numerous public and private entities. This
            growing awareness of the interconnection of
            vital public issues is being driven in part by
            the intractable nature of the social and
            policy problems that governments confront,
            the globalization of national economies, and
            the rapid growth in communication and
            information flows made possible by the
            increasing use of technology.

            Faced with these challenges, foreign
            governments—and state and local
            governments here in the United


            Page 28    GAO/OCG-99-1 A Governmentwide Perspective
Major Performance and Management
Challenges




States—have recognized that the traditional
ways of doing the public’s business are
becoming less effective in meeting current
and emerging demands. In response, these
governments have implemented major public
sector management reform initiatives.1 While
these initiatives have been crafted in
response to different needs, political
environments, and cultures, the reform
initiatives are taking a generally consistent
direction. Performance-based management,
the unifying theme of these reform
initiatives, seeks to shift the focus of
government performance and accountability
away from a preoccupation with
activities—such as grants or inspections—to
a focus on the results of those
activities—such as real gains in safety,
health, and living standards.

Defining performance and accountability in
such terms requires a management
orientation that moves beyond what
government can largely control—the
activities it undertakes—to an orientation
that is more concerned with what
government merely
influences—results—and how best to

1
 Managing for Results: Experiences Abroad Suggest Insights for
Federal Management Reforms (GAO/GGD-95-120, May 2, 1995) and
Managing for Results: State Experiences Provide Insights for
Federal Management Reforms (GAO/GGD-95-22, Dec. 21, 1994).

Page 29       GAO/OCG-99-1 A Governmentwide Perspective
Major Performance and Management
Challenges




achieve those results.2 Such an approach to
public management also systematically
integrates thinking about organizational
structures, program and service delivery
strategies, the use of technology, financial
management, and human capital policies and
practices into decisions about the results
that the organization intends to achieve.

At the federal level, the Congress has put in
place a statutory framework to instill such a
performance-based approach into the
management of federal agencies. This
framework includes the Chief Financial
Officers (CFO) Act and related financial
management legislation; information
technology reform legislation, including the
Clinger-Cohen Act of 1996 and the
Paperwork Reduction Act (PRA) of 1995; and
the Government Performance and Results
Act of 1993—commonly known as the
“Results Act.”3

In enacting this framework, the Congress
sought to create a more focused,
performance-based management and
decisionmaking process within both the

2
 Managing for Results: Measuring Program Results That Are Under
Limited Federal Control (GAO/GGD-99-16, Dec. 11, 1998).
3
 Managing for Results: The Statutory Framework for
Performance-Based Management and Accountability
(GAO/GGD/AIMD-98-52, Jan. 28, 1998).

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Congress and the executive branch. This
statutory framework provides the basis for
developing fully integrated information
about agencies’ missions and strategic
priorities, results-oriented goals that flow
from those priorities, performance data to
show progress in achieving those goals, the
relationship of information technology
investments to the achievement of
performance goals, and accurate and audited
financial information about the costs of
achieving results.

As a result of agencies’ implementation of
this framework, a tremendous amount of
new information is being generated—from
agency plans that are produced under the
Results Act and audited financial statements
produced under the financial management
reform legislation—that had not been
available on a consistent, governmentwide
basis in the past. This new information is
providing deeper understandings of the
performance and management challenges
confronting each agency and helping to
target program areas needing the most
attention.4 As described in this report and
evidenced throughout our performance and
accountability series, the federal government
as a whole also confronts a number of major
4
 Managing for Results: Using GPRA to Assist Congressional and
Executive Branch Decisionmaking (GAO/T-GGD-97-43, Feb. 12,
1997).

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challenges to improving governmentwide
performance and management. These
governmentwide performance and
management challenges include:




The current statutory framework provides
most of the fundamental building blocks for
agencies to address these challenges and
become more performance-based. Over the
last several years, we have issued a large
number of reports, guides, and other
products aimed at helping to show the
Congress and agencies how they can use the
performance-based management principles
embodied in the statutory framework to
guide decisionmaking.5 A central theme of
that work has been that an integrated
implementation of the statutory
requirements is essential if agency managers,
the Congress, and other decisionmakers are
to find the framework useful.



5
 See “Related GAO Products” at the end of this report for a list of
our reports, guides, and other products.

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              The improved performance and
              decisionmaking that the Congress expects
              will not occur simply because, for example,
              an agency issues a strategic plan or financial
              statement. Rather, performance and
              decisionmaking are improved when agency
              managers and congressional and other
              decisionmakers use the information in those
              documents and the performance-based
              management processes that underpin them.


Adopting a
Results
Orientation




              The cornerstone of federal efforts to
              successfully meet current and emerging
              public demands is the adoption of a results
              orientation—a clear sense of what results
              the agency wants to achieve, how the
              organization is aligned to achieve results,
              how it will measure progress toward those
              results, how those results will be achieved,
              what data will be gathered to support
              decisionmaking, and what incentives and


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accountability mechanisms will be used to
help ensure success. Under the Results Act,
multiyear strategic plans and annual
performance plans are the primary vehicles
for agencies to use in adopting this results
orientation and clearly communicating their
strategic vision and results to the Congress
and other decisionmakers. Agencies’ first
strategic plans, covering at least 5 years,
were issued by September 30, 1997. Building
on these strategic plans, the first annual
performance plans were developed for fiscal
year 1999, which began October 1, 1998.

Our work on federal performance and
accountability issues, including assessing
progress in implementing the Results Act,
has found that many agencies continue to
struggle to implement the basic tenets of
performance-based management.6 The
uneven pace of progress across the federal
government is not surprising because
agencies still are in the early years of
undertaking the changes that
performance-based management entails.




6
 The Government Performance and Results Act: 1997
Governmentwide Implementation Will Be Uneven
GAO/GGD-97-109, June 2, 1997 and Managing for Results: Prospects
for Effective Implementation of the Government Performance and
Results Act (GAO/T-GGD-97-113, June 3, 1997).

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                     The challenge for federal agencies is to make
                     significant progress in several areas,
                     including (1) defining results-oriented goals
                     and measures, (2) aligning organizations and
                     programs in response to current and
                     emerging demands, (3) rationalizing
                     crosscutting federal program efforts,
                     (4) creating performance-based
                     intergovernmental partnerships, and
                     (5) developing the capability to gather and
                     use results-oriented performance
                     information to make decisions. The Results
                     Act provides agencies with a mechanism to
                     establish and continuously refine and update
                     their results orientation. Moreover, as will be
                     discussed below, successfully addressing
                     these challenges will require agencies to
                     make progress in meeting human capital
                     issues, in particular implementing incentive
                     and accountability mechanisms.


Defining             Too often, the federal government’s
Results-Oriented     performance has been limited by a failure to
Goals and Measures   manage on the basis of a clear understanding
                     of the results agencies are to achieve and
                     how performance will be gauged.7 These
                     understandings are vital because federal
                     programs are designed and implemented in

                     7
                      GAO/T-GGD-97-43, Feb. 12, 1997 and Managing for Results: Steps
                     for Strengthening Federal Management (GAO/T-GGD/AIMD-95-158,
                     May 9, 1995).

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dynamic environments where competing
program priorities and stakeholders’ needs
must continuously be balanced and new
needs must be addressed. The challenges at
the Immigration and Naturalization Service
(INS), the Internal Revenue Service (IRS), the
Social Security Administration (SSA), and the
Department of Veterans Affairs (VA) show
the importance—and the difficulty, in many
cases—of establishing a set of goals and
performance measures that cover the variety
of results that agencies are expected to
achieve.

INS  has come under severe criticism for the
difficulty it has had in carrying out two of its
core missions. On the one hand, INS is to
enforce laws to prevent aliens from entering
the country illegally, and on the other hand,
it is to provide services and benefits to legal
immigrants. The Commission on
Immigration Reform and other organizations
have concluded that INS has achieved only
limited success in both its enforcement and
services and benefits missions, in part
because of “mission overload.”

As a part of its enforcement mission, INS is to
remove deportable criminal aliens from this
country. However, we found that INS failed to
identify nearly 2,000 potentially deportable


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aliens who were released from prison
between January 1 and June 30, 1997. These
criminal aliens were released into U.S.
communities without INS having determined
whether they posed a risk to public safety.
Hundreds of these criminal aliens were
aggravated felons who, by law, should have
been placed in removal proceedings while in
prison and taken into INS custody upon
release; some were subsequently rearrested
for new crimes, including felonies.

As part of its services and benefits mission,
INS is to facilitate the processing of aliens’
applications for citizenship. However, INS has
had problems in providing these services and
benefits. In order to become a naturalized
citizen, aliens must meet certain
requirements, such as being of good moral
character. We have reported that INS’ failure
to conduct complete criminal history checks
on all applicants before granting citizenship
resulted in individuals with felony
convictions improperly becoming
naturalized.

Similarly, IRS has been criticized for not
successfully balancing two key priorities:
revenue collection and the fair and
respectful treatment of taxpayers. After a
series of well-publicized hearings


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highlighting cases of reported taxpayer
abuse, the Congress passed the IRS
Restructuring and Reform Act of 1998, and
the Commissioner of Internal Revenue began
implementing a multiyear plan for the
agency aimed at improving customer service.

IRS’ traditional performance goals and
measures, such as amounts collected from
taxpayers, had created incentives to
maximize enforcement results. They did not
create sufficient incentives to ensure that
taxpayers received fair treatment. Under
proposed changes, IRS plans to emphasize
identifying, as promptly as possible,
taxpayers who may have compliance
problems and then addressing the particular
problems of those taxpayers. This more
customer-oriented approach is intended to
help both the taxpayer and IRS by minimizing
the need for subsequent enforcement
actions.

SSA provides an additional illustration of the
need for agencies to focus their efforts on
the full range of expected results. We have
found that for its disability programs—the
Disability Insurance (DI) program and the
Supplemental Security Income (SSI)
program—SSA has emphasized improving
processes for quickly determining eligibility


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and moving the eligible claimants onto the
disability rolls. Although progress in this
area is vitally important to improving the
well-being of eligible individuals and their
families, SSA has not put the emphasis on the
equally important need to help individuals
return to work and move off of the disability
rolls.

The Social Security Act calls for
rehabilitating benefit applicants to the
maximum extent possible. Further, helping
individuals return to work is especially
appropriate now when each day seems to
bring fresh reports of technological and
medical advances leading to new
opportunities for persons with disabilities to
return to work.

Advances in the management of disabilities,
such as computer-aided prosthetic devices
that return some functioning to the
physically impaired, have helped reduce the
severity of the functional loss caused by
some disabilities. Electronic
communications and assisting technologies,
such as synthetic voice systems, standing
wheelchairs, and modified automobiles and
vans, have also given people with certain
types of disabilities more independence and
potential to work. Moreover, society’s


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awareness of the important contributions
that people with disabilities can make in the
workplace has grown in recent years. This
awareness is reflected in part by the
enactment of the Americans With
Disabilities Act, which has among its core
principles the premise that many people with
disabilities can work.

Despite the technological, medical, and
social advances, not more than 1 in 500 DI
beneficiaries and few SSI beneficiaries have
left SSA’s disability rolls to return to work.
SSA has recognized the need to expand its
efforts to place greater priority on helping
individuals return to work and has efforts
under way in this regard. However,
additional steps, such as providing
return-to-work assistance earlier in the
eligibility process, are needed to strengthen
SSA’s efforts.


VA is one of a large number of agencies that,
in response to emerging citizen needs and
new opportunities, is making major changes
in how it defines its role, the results it wants
to achieve, and the performance measures it
will use to gauge progress in achieving those
results. Over the past 3 years, VA has
introduced initiatives to fundamentally
change the way it manages its approximately


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$18 billion health care system. In particular,
VA is shifting the way it delivers health care
services from an episodic, predominantly
inpatient-based model to a system of
primary, outpatient, and preventive care.
However, as VA makes this difficult and
important change in how it defines its role, it
must develop, implement, and use more
results-oriented performance measures that
focus on the health status of veterans as the
overall indicators of its effectiveness.

Traditionally, VA defined its success and
measured its progress based on health care
delivery measures, such as the number of
hospital beds in use, the number of patients
served, and the number of patients receiving
certain diagnostic tests. Although these
measures can provide useful information for
managing VA’s programs, they provide little
perspective on the relationships between
VA’s services and the health and well-being of
veterans—the key result that veterans and
their families care about and an overriding
focus of the VA reform efforts.




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Aligning              Our work has frequently found that
Organizations and     ineffective and outmoded organizational and
Programs in           program structures have undermined
Response to Current   agencies’ effectiveness.8 Moreover, agencies
and Emerging
                      have been slow in responding to changes in
Demands
                      stakeholders’ expectations; technological
                      developments; and social, political, and
                      demographic trends. The organizational
                      challenges that agencies such as the
                      Department of Energy (DOE), the Department
                      of Agriculture (USDA) and the Department of
                      Defense (DOD) confront range from the need
                      for clearer lines of authority and
                      accountability to streamlining organizational
                      structures in response to changing
                      circumstances. Although each agency must
                      craft a specific organizational solution in
                      response to its own needs and situation,
                      these agencies share a challenge common to
                      all federal agencies as they seek to become
                      more performance-based—the ongoing need
                      to ensure that organizational structures and
                      program approaches are in place to
                      efficiently support the accomplishment of
                      mission-related goals.

                      In a series of reports starting in 1981, we
                      found that DOE’s organizational structure has
                      neither clear lines of authority nor clear

                      8
                      Managing for Results: Status of the Government Performance and
                      Results Act (GAO/T-GGD-95-193, June 27, 1995) and Government
                      Management Issues (GAO/OCG-93-3TR, Dec. 1992).

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definitions of roles and responsibilities.
DOE’s organization includes 12 headquarters
program offices; 10 major field offices, with
many smaller offices located near DOE’s
facilities; and over 50 major facilities owned
by the government and operated by DOE’s
contractors. Contractors receive policy
guidance from different program offices but
are managed and evaluated by field offices
that are not accountable to the program
offices.

A more effective organization of its offices
and facilities could assist DOE in obtaining
the performance and accountability it needs
from its contractors. For example, in 1997,
we found that weaknesses in DOE’s
organizational structure prevented adequate
control over leaks of tritium (a radioactive
element) into groundwater from a research
reactor at the Brookhaven National
Laboratory on Long Island, New York. These
leaks went undetected for many years and
then remained uncorrected for several more
years because the contractor assigned a low
priority to them, despite public concern and
local environmental regulations requiring
corrective action.

We found that DOE’s organizational structure
prevented effective accountability over the


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operation of the Department’s on-site field
office—the office with the most immediate
responsibility for ensuring the laboratory’s
compliance with environmental, safety, and
health requirements. The on-site office was
part of a chain of command with no explicit
responsibilities for environmental, safety,
and health issues, and it did not report
directly to either of two other offices with
such responsibilities. While DOE eventually
terminated the contract, its ineffective
organizational structure contributed to
prolonged delays in addressing health and
safety issues and a loss of public trust.

USDA also is challenged by the need to
improve its effectiveness by means of a more
efficient organizational structure. In USDA’s
situation, streamlining and consolidating its
offices have been the driving forces behind
its continuing effort to implement an
ambitious restructuring of its outmoded field
structure. The USDA field structure, created in
the 1930s, was based on placing an office in
nearly all of the nation’s rural counties to
provide a range of services to farmers and
rural communities. But the number of
farmers living in rural America has declined,
and by the early 1990s, the significant
changes in the farming sector had rendered



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USDA’s field structure obsolete and
inefficient.

Directed by the Federal Crop Insurance
Reform and Department of Agriculture
Reorganization Act of 1994, USDA has
reduced the number of county office
locations by more than 1,000—from 3,760 to
about 2,700, as of March 1998. Nonetheless,
USDA’s field structure continues to represent
a major investment for the Department, with
the costs of operating the USDA local county
offices now at almost $1 billion annually. As
USDA continues to seek opportunities to
streamline and modernize its field structure,
the reduced costs to the government that
could result from further streamlining need
to be carefully weighed against any resulting
changes in the quality of services to the
farmers who participate in farm programs.

Similar to USDA, as we enter the next century,
DOD also faces an external reality that has
fundamentally changed from the one it
confronted just a few short years ago. The
end of the Cold War has provided DOD with
the opportunity to reduce the size and cost
of its infrastructure and thereby free up
resources for other priorities, such as
modernizing its forces and maintaining high
levels of military readiness. The Secretary of


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Defense’s November 1997 Defense Reform
Initiative Report noted that DOD continued to
be weighed down by facilities that are too
extensive for its needs, more expensive than
it can afford, and detrimental to the
efficiency and effectiveness of the nation’s
armed forces. As discussed in Performance
and Accountability Series: Major
Management Challenges and Program Risks:
Department of Defense, in February 1997,
we identified defense infrastructure as a
high-risk area, and it remains on our
high-risk list.

We have identified numerous areas in which
DOD’s infrastructure can be eliminated,
streamlined, or reengineered to be made
more efficient. The Secretary’s report also
provided specific initiatives, including
privatizing military housing and utility
systems, demolishing excess buildings,
consolidating and regionalizing many
defense support agencies, and requesting
legislative authority to conduct two
additional base realignment and closure
rounds. However, DOD has found that
infrastructure reductions are difficult
because of service parochialism, a cultural
resistance to change, and public concern
about the effects and impartiality of
decisions.


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Moreover, while the defense reform
initiatives are steps in the right direction and
have brought high-level attention to the need
for infrastructure reductions, collectively
they do not provide a comprehensive
long-range plan for a facilities infrastructure
that is affordable, appropriate, and
sustainable for DOD in the post-Cold War
world. We have cited the need for such a
plan but have noted that DOD’s past plans did
not include long-term comprehensive
strategies for facilities’ revitalization,
replacement, and maintenance and lacked
some of the basic elements of
performance-based management—ties to
measurable goals to be accomplished over
specified time frames and links to funding.

Improved infrastructure planning can help
DOD’s components and programs to develop
results-oriented goals and performance
measures that are linked to and support
DOD-wide goals. Faced with a limited budget,
DOD’s infrastructure inefficiencies, if not
addressed, will consume money that could
be made available to meet other defense
priorities, such as force modernization and
readiness needs.




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Rationalizing          Virtually all of the results that the federal
Crosscutting Federal   government strives to achieve require the
Program Efforts        concerted and coordinated efforts of two or
                       more agencies. This shared responsibility is
                       an outgrowth of several factors, including
                       the piecemeal evolution of the federal
                       government and the complexity of public
                       issues requiring several agencies to
                       contribute differing perspectives, expertise,
                       and resources to address these issues. Our
                       work looking at these responsibilities has
                       repeatedly shown that mission
                       fragmentation and program overlap are
                       widespread in the federal government and
                       that crosscutting federal program efforts are
                       not well-coordinated.9 As was shown above
                       in table 1, our work identifying
                       fragmentation and overlap has involved over
                       30 program areas across the federal
                       government and covered nearly a dozen
                       federal mission areas.

                       In program area after program area, we have
                       found that unfocused and uncoordinated
                       crosscutting programs waste scarce funds,
                       confuse and frustrate taxpayers and other
                       program customers, and limit overall
                       program effectiveness. Crosscutting
                       programs in food safety, combating

                       9
                        Managing for Results: Using the Results Act to Address Mission
                       Fragmentation and Program Overlap (GAO/AIMD-97-146, Aug. 29,
                       1997).

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terrorism, and federal land management are
but three examples of the many crosscutting
areas where better coordination among
federal agencies, perhaps leading to more
rationalized program approaches, are clearly
needed.

The fragmented federal approach to ensure
the safety and quality of the nation’s
food—at the cost of over $1 billion a
year—is inefficient and hinders the
government’s efforts to effectively protect
consumers from unsafe food. Estimates of
foodborne illness range widely, from
6.5 million to 81 million cases annually, and
cause between 500 to 9,100 related deaths
each year. Also, estimates of the cost of
medical treatment and productivity losses
associated with these illnesses and deaths
range from $6.6 billion to $37.1 billion.

The current system to ensure food safety
suffers from inconsistent oversight, poor
coordination, and inefficient allocation of
resources. As many as 12 different federal
agencies administer over 35 different laws
overseeing food safety. To underscore the
fragmentation, subtle differences in food
products dictate which agency regulates a
product. For example, USDA is responsible
for inspecting food plants that produce


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open-faced meat sandwiches and pizzas with
a meat topping, whereas the Department of
Health and Human Services’ (HHS) Food and
Drug Administration is responsible for
inspecting food plants that produce
traditional meat sandwiches and nonmeat
pizzas. We have recommended that the
highly fragmented federal food safety
structure needs to be replaced with a
uniform, risk-based inspection system under
a single food agency.

While rationalization and consolidation
appear to be solutions for the problems
confronting food safety agencies, better
coordination is the initial step in improving
the effectiveness of efforts to safeguard the
nation from terrorist attacks. Over 40
agencies, bureaus, and offices—at a cost of
nearly $7 billion for unclassified programs
during fiscal year 1997—implement
numerous programs designed to prevent and
deter terrorism, respond to terrorist threats
and incidents, and manage the consequences
of terrorist acts. Because of the large scope
of federal efforts to combat terrorism, no
single agency can effectively undertake the
entire effort. In response to this situation,
the President recently issued Decision
Directives that established the roles and
responsibilities of many agencies involved in


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    combating terrorism and created a position
    at the National Security Council to
    coordinate such programs.

    The Presidential Decision Directives
    represent an important step in improving
    program coordination and thereby
    strengthening federal efforts to combat
    terrorism. However, our prior work has
    shown that better coordinating such
    programs will entail a substantial effort. For
    example, we reported in December 1997 that
    governmentwide priorities for combating
    terrorism had not been established and
    funding requirements had not been validated
    based on an analytically sound assessment
    of the threat and risk of a terrorist attack.
    There was therefore no reasonable
    assurance that

•   agencies’ requests were funded through a
    coordinated and focused approach to
    implement national policy and strategy,
•   the highest priority requirements were being
    met,
•   terrorism-related activities and capabilities
    were not unnecessarily duplicative or
    redundant, and
•   funding gaps or misallocations had not
    occurred.



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Programs to manage federal lands provide
another illustration of the need for improved
coordination in an important crosscutting
program area. The federal government owns
about 30 percent (about 650 million acres) of
the nation’s total surface area. Four federal
agencies—the Forest Service in USDA and the
Park Service, Bureau of Land Management,
and Fish and Wildlife Service in the
Department of the Interior—manage about
95 percent of these lands for a variety of
uses. The central coordination challenge
confronting these agencies is to reconcile
the administrative boundaries and
jurisdictions with the boundaries of natural
systems, both in planning how best to
manage use of these lands and in assessing
the cumulative impact of federal and
nonfederal activities on the environment.

Federal land management agencies are
authorized by laws such as the National
Forest Management Act to plan primarily
along administrative boundaries, such as
those defining forests, parks, resource areas,
and wildlife refuges. Conversely,
environmental laws and regulations require
the agencies to analyze environmental issues
and concerns along the boundaries of
natural systems, such as watersheds,



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                    airsheds, soils, and vegetative and animal
                    communities.

                    Federal land management plans have often
                    considered effects only on those portions of
                    natural systems that exist within the
                    boundaries of the administrative units
                    covered by the plans. However, the
                    boundaries of administrative units and
                    natural systems are frequently different. For
                    example, a widely recognized boundary of
                    the Greater Yellowstone ecosystem
                    encompasses all or part of seven national
                    forests, two national parks, and three
                    national wildlife refuges—most of which are
                    covered by different plans.


Creating            As part of the performance-based approach
Performance-Based   to management and accountability that is
Intergovernmental   being implemented at the federal level,
Partnerships        agencies are working with their state
                    partners to instill similar approaches in the
                    management of intergovernmental programs.
                    Under these efforts, the federal government
                    and the states seek agreement on the results
                    to be achieved, focus accountability within
                    the intergovernmental system on those
                    agreed-upon results, and provide states with




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the flexibility needed to achieve the results.10

These partnerships can be particularly
important today when services traditionally
provided by the federal government are
increasingly being provided by state and
local governments along with the federal
government. The Environmental Protection
Agency (EPA) and HHS are two agencies that
have such partnership efforts under way.

EPA relies on the states to implement most of
its programs. However, our prior reviews
have documented long-standing problems in
the relationship between EPA and the states,
which has often been characterized by
fundamental disagreements over such issues
as EPA’s and state environmental agencies’
respective roles, priorities among state
environmental programs, and the degree of
federal oversight needed. These
disagreements have made environmental
programs more difficult to implement.

In response, EPA and the states are pursuing
a new initiative, called the National
Environmental Performance Partnership
System, that is designed to address many of
these concerns. The initiative includes


10
 Block Grants: Issues in Designing Accountability Provisions
(GAO/AIMD-95-226, Sept. 1, 1995).

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increasing the use of environmental goals
and measures, conducting state assessments
of environmental and program performance,
and negotiating performance partnership
agreements between EPA and individual
states.

Under the initiative, states with strong
environmental programs are to have more
leeway in setting environmental priorities,
designing new strategies, and managing their
own programs, while EPA concentrates its
oversight and technical assistance on
weaker programs. The performance
partnerships are intended to provide a
means for EPA and a state to agree on the
environmental problems that will receive
priority attention by the state and for how
the state’s progress in achieving clearly
defined program results will be assessed.
Thirty-three states had entered into some
form of performance partnership agreement
with EPA as of July 1998.

HHS is another agency that is making
progress in working with state governments
to develop results-oriented goals and
performance measures to serve as a basis for
program management and accountability.
For example, the Office of Child Support
Enforcement and the states worked together


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to develop national goals for the child
support enforcement program. Similarly, the
Maternal and Child Health Block Grant
Program collaborated with its state partners
to develop a set of core performance
measures that have now become the basis
for awarding and monitoring grants under
the program. In addition, the Substance
Abuse and Mental Health Services
Administration has been working with states
to develop outcome indicators for substance
abuse and mental health services. Also, the
Centers for Disease Control and Prevention,
through categorical grant programs to states,
are developing health status indicators,
uniform data sets, and public health
surveillance systems.

Partnership agreements centered on
results-oriented goals and performance
measures can be an effective vehicle for
achieving results while providing states with
needed flexibility. However, our work has
shown that in some cases the federal
government must do a better job of fulfilling
its responsibilities in intergovernmental
efforts. For example, nursing homes that
receive federal payments through Medicare
and Medicaid—which in 1997 totaled
$28 billion—must comply with certain
federal requirements. As required by statute,


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HHS’ Health Care Financing Administration
(HCFA) delegated to states the responsibility
to inspect nursing homes and certify that
they meet federal standards.

However, we have identified problems in the
enforcement of these standards. In analyzing
recent inspection and complaint information
in California, we found that nearly one in
three nursing homes was cited by state
inspectors for providing care that created
serious or potentially life-threatening
problems. Although state inspectors
identified serious deficiencies, HCFA’s
enforcement policies were ineffective and
did not ensure that the deficiencies were
corrected and stayed corrected.

This is a national problem—one in nine
nursing homes in the United States was cited
in its last two inspections for conditions that
harmed residents or put residents in
immediate jeopardy. Until recently, HCFA had
taken a lenient stance toward enforcing
compliance with federal standards and had
encouraged states to grant almost all
noncompliant homes a grace period to
correct deficiencies without penalty,
regardless of past performance.




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                       HCFA  is developing plans to improve state
                       inspection practices, revise its oversight of
                       state inspection agencies and strengthen
                       enforcement actions against poorly
                       performing homes. It also plans to
                       disseminate information to consumers and
                       providers about homes’ performance records
                       and best practices for certain common care
                       problems.


Developing the         A federal environment that focuses on
Capability to Gather   results relies on new types of information
and Use Program        that are different from those that have
Performance            traditionally been collected by federal
Information to Make
                       agencies. Obtaining credible results-oriented
Decisions
                       performance information is essential for
                       accurately assessing agencies’ progress in
                       achieving goals and, in cases where
                       sufficient progress is not being made, for
                       identifying opportunities for improvement.
                       In recognition of the importance of high
                       quality performance information, the Results
                       Act requires that agencies’ annual
                       performance plans describe the means that
                       will be used to verify and validate
                       performance data. The challenge confronting
                       federal agencies is to obtain timely and
                       reliable results-oriented performance
                       information and to ensure that program



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evaluations are undertaken that allow for the
informed use of that information.

Federal agencies often depend on the state
and local agencies they are working with to
provide the performance information that
indicates whether results are being achieved.
For example, state water quality reports
required by the Clean Water Act are a key
source of information for measuring
progress in cleaning up the nation’s lakes,
rivers, and streams. However, EPA has found
that the wealth of environmental data EPA
and states collect are often difficult to
compile in a meaningful way.

Inconsistencies in water quality assessments
that are due to states using methodologies
that differ make it difficult for EPA to
aggregate the data. Therefore, using
information from various sources presents a
challenge when attempting to conclusively
determine whether the quality of rivers,
lakes, and streams is getting better or worse
over time. Absent this information, it has
been difficult for EPA to set priorities,
evaluate the success of its programs and
activities, and report on its accomplishments
in a credible and informed way.




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HHS  also needs comparable and reliable data
from the states to implement many of its
programs, including implementing welfare
reform as required by the Personal
Responsibility and Work Opportunity Act of
1996 and subsequent legislation. These
reforms require HHS to give the states
program flexibility while maintaining
adequate oversight. However, the data from
the states, where available, are often
incomplete or inconsistent. For example, HHS
will use data provided by the states to ensure
that the states are meeting new welfare
reform requirements, such as the 5-year time
limit for recipients to obtain welfare
benefits. The state information on the length
of time an individual has received welfare is
often unavailable or inconsistent, making it
difficult for HHS to enforce federal benefit
limits.

Program evaluations assist decisionmakers
by telling them whether a program is or is
not contributing to results and why.
However, our work has shown that many
agencies are not well-positioned to
undertake the program evaluations that will
be critical to assessing performance and




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identifying improvement opportunities.11 For
example, INS had no planned evaluation of
the effectiveness of its strategy to deter
illegal entry along the southwest border even
though billions of dollars have been spent in
response to concerns about the numbers of
illegal aliens entering the United States.

INS lacked vital information on several
outcomes that its border patrol strategy was
expected to achieve. For example, there
were no data to indicate whether illegal
aliens have been deterred from entering the
United States, whether there had been a
decrease in attempted reentries by those
who had previously been apprehended, and
whether the strategy had reduced border
violence. Our work has shown that INS had
an incomplete picture of the effects of
increased border control and did not know
whether the investment was producing the
intended results. In response to our report,
INS has contracted with independent
research firms for an evaluation.

Similarly, the Department of Labor lacks
accurate and reliable information needed to
effectively assess whether many of its

11
  Program Evaluation: Agencies Challenged by New Demand for
Information on Program Results (GAO/GGD-98-53, Apr. 24,
1998) and Performance Measurement and Evaluation: Definitions
and Relationships (GAO/GGD-98-26, Apr. 1998).

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                        programs are producing their intended
                        results and to determine whether its
                        resources are being used effectively. Some
                        of Labor’s responsibilities are fragmented or
                        duplicated, either within the Department or
                        by activities in other federal departments.

                        Therefore, obtaining overall information on
                        the impact of the entire federal effort is
                        particularly difficult. For example, even
                        though the Congress enacted legislation to
                        consolidate aspects of the nation’s
                        employment training system, separate
                        programs that are focused on the same
                        population, each with its own outcome and
                        performance data, remain in Labor and other
                        departments. Information on the
                        performance of the collective federal effort
                        is not available.


Opportunities Exist     The reports on individual agencies that are
to Better Use the       part of the performance and accountability
Results Act to Adopt    series discuss, as appropriate, how the
a Results Orientation   Results Act can be or is being used to help
                        address the management challenges facing
                        each individual agency. These reports show
                        how agencies’ strategic plans and annual
                        performance planning efforts have the
                        potential to provide useful information on
                        the results to be achieved. From a


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governmentwide perspective, however, we
consistently have found that agencies’ initial
strategic plans and fiscal year 1999 annual
performance plans were not as useful as
they could be for agency and congressional
decisionmakers.12

In the case of the fiscal year 1999 annual
performance plans, we identified five major
opportunities to improve the usefulness of
subsequent plans and made specific
suggestions to the Office of Management and
Budget (OMB) and the Congress on how they
could take advantage of these opportunities.
These opportunities were centered on many
of the previously discussed governmentwide
challenges, such as the need for more
results-oriented goals and performance
measures and better coordination of
crosscutting program efforts.

With regard to the coordination of
crosscutting programs, for example, most
agencies’ plans listed other agencies with
which they shared the same or similar
results, but the substantive work of
coordination was not yet evident. Few of the


12
 Managing for Results: Agencies’ Annual Performance Plans Can
Help Address Strategic Planning Challenges (GAO/GGD-98-44,
Jan. 30, 1998) and Managing for Results: An Agenda to Improve the
Usefulness of Agencies’ Annual Performance Plans
(GAO/GGD/AIMD-98-228, Sept. 8, 1998), respectively.

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annual plans showed evidence that
crosscutting programs had developed
complementary goals; mutually reinforcing
strategies; and where appropriate, common
performance measures. Based on the initial
progress that some agencies have made, the
usefulness of plans would be enhanced if all
agencies more consistently identified the
results-oriented annual performance goals
that involve other federal agencies and set
intermediate goals to clarify agency-specific
contributions to the shared results.

We also found that the value of the annual
performance plans increase as they more
fully include goals that address
mission-critical management issues, such as
those on our high-risk list and others
identified in our performance and
accountability series reports. In our
assessments of agencies’ fiscal year 1999
plans, we found that agencies, contrary to
OMB guidance, were not consistently setting
goals to address management challenges
that are mission-critical or could impede the
agencies’ ability to meet their programmatic
goals. Precise and measurable goals for
resolving management challenges are
important to ensure that the agencies have
the institutional capacity to achieve their
more results-oriented programmatic goals.


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Consistently including goals in individual
agency plans to address mission-critical
management issues would also facilitate the
integration of governmentwide and agency
performance planning processes. Under the
Results Act, OMB is to prepare a
governmentwide annual performance plan.
The first such plan was prepared for fiscal
year 1999.

That governmentwide annual performance
plan contains a clear recognition that better
management is key to improving
performance. One of the more important and
valuable reflections of that recognition is a
listing of the administration’s priority
management objectives. We found that the
clarity and effectiveness of OMB’s discussion
of these objectives could be improved by a
more integrated and focused discussion of
the strategies associated with the
objectives.13 In this regard, augmenting
agency performance plans to show that
agencies, where appropriate, are positioned
to address governmentwide priority
management objectives, such as the
production of timely and reliable financial
data throughout the year to help manage

13
 For a discussion of this section of the governmentwide plan, see
The Results Act: Assessment of the Governmentwide Performance
Plan for Fiscal Year 1999 (GAO/AIMD/GGD-98-159, Sept. 8, 1998),
pp. 9 and 18-ff.

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operations, would make the plans more
useful.

The more useful annual plans for
decisionmakers also discussed how the
agencies’ programs and strategies would
lead to the achievement of results. The
listings of current programs and initiatives,
which often were included in agencies’
plans, are useful in providing an
understanding of what agencies do.
Presentations that explain how programs
and initiatives achieve goals will help the
Congress assess the degree to which
strategies are appropriate and reasonable in
relation to the goals to be achieved.

Over the longer term, discussions of how
different governing tools (for example,
intergovernmental partnerships,
performance-based contracts, financial
grants and credits, and direct service
provision by the federal government) can be
used in achieving goals could further
enhance the value of the plans and allow for
appropriate considerations of best practices
from the public and private sectors in
service and program delivery. Such
discussions also could assist in the
development of a base of governmentwide
information on the strengths and


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weaknesses of various tools in addressing
differing public policy issues.

The annual performance plans prepared
under the Results Act provide the agencies
with an opportunity to articulate how they
will ensure that they have the timely and
reliable results-oriented performance
information they need to confidently make
decisions. Performance plans can help do
this by including a discussion of the means
agencies will use to verify and validate
performance information. Means such as
audits, program evaluations, independent
external reviews, and internal controls will
help provide confidence that performance
data are of sufficient quality to support
decisionmaking.

Especially in an environment where the
federal government influences but does not
fully determine results, program evaluations
can provide vital information about the
distinguishable contributions made through
federal efforts and ways to better leverage
those efforts. The more useful fiscal year
1999 annual performance plans showed that
some agencies were making a serious effort
to use program evaluations to better inform
decisionmaking.



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Effectively Using
Information
Technology to
Achieve Program
Results


                    The federal government is increasingly
                    dependent on information technology (IT) to
                    improve its performance and meet mission
                    goals. The government’s $1.6 trillion annual
                    budget is heavily dependent on computer
                    systems and networks to implement a vast
                    array of programs supporting national
                    defense, revenue collection, and social
                    benefits. We have issued several hundred
                    reports during this decade that document
                    (1) billions of dollars in wasted IT
                    expenditures for computer systems that
                    failed to deliver expected results, (2) poorly
                    defined management processes that fostered
                    suboptimal solutions to agency business
                    needs, and (3) the need for greater response
                    to the Year 2000 problem and computer
                    security issues that threaten the integrity of
                    agency operations. To the extent the nearly
                    $27 billion in planned annual obligations for
                    computer technology and information
                    systems can be spent more wisely, federal



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programs will operate more efficiently with
less cost.

To ensure that IT dollars are directed toward
prudent investments designed to achieve
cost savings, increase productivity, and
improve the timeliness and quality of service
delivery, agencies need to successfully
deploy modern IT management practices that
ensure that IT investments support
mission-related goals and are integrated
within the agencies’ strategic plans. Our
research of leading private and public sector
organizations identified specific
management practices used to achieve such
benefits.14

To help achieve similar benefits across all
government functions and programs, the
Congress passed the PRA and the
Clinger-Cohen Act of 1996. This information
technology legislation builds on the best
practices of leading public and private
organizations by requiring agencies to better
link their information technology planning
and investment decisions to program
missions and goals. Just as technology is

14
 Executive Guide: Improving Mission Performance Through
Strategic Information Management and Technology
(GAO/AIMD-94-115, May 1994) and Information Technology: Best
Practices Can Improve Performance and Produce Results
(GAO/T-AIMD-96-46, Feb. 26, 1996).

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most effective when it supports defined
business needs and objectives, the PRA and
Clinger-Cohen Act will be more powerful if
they can be integrated with the objectives of
broader governmentwide management
reforms.

The Clinger-Cohen Act contains critical
provisions requiring federal agencies to use
investment and capital planning processes to
manage their information management and
technology portfolios. Further, it requires
that agencies modernize inefficient
administrative and mission-related work
processes before making significant
technology investments to support them.

To assist in implementation, we have
worked with OMB to design new, more
effective governmentwide guidance,
including a joint guide published in 1995 that
established a “select, control, and evaluate”
decisionmaking framework.15 We also have
issued comprehensive evaluation guidance
on IT investment decisionmaking and
business process reengineering, and we have
provided expertise in constructing OMB’s new
governmentwide guidance on capital

15
 Evaluating Information Technology Investments: A Practical
Guide, Version 1.0, Nov. 1995 (Executive Office of the President,
Office of Management and Budget, Office of Information and
Regulatory Affairs, Information Policy and Technology Branch).

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program planning.16 All of these efforts are
intended to enhance the implementation
pace and rigor of the IT management reforms
by providing agencies with examples and
common approaches of effective
management practices.

Creating and maintaining momentum for
implementing these reforms is critical to
improving the federal government’s
lackluster track record in managing its
enormous portfolio of information
technology initiatives.17 Although the
Congress passed the Clinger-Cohen Act in
1996, it is still in the early stages of
implementation in most federal agencies.
Yet, constructive changes are occurring.
Federal policies and guidance are being
updated and revamped to be in concert with
the new legislative requirements, and several
agencies are taking positive actions to revise
IT management approaches.



16
 Assessing Risks and Returns: A Guide for Evaluating Federal
Agencies’ IT Investment Decision-making, Version 1
(GAO/AIMD-10.1.13, Feb. 1997); Business Process Reengineering
Assessment Guide, Version 3 (GAO/AIMD-10.1.15, Apr. 1997);
Capital Programming Guide, Version 1.0 (Executive Office of the
President, Office of Management and Budget, July 1997); and OMB
Circular A-11 Revised, Part 3, “Planning, Budgeting, and
Acquisition of Capital Assets,” June 23, 1997.
17
 Information Management Reform: Effective Implementation is
Essential for Improving Federal Performance (GAO/T-AIMD-96-132,
July 17, 1996).

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Progress, although mixed, is being made on
several fronts. Governmentwide guidance in
areas such as IT capital planning and
investment, information architectures, and
strategic planning was updated and refined
during 1997 and 1998 to assist with agency
implementation.18 Toward this end, we have
worked with the Congress, the executive
branch, and the federal Chief Information
Officers (CIO) Council in preparing guidance
on IT investment management, IT
performance management, information
security practices, and Year 2000 program
and project management that has been
widely accepted and adopted throughout
government.

Additionally, the federal CIO Council has
been instrumental in developing
recommendations for policies and standards
that are closely aligned with legislative
requirements. Over the last 2 years, the




18
  OMB Memorandum M-97-02, “Funding Information Systems
Investments,” Oct. 25, 1996; OMB Circular A-130 Revised,
“Management of Federal Information Resources,” Feb. 8, 1996;
OMB Circular A-11 Revised, Part 3, “Planning, Budgeting, and
Acquisition of Capital Assets,” June 25, 1997; OMB Memorandum
M-97-16, “Information Technology Architectures,” June 18, 1997.

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    Council has focused on six strategic areas

•   Year 2000 conversion problems;
•   capital planning and investment processes;
•   information security practices and policies;
•   skills and competencies to develop,
    maintain, manage, and use IT programs,
    projects, and systems;
•   federal information architecture and
    interoperability issues; and
•   outreach programs with federal
    organizations, industry, the Congress, and
    the public.

    These are appropriate priorities for the
    Council and coincide with issues we have
    raised in our high-risk updates and
    recommendations formulated in conjunction
    with specific audit work. They also parallel
    concerns that have been raised by the
    Congress about federal IT management.

    Furthermore, there is evidence to suggest
    that agencies are responding with concerted
    actions to effectively address critical IT
    management shortcomings. For example, in
    response to our reviews, the Federal
    Aviation Administration (FAA) is developing a
    complete air traffic control systems
    architecture, establishing defined
    cost-estimating processes, improving its
    software acquisition capability, and has
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committed to hiring a CIO who reports
directly to FAA’s Administrator.19

Similarly, after years of huge IT investments
with only marginal results, the IRS has taken
noteworthy steps to strengthen its IT
management capabilities. For instance, it has
hired a CIO and created an investment review
board to make joint decisions about IT
investments, produced the first two levels of
a four level modernization blueprint for the
Congress, and selected a prime systems
modernization integration contractor to
overhaul its systems over the next 10 to 15
years.20 We are seeing similar patterns of
increased management attention and
concerted efforts to address past IT
shortcomings at other high-risk agencies,
such as the National Weather Service and
DOD.


Nevertheless, IT management reforms are
still in their nascent stages in most federal
agencies. Indeed, most agencies are
preoccupied with resolving their Year 2000
problems. As noted in our High-Risk Series:
An Update report, agencies that fail to
successfully correct this problem run the
very real risk of complete loss or serious

19
  See GAO/HR-99-1, Jan. 1999.
20
  See GAO/HR-99-1, Jan. 1999.

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    degradation of key business processes.
    Agencies also share a common risk with
    poor information security. We reported that
    major agencies have serious computer
    security weaknesses that put agency
    operations at risk.21

    Agencies also continue to struggle to
    implement the management processes
    required by the Clinger-Cohen Act and the
    PRA. Our recent reviews show that numerous
    agencies continue to be challenged by

•   weaknesses with IT investment selection and
    control processes, including (1) a lack of
    clarity concerning how IT investments are
    being or will be used to improve
    performance or help achieve specific agency
    goals and (2) incomplete data upon which to
    base informed decisions;
•   slow progress in designing and implementing
    IT architectures before proceeding with
    massive systems modernization efforts;
•   immature software development, cost
    estimation, and acquisition practices; and
•   the need to build effective CIO leadership and
    organizations.




    21
     Information Security: Serious Weaknesses Place Critical Federal
    Operations and Assets at Risk (GAO/AIMD-98-92, Sept. 23, 1998).

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Strengthening IT    Effective IT investment management
Investment and      processes—a cornerstone of the
Control Processes   Clinger-Cohen Act reforms—are of key
                    concern. These processes are essential for
                    implementing performance-based
                    management in that they can demonstrate
                    how technology is being used to support
                    better informed management decisions,
                    increase the efficiency and effectiveness of
                    government operations,
                    and—ultimately—provide more
                    cost-effective delivery of government
                    services to the public.

                    Progress has been made in addressing some
                    of the fundamental elements of IT investment
                    management as demonstrated by the
                    widespread creation of IT investment review
                    boards and the development of more robust
                    procedures for making IT project choices.
                    But many of our reviews have pinpointed
                    critical flaws, such as a lack of discipline in
                    ensuring complete, up-to-date cost, benefit,
                    and risk data on projects and a focus on
                    justifying new proposals rather than
                    controlling and evaluating the entire
                    portfolio of IT investments being undertaken
                    by the agency. Moreover, our reviews of
                    strategic plans and annual performance
                    plans of the 24 departments and agencies
                    covered by the CFO Act generally have noted


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weak linkages between the mission goals
and planned or ongoing information
technology initiatives that are essential to
the achievement of those goals.22

We have previously reported on several of
these problems in individual agency reviews.
For example, at HCFA, our review of the
proposed Medicare Transaction System
(MTS) found an absence of cost-benefit
analyses and inadequate involvement of
senior level officials in monitoring major
decisions made at critical project milestone
dates.23 Moreover, we noted that HCFA had
not adequately reviewed, revised, and
improved mission-related and administrative
processes before making significant
investments in MTS. These weaknesses led to
the termination and subsequent
reassessment of the project after cost
estimates had soared nearly 7-fold over 5
years, from $151 million in 1992 to about
$1 billion in 1997.

Similarly, our analyses of IT investment
management processes at DOD and VA also

22
 Managing for Results: Critical Issues for Improving Federal
Agencies Strategic Plans (GAO/GGD-97-180, Sept. 16, 1997) and
GAO/GGD-98-44, Jan. 30, 1998.
23
 Medicare Transaction System: Serious Managerial and Technical
Weaknesses Threaten Modernization (GAO/T-AIMD-97-91, May 16,
1997).

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have discovered the absence of cost, benefit,
and risk data that are essential for managers
and executives to use in reaching decisions
about proposed IT investments or assessing
the return on investment for completed
projects.24 With the size of the investment
portfolios involved—nearly $1 billion in the
fiscal year 1999 budget request at VA and
some $18 billion expected to be spent
between 1995 and 2000 for systems
migration at DOD—better cost and
performance data to make informed choices
are a necessity.

At the Department of Housing and Urban
Development (HUD), we recently reported
that investment selection decisions about its
Financial Systems Integration initiative—an
estimated $371 million project designed to
provide managers timely and accurate
information—have not been based on
current, complete cost and benefit data. As
such, expected costs remain uncertain. In
addition, HUD’s investment management
processes were incomplete and little
attention was paid to comparing the
expected versus actual project cost,
schedule, benefit, and risk data or

24
 Defense IRM: Poor Implementation of Management Controls Has
Put Migration Strategy at Risk (GAO/AIMD-98-5, Oct. 20, 1997) and
VA Information Technology: Improvements Needed to Implement
Legislative Reforms (GAO/AIMD-98-154, July 7, 1998).

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                  performing critical post-implementation
                  reviews of completed projects.25

                  As agencies continue to implement and
                  refine their IT investment decisionmaking
                  approaches, it is imperative that they first
                  focus on establishing complete investment
                  processes that factor in effective control and
                  evaluation mechanisms for significant
                  dollars dedicated to ongoing IT investment
                  projects. Second, steps must be taken to
                  ensure that IT projects are tightly linked to
                  business cases and monitored in terms of
                  their contribution to improvement in
                  program results. And third, actions must be
                  instigated for improving veracity of cost and
                  benefit data so that informed management
                  decisions can be made.


Implementing IT   Another area of continuing concern is the
Architectures     implementation of IT architectures. As
                  underscored by the Clinger-Cohen Act and
                  executive branch guidance, complete and
                  enforceable systems architectures are
                  essential foundations on which the
                  interoperability and coordination of related
                  business processes and systems are built.
                  These “construction plans” systematically

                  25
                   HUD Information Systems: Improved Management Practices
                  Needed to Control Integration Cost and Schedule
                  (GAO/AIMD-99-25, Dec. 18, 1998).

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detail the full breadth and depth of an
organization’s mission-based mode of
operations in logical and technical terms.
Without these blueprints to guide and
constrain large scale systems development
activities, there is no systematic way to
preclude either inconsistent systems design
or development decisions or the resulting
suboptimal performance and added cost
associated with incompatible systems.

In general, we have found that agencies have
embarked upon massive modernization
projects without defined information
architectures in place. This often results in
the proliferation of nonintegrated systems
that leads to problems in systems interface
and data exchange, confusion for users, and
delays in program operations.

For example, at FAA, we have raised
concerns about the lack of complete systems
architecture to guide over $25 billion
appropriated to modernize its aging air
traffic control system from fiscal year 1981
through fiscal year 1998 and an additional
$17 billion needed for fiscal years 1999
through 2004. Without the benefit of this
overall systems blueprint to guide the
program, FAA has experienced higher costs
to develop, integrate, and maintain hardware


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and software that is essential to air traffic
control modernization.26

We have consistently raised questions at the
National Weather Service about the lack of a
comprehensive architecture to guide the
$4.5 billion estimated in fiscal year 1997 to
modernize its systems used to observe
weather, improve weather forecasts and
predictions, and achieve higher
productivity.27 Again, this has resulted in
higher costs and protracted delays in
integrating the array of complex systems
essential for improving forecasting
operations and capabilities.

At the Customs Service, an incomplete
systems architecture has hindered its ability
to effectively manage the development of its
Automated Commercial Environment (ACE)
system. At the end of fiscal year 1998,
Customs reported that it had spent
$62.1 million on ACE, with an estimated total
cost of $1.05 billion to develop, operate, and
maintain ACE between 1994 and 2008. Yet, we
have reported that Customs does not have a
thorough understanding of its agencywide


26
 Air Traffic Control: Status of FAA’s Modernization Program
(GAO/RCED-99-25, Dec. 3, 1998).
27
 Weather Service Modernization: Risks Remain That Full Systems
Potential Will Not Be Achieved (GAO/T-AIMD-97-85, Apr. 24, 1997).

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Major Performance and Management
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functional and information needs.
Consequently, there is not adequate
assurance that Customs’ information
systems will optimally support Customs’
ability to (1) fully collect and accurately
account for billions of dollars in annual
federal revenue and (2) allow for the
expeditious movement of legal goods and
passengers across the nation’s borders.28

Finally, at the Department of Education, the
lack of a sound, integrated information
systems architecture for managing the
Department’s array of information systems
used to support student financial aid
programs has contributed to problems in
data exchanges, questionable data accuracy,
and unnecessary redundancy across
systems. In fiscal year 1998, the Department
expected to spend some $320.5 million on
contracts used to maintain these systems.29

These previous reviews highlight the need
for agencies to consult and implement
existing guidance on approaches for

28
 Customs Service Modernization: ACE Poses Risks and Challenges
(GAO/T-AIMD-97-96, May 15, 1997) and Customs Service
Modernization: Architecture Must Be Complete and Enforced to
Effectively Build and Maintain Systems (GAO/AIMD-98-70, May 5,
1998).
29
 Department of Education: Multiple, Nonintegrated Systems
Hamper Management of Student Financial Aid Programs
(GAO/T-HEHS/AIMD-97-132, May 15, 1997).

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                     developing information architectures issued
                     by GAO, OMB, and the federal CIO Council.30 As
                     noted in our own guidance to agencies,
                     serious attention should be focused on
                     defining complete architectural frameworks
                     both in (1) logical terms, such as defining
                     business functions and associated
                     information flows and interrelationships,
                     and (2) technical or physical terms, such as
                     specifying hardware, software, data,
                     communications, security, and performance
                     characteristics. This is an essential
                     prerequisite to large, complex systems
                     development activities involving multiple
                     systems.


Developing and       We also see continued challenges for
Acquiring Software   agencies in putting in place disciplined
                     systems development practices, particularly
                     as they relate to developing and acquiring
                     software. Software development has been
                     identified by many experts as one of the
                     riskiest and most costly aspects of systems
                     development. Without disciplined
                     approaches to software development

                     30
                      Strategic Information Planning: Framework for Designing and
                     Developing System Architectures (GAO/IMTEC-92-51, June 1992);
                     OMB Memorandum M-97-16, Information Technology
                     Architectures, June 18, 1997; and Federal Enterprise Architecture
                     Conceptual Framework, Developed by the Federal Conceptual
                     Model Subgroup for the Chief Information Officers’ Council,
                     Aug. 1998.

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capability, agencies can easily fall prey to ad
hoc and chaotic processes that subject
projects to continuing risks of cost overruns,
poor quality software, and lengthy
scheduling delays.

Our reviews at FAA and the Veterans Benefits
Administration (VBA) have discussed how the
ad hoc, sometimes chaotic nature of
software acquisition capabilities put these
agencies at tremendous risk of not delivering
new software capabilities on time and within
budget. For example, at FAA, we reported
that the agency’s processes for acquiring
software for its complex air traffic control
systems modernization initiatives were ad
hoc and nonrepeatable across projects and
significantly contributed to FAA’s frequent
failures to deliver promised system
capabilities on time and within budget.31

At VBA, we reported that the agency was
operating with immature software
development capability. We also noted that
VBA had inadequate software engineering
process improvement training for key
software development personnel and
managers. VBA had not validated contractor


31
  Air Traffic Control: Immature Software Acquisition Processes
Increase FAA System Acquisition Risks (GAO/AIMD-97-47, Mar. 21,
1997).

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certification of its software development
maturity level.32

To address these kinds of deficiencies,
agencies need to put in place rigorous
software development improvement plans
and processes, patterning them for example
after Carnegie Mellon’s Software
Engineering Institute’s software evaluation
methodology.33 In addition, as we have
recommended to several agencies where we
have conducted software development
capability reviews, agencies should take
steps to have periodic independent
assessments made of their existing software
development and acquisition capabilities and
specific improvement plans initiated. And
lastly, agency executives should ensure that
the planned IT investment scope and pace is
commensurate with the organization’s
capability to deliver or oversee high quality
software products and services.




32
 Veterans Benefits Modernization: VBA Has Begun to Address
Software Development Weaknesses But Work Remains
(GAO/AIMD-97-154, Sept. 15, 1997).
33
  The Software Engineering Institute is a nationally recognized,
federally funded research and development center established at
Carnegie Mellon University in Pittsburgh, Pennsylvania, to address
software development issues.

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Building the CIO      The PRA and the Clinger-Cohen Act clearly
Organizational        require that agency heads and their
Capacity to Achieve   executive management teams must be
Lasting IT Reforms    involved in, and held accountable for,
                      investments in information technology. In a
                      resounding fashion, the global Year 2000
                      date conversion crisis has reminded
                      executives of the essential role that
                      information systems and technology now
                      play in running and managing their
                      organizations.

                      The information technology reforms now
                      required by the Congress will be difficult for
                      agencies to achieve without effective CIO
                      leadership in place to ensure that IT
                      investment decisions are directly integrated
                      into the agencies’ strategic and program
                      plans. The Clinger-Cohen Act established
                      federal CIOs throughout government and
                      envisioned their role to be much more than
                      that of a senior technology manager. The CIO
                      is responsible for working with senior
                      managers to ensure that information
                      management is designed to achieve strategic
                      performance goals; promote improvements
                      in work processes; implement an integrated
                      information technology architecture; and
                      strengthen IT knowledge, skills, and
                      capabilities.



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Getting the right people into CIO positions
can make a real difference in the pace of the
implementation and the quality of
technology management improvements. The
escalating demands of rapidly evolving
technologies and the formidable tasks
associated with the position—including
managing Year 2000 date conversion efforts,
computer security, systems architecture
management, and software acquisition and
development—require the full-time attention
of a CIO.

Success in dealing with these issues will also
depend heavily upon the skills and
performance of the entire CIO organization
within departments and agencies. A great
deal of executive management attention
needs to be focused on putting in place
disciplined technology management
processes for designing and implementing
systems architectures, information security
procedures, investment decisionmaking
processes, and software development and
acquisition. Without these capabilities in
place, CIO organizations will be handicapped
in their ability to deliver high quality,
cost-effective results that support mission
needs.




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Establishing
Financial
Management
Capabilities That
Effectively
Support
Decisionmaking
                    Federal decisionmakers must have reliable,
and
                    timely performance and financial
Accountability      information to ensure adequate
                    accountability, manage for results, and make
                    well-informed judgments. Unfortunately,
                    such information has historically not been
                    routinely available across government. The
                    combination of reforms ushered in by the
                    Results Act and the CFO legislation, however,
                    will, if successfully implemented,
                    systematically fill this void and generate the
                    necessary foundation to effectively run a
                    results-oriented government.

                    The requirements for performance
                    measurement information under the Results
                    Act, in conjunction with the mandate to
                    produce reliable, meaningful financial data
                    under the CFO Act, are introducing
                    unprecedented changes in management and
                    financial accountability for our national
                    government. To promote the necessary
                    framework for accountability, the CFO Act
                    also set expectations for agencies to develop

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                     and deploy more modern financial
                     management systems; to routinely produce
                     sound cost and operating performance
                     information; and to design results-oriented
                     reports on the government’s financial
                     condition by integrating, budget, accounting,
                     and program information.


Producing Reliable   The challenge of developing financial reports
Financial Reports    that are specifically tailored to meet
                     decisionmakers’ needs based on consistent
                     accounting standards is being met in part by
                     the Federal Accounting Standards Advisory
                     Board (FASAB).34 FASAB has assembled a new
                     set of accounting concepts and standards35
                     to underpin the form and content of
                     individual agency financial statements under
                     the CFO Act as well as the consolidated
                     financial statements for the U.S. government.
                     FASAB’s financial reporting objectives require
                     reporting on (1) budgetary integrity,
                     (2) operating performance, (3) stewardship,
                     and (4) controls. Through this new reporting

                     34
                       FASAB was created by the Secretary of the Treasury, the Director
                     of OMB, and the Comptroller General in October 1990 to consider
                     and recommend federal accounting standards. Treasury, OMB, and
                     GAO then decide whether to adopt the recommended standards; if
                     they do, the standards are published by OMB and GAO and become
                     effective.
                     35
                       FASAB, Overview of Federal Accounting Concepts and Standards
                     (as of Sept. 30, 1996): Reporting Relevant Financial Information,
                     Report Number 1, Dec. 31, 1996.

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    model, decisionmakers and the public now
    annually receive for all major departments
    and agencies audited financial reports that
    are to

•   present a top-level overview discussion of
    trends in financial performance and
    commentary on performance results that are
    consistent with goals and measures used
    under the Results Act;
•   detail the uses of budgetary resources,
    obligations incurred, outlays, and the
    balance of budgetary resources available;
•   show the net cost of operations and
    programs that enables users to relate costs
    to outputs and results;
•   report operating assets available for use in
    providing goods, services, and benefits and
    all liabilities incurred, with special displays
    of those that would require future funding by
    the Congress; and finally
•   reflect the nation’s assets and investments
    for which there is a federal stewardship
    responsibility, such as national forests.

    The challenge will be to fully meet these
    reporting objectives. Toward that end, there
    has been progress, with all 24 CFO Act
    agencies preparing annual financial
    statements beginning with fiscal year 1996,
    and 11 of these agencies receiving


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unqualified audit opinions for fiscal year
1997—up from 6 for fiscal year 1996. At the
same time, there are major obstacles to
overcome, both at the agency level and in
preparing reliable, consolidated financial
statements for the U.S. government.

The most serious challenges are framed by
the results of our first-ever audit of those
financial statements, for fiscal year 1997.36 In
summary, significant, widespread financial
system weaknesses, problems with
fundamental recordkeeping, incomplete
documentation, and weak internal controls,
including computer controls, prevented the
government from accurately reporting a
large portion of its assets, liabilities, and
costs. These deficiencies not only affect the
reliability of financial statements, but also
undermine the ability to accurately measure
the full cost and financial performance of
programs and to effectively safeguard
federal assets and manage operations.

Material financial management deficiencies
at DOD, with its vast worldwide operations
and long history of poor financial
management, represent the single largest
obstacle to improving the reliability of the

36
 Financial Audit: 1997 Consolidated Financial Statements of the
United States Government (GAO/AIMD-98-127, Mar. 31, 1998).

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government’s consolidated financial
statements.37 No major part of DOD has been
able to pass the test of an independent
financial statement audit because of
pervasive weaknesses in DOD’s financial
operations and systems, which led us, in
1995, to put DOD financial management on
our high-risk list—a situation that continues
today.

Other agencies face difficult challenges as
well, as they work to improve financial
management and fully attain the goals of the
CFO Act. For example, the Forest Service
continues to be plagued by serious
shortcomings that resulted in significant
reporting errors in its financial statements, a
lack of policies and procedures to
adequately safeguard assets, and an inability
to accurately track revenues and costs. Due
to the severity of the problems, the Forest
Service did not prepare financial statements
for fiscal year 1996, but chose instead to
focus on resolving these problems. However,
the Inspector General issued a disclaimer of
opinion on the Forest Service’s most recent
financial statements, those for fiscal year
1997, citing major weaknesses in the
agency’s accounting and financial reporting,

37
 Department of Defense: Financial Audits Highlight Continuing
Challenges to Correct Serious Financial Management Problems
(GAO/T-AIMD/NSIAD-98-158, Apr. 16, 1998).

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and this year the Forest Service’s financial
management was added to our high-risk list.

Likewise, FAA’s financial management was
added to our high-risk list this year. FAA’s
continuing serious problems in accounting
for property, plant, and equipment and
inventory and related property, which were
the principal reasons the Inspector General
issued a disclaimer of opinion on the
agency’s fiscal year 1997 financial
statements, affect FAA’s ability to properly
manage these assets and may result in
operating inefficiencies and the inability to
make prudent business decisions and
safeguard assets. Theft could go undetected
and funds could be spent to acquire
equipment already on hand.

HCFA also faces major financial management
challenges. The fiscal year 1997 financial
statement audit again reported HCFA’s
inadequate oversight of the Medicare
program as a material weakness—one that
hampers HCFA’s fiduciary responsibilities.
For example, HCFA had not developed its
own process for estimating the national
error rate for fee-for-service payments. For
fiscal year 1997, the HHS Inspector General
estimated that about 11 percent of all
Medicare fee-for-service payments for


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claims, or about $20 billion, did not comply
with Medicare laws and regulations.

Financial management has been designated
one of OMB’s priority management objectives,
with a goal of producing performance and
cost information in a timely, informative, and
accurate way, consistent with federal
accounting standards. To help accomplish
this goal, a May 26, 1998, Presidential
memorandum required agency heads to
develop plans for resolving the problems
that have been identified. Further, House
Resolution 447, passed on June 9, 1998,
underscored congressional expectations for
timely resolution of the problems.

Considerable effort is now being exerted to
address the problems, and several agencies,
such as SSA, have made good progress
toward achieving financial management
reform goals. With a concerted effort, the
federal government as a whole can continue
to make progress toward generating reliable
financial information on a regular basis.
Annual audited financial statements are
essential to sustaining and measuring the
effectiveness of the improvements now
under way.




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While audited financial statements are
essential to identifying any serious financial
management problems that might exist,
helping ensure accountability, and providing
an annual public scorecard on
accountability, an unqualified audit opinion,
while certainly important, is not an end in
itself. The CFO Act is focused on providing
accurate, timely, and relevant financial
information needed for management
decisionmaking and accountability, on a
systematic basis, throughout the year.
Efforts to obtain reliable year-end data that
are not backed up by fundamental
improvements in underlying financial
management systems and operations that
enable the routine production of accurate,
timely, and relevant data to support ongoing
program management and accountability
will not achieve the intended results of the
CFO Act over the long-term.


For example, after several years of
concerted effort by IRS and GAO, for fiscal
year 1997 we were for the first time able to
conclude that IRS’ custodial financial
statements, covering over $1.6 trillion in tax
revenue, were reliable.38 Prior to fiscal year

38
 Internal Revenue Service: Remaining Challenges to Achieve
Lasting Financial Improvements (GAO/T-AIMD/GGD-98-139, Apr.
15, 1998) and Financial Audit: Examination of IRS’ Fiscal Year 1997
Custodial Financial Statements (GAO/AIMD-98-77, Feb. 26, 1998).

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                     1997, weaknesses in IRS’ internal controls
                     and financial management systems
                     prevented it from producing reliable
                     year-end financial information. Our ability to
                     conclude that the fiscal year 1997 custodial
                     financial statements were reliable was a
                     mark of progress. However, this was
                     accomplished only after extensive use of ad
                     hoc programming by IRS to extract data from
                     its systems, followed by numerous
                     adjustments to these data totaling tens of
                     billions of dollars to produce final financial
                     statements. IRS’ controls and systems remain
                     plagued by weaknesses that affect its ability,
                     among other things, to report reliable
                     financial information throughout the year,
                     and IRS’ financial management remains a
                     high-risk area.


Ensuring That        Serious systems problems limit the
Federal Management   reliability, usefulness, and timeliness of
Financial Systems    financial information needed to effectively
Can Perform to       manage federal programs and operations.
Standards
                     For some agencies, the preparation of
                     financial statements requires considerable
                     reliance on ad hoc programming and
                     analysis of data produced by inadequate
                     financial management systems that are not
                     integrated or reconciled, and that often
                     require significant audit adjustments. Thus,


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the overarching challenge in generating
timely, reliable data throughout the year is
overhauling financial and related
management information systems. This
overhaul has as its core objective the ability
to (1) integrate financial, budget, and
program information; (2) provide
information for decisionmaking both
throughout the year and at year-end; and
(3) provide cost information that can be
related to programs and operations under
the Results Act.

Fiscal year 1997 ushered in the new
requirements of the 1996 Federal Financial
Management Improvement Act (FFMIA),
which is focused on ensuring greater
attention to making much needed
improvements in underlying systems. This
act requires that agency financial
management systems comply with
(1) federal systems requirements,39
(2) federal accounting standards, and (3) the
U.S. Government Standard General Ledger at
the transaction level. For fiscal year 1997, 20
of the 24 CFO Act agencies’ financial
management systems were found by

39
  The financial management systems requirements have been
developed by the Joint Financial Management Improvement
Program (JFMIP), which is a joint and cooperative undertaking of
the Department of the Treasury, OMB, GAO, and the Office of
Personnel Management.

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auditors to be in substantial noncompliance
with FFMIA’s requirements.40 The four
agencies in compliance were DOE, the
National Aeronautics and Space
Administration, the General Services
Administration, and the National Science
Foundation.

Agencies are challenged to improve their
critical existing financial systems
applications, which are not designed to fully
meet current accounting standards and
financial system requirements. These
systems will need to be replaced or
significantly upgraded in the next 5 years. At
the end of fiscal year 1997, agencies
identified 809 financial management system
applications that fall into this category,
representing 72 percent of the applications
in operation at the time. Therefore, it will
take time and concerted effort to raise
federal financial management systems to the
level of quality and reliability envisioned in
FFMIA. In addition, agencies face the Year
2000 computing challenge of ensuring that
their current systems function properly at
the turn of the century. This task is
appropriately taking priority and will likely


40
 Financial Management: Federal Financial Management
Improvement Act Results for Fiscal Year 1997 (GAO/AIMD-98-268,
Sept. 30, 1998).

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                     sidetrack temporarily longer term system
                     modernizations.41


Developing Cost      Cost accounting also remains a key
Accounting Systems   challenge in providing accountability and
and Accountability   supporting the Results Act. Along with the
Reports              new financial reporting model, new cost
                     accounting standards became effective in
                     fiscal year 1998.42 These standards require
                     agencies to develop measures of the full
                     costs of carrying out a mission, producing
                     products, or delivering services. Thus,
                     decisionmakers are to have information on
                     the costs of all resources used to allow for a
                     comparison of the costs of various programs
                     and activities and their performance outputs
                     and results. Developing the necessary
                     approach to gather and analyze needed
                     program and activity-level cost information
                     will be a substantial undertaking; while there
                     is a broad recognition of the importance of
                     doing so, for the most part, agencies have
                     just begun this effort.




                     41
                      Year 2000 Computing Crisis: Actions Must Be Taken Now to
                     Address Slow Pace of Federal Progress (GAO/AIMD-98-205,
                     June 10, 1998).
                     42
                      Statement of Federal Financial Accounting Standards No. 4:
                     “Managerial Cost Accounting Standards,” issued July 1995, to be
                     effective October 1, 1997.

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    Finally, as authorized by the 1994
    Government Management Reform Act, OMB is
    piloting accountability reports that provide a
    single overview of federal agencies’
    performance. For fiscal year 1997, 12
    agencies prepared accountability reports,
    and 18 are expected to do so for fiscal year
    1998. By seeking to consolidate and integrate
    the separate reporting requirements of the
    Results Act, the CFO Act, and other specified
    acts, the accountability reports are to show
    the degree to which an agency met its goals,
    at what cost, and whether the agency was
    well run. SSA, which has received an
    unqualified opinion on its financial
    statements for fiscal years 1994 to 1998, has
    been a leader in accountability reporting. Its
    fiscal year 1998 accountability report,
    published on November 20, 1998 (less than 2
    months after the close of the fiscal year),
    includes, among other things,

•   the audited financial statements and the
    auditor’s report;
•   a 10-year summary of financial highlights;
•   SSA’s performance goals and results and its
    Results Act report; and
•   a discussion of the major issues facing SSA,
    including the status of efforts to address the
    Year 2000 compliance issue.



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                   Accountability reports that present an
                   agency’s financial condition and the results
                   of its operations in an integrated way hold
                   great promise for enhancing the usefulness
                   of performance information. Such reports
                   and independent audits will help correct the
                   problem of the lack of complete and reliable
                   information that has been a source of
                   concern for congressional and agency
                   decisionmakers for decades. If effectively
                   implemented, accountability reports that
                   include information on the full cost and
                   results of carrying out federal activities
                   could greatly aid decisionmaking for our
                   national government.



Building,
Maintaining, and
Marshaling the
Human Capital
Needed to
Achieve Results

                   Leading performance-based organizations
                   understand that effectively managing the
                   organization’s employees—or human
                   capital—is essential to achieving results.
                   People are an organization’s most important


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asset, especially within service-providing
organizations. Only when the right
employees are on board and are provided
the training, tools, structures, incentives, and
accountability to work effectively is
organizational success possible. Thus,
human capital planning must be an integral
part of an organization’s strategic and
program planning; human capital itself
should be thought of not as a cost to be
minimized but as a strategic asset to be
enhanced. The challenge—and
opportunity—confronting federal agencies
as they seek to become more
performance-based is to ensure that their
human capital policies and practices are
aligned with the particular agency’s program
goals and strategies.43

Human capital will become an increasingly
prominent issue for the federal government
as agencies implement the
performance-based management agenda
established by the Congress in the 1990s.
Whereas financial management, information
technology management, and
results-oriented goal-setting and
performance measurement have all been the

43
 Performance Management: Aligning Employee Performance With
Agency Goals at Six Results Act Pilots (GAO/GGD-98-162, Sept. 4,
1998) and Transforming the Civil Service: Building the Workforce
of the Future (GAO/GGD-96-35, Dec. 26, 1995).

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                       subject of major reform legislation this
                       decade, no consensus has emerged on the
                       fundamental structural or policy changes
                       that may be needed to better align the
                       federal government’s human capital
                       approaches with the new performance-based
                       framework for management and
                       accountability. Human capital reforms (for
                       example, changes to the civil service system)
                       will be necessary in order to fully realize the
                       benefits which can be gained through a
                       well-defined performance-based
                       management and accountability framework.
                       In that regard, we will work with the
                       Congress to develop a body of work that
                       helps to define the guiding principles and
                       best practices for federal human capital
                       issues.


Adopting a Strategic   Strategic human capital planning has
Approach to Human      traditionally been a weak link in federal
Capital Planning       agency management and has not
                       consistently been part of agencies’ strategic
                       and programmatic approaches to
                       accomplishing their missions. For example,
                       HUD initiated its 2020 Management Reform
                       Plan to, among other things, correct several
                       management deficiencies. While it has made
                       progress, having the right number of staff
                       with the proper skills remains a challenge


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for HUD. One of HUD’s 2020 Management
Reform Plan’s goals was to reduce staffing
from about 10,500 to 7,500 by 2002.
However, we found that HUD’s target levels
were not based on a systematic analysis of
how many staff it needed to carry out a given
responsibility or function.

This weakness in HUD’s human capital
planning is particularly troubling because, in
the past, not having enough staff with the
necessary skills has limited HUD’s ability to
perform essential functions, such as
monitoring multibillion dollar federal
programs. As discussed in detail in
Performance and Accountability Series:
Major Management Challenges and Program
Risks: The Department of Housing and
Urban Development, HUD’s human capital
problems, together with its other
management deficiencies, place the integrity
and accountability of HUD’s programs at risk.

A strategic approach to human capital
directly integrates decisions about the
results the organization is striving to
achieve. It also takes into account an
organization’s human capital needs, the way
the capital will be obtained, the cost of
obtaining it, and the way human capital will
be used.


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Acquiring and         Given the rapid pace of social and
Developing Staff      technological change, in addition to the
With the Skills to    shifts in strategies agencies adopt to achieve
Meet Critical Needs   their missions, agencies are continually
                      faced with the challenge of attracting,
                      retaining, and motivating appropriately
                      skilled staff. Skills gaps in critical mission
                      areas undermine agencies’ effectiveness and
                      efforts to address high-risk areas.

                      For example, the lack of staff with the
                      requisite technical skills has limited the
                      effectiveness of DOE’s self-regulation and
                      contributed to the environmental problems
                      at many of DOE’s facilities. The Defense
                      Nuclear Facilities Safety Board has
                      repeatedly stated in its annual reports to the
                      Congress that the lack of appropriate
                      technical expertise in DOE is a significant
                      problem. As we have reported since 1991,
                      managers throughout DOE have told us that
                      the lack of skilled staff in program and
                      contracting oversight positions is one of the
                      most fundamental challenges for the
                      Department. In March 1997, we reported that
                      DOE did not assign enough staff with the
                      proper technical capability to oversee the
                      early stages of a project at the Fernald site in
                      Ohio, resulting in major cleanup problems
                      that could have been avoided.



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                 DOD  is another department that has
                 experienced difficulties in finding and
                 retaining staff with the technical training it
                 needs. To achieve the wide-ranging reforms
                 necessary to address its long-standing
                 financial management deficiencies, DOD must
                 upgrade the skills of its financial personnel.
                 DOD’s vast financial operations involve a
                 cadre of about 32,000 financial management
                 personnel. Our survey of over 1,400 key DOD
                 financial managers—individuals often
                 serving in comptroller, deputy comptroller,
                 or budget officer positions—showed that
                 over half (53 percent) had received no
                 financial or accounting-related training
                 during 1995 and 1996. DOD is relying on these
                 personnel to lead its efforts to produce
                 reliable financial data. This will require DOD’s
                 financial managers to follow recently
                 developed, and more comprehensive,
                 accounting standards and federal financial
                 management systems requirements and to
                 implement these reforms throughout a large
                 and complex organization with
                 acknowledged serious financial deficiencies.


Creating a       Moving successfully to a more
Performance-     performance-based approach to
Oriented         management requires that organizations
Organizational   align their human capital policies and
Culture

                 Page 106    GAO/OCG-99-1 A Governmentwide Perspective
Major Performance and Management
Challenges




practices with their missions and goals. New
ways of thinking must be adopted about the
goals to be achieved; the organizational
arrangements, program strategies, and
partnerships needed to achieve those goals;
and how progress will be measured.
Likewise, performance management
approaches are needed that align employee
incentive and accountability mechanisms
with the goals of the organization.

A key to redirecting employee performance
toward organizational goals is to establish a
performance-oriented culture in which
employees understand the importance of
and the connection between their
performance and the organization’s success.
One step management must take in creating
a culture of performance is to inform staff at
all levels of the organization’s intentions and
involve them in the process of designing and
implementing change.

The failure to constructively involve staff in
an organization’s efforts to become more
performance-based means running the risk
that the changes will be more difficult and
protracted than necessary. For example, in
the fall of 1997, the Nuclear Regulatory
Commission’s (NRC) Office of Inspector
General surveyed NRC staff to obtain their


Page 107    GAO/OCG-99-1 A Governmentwide Perspective
Major Performance and Management
Challenges




views on the agency’s safety culture. In its
June 1998 report, the Inspector General
noted that the staff had a strong commitment
to protecting public health and safety but
expressed high levels of uncertainty and
confusion about the new directions in
regulatory practices and challenges facing
the agency.

The employees said that, in their view, they
spend too much time on paperwork that may
not contribute to the safety mission of the
organization. Employees who are confused
about the direction their agency is taking
will not be able to effectively focus on
results or make as full a contribution as they
might otherwise. Therefore, as the Inspector
General concluded, improved management
leadership and communication are needed to
effectively involve employees in achieving
results.

As shown in the relevant performance and
accountability series reports, we have
identified additional agencies, such as DOD
and FAA, where problems in organizational
culture have hampered effectiveness and
plagued improvement efforts. For example,
we have found that FAA’s organizational
culture has been an underlying cause of
acquisition problems with the agency’s


Page 108    GAO/OCG-99-1 A Governmentwide Perspective
                   Major Performance and Management
                   Challenges




                   multibillion dollar modernization program
                   that, over the past 17 years, has experienced
                   cost overruns, schedule delays, and
                   significant performance shortfalls. We have
                   found that FAA employees have acted in ways
                   that did not reflect a strong enough
                   commitment to mission focus,
                   accountability, coordination, and
                   adaptability.


Protecting Merit   As federal agencies give new emphasis to
Principles         designing and implementing human capital
                   approaches aimed at enhancing their
                   performance, they must also recognize that
                   certain statutorily established merit
                   principles and other national goals, such as
                   veterans’ preference, must continue to be
                   upheld. The balance between performance
                   considerations and merit requirements is
                   one with which the civil service continues to
                   struggle. The Office of Personnel
                   Management’s (OPM) strategic mission
                   statement acknowledges the agency’s dual
                   role in designing policies to help agencies
                   align their human capital approaches with
                   their missions and in overseeing
                   “governmentwide implementation of those
                   policies” so that the agencies will uphold the
                   merit principles and veterans’ preference.
                   OPM’s intentions and initiatives in this area



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                  Major Performance and Management
                  Challenges




                  notwithstanding, the civil service continues
                  to be marked by a tension between federal
                  agencies’ needs for flexibility in managing
                  their human capital and the government’s
                  need to ensure that they continue to adhere
                  to what OPM calls “national values embodied
                  by law.”


Improving
Performance and
Strengthening
Accountability
Across the
Federal           Agencies across the federal government face
Government        a series of daunting challenges as they strive
                  to create performance-based organizations
                  that are capable of meeting the demands and
                  opportunities of the next century in a cost
                  effective manner. While every agency we
                  have examined has made progress in
                  becoming more performance-based, that
                  progress is very uneven across agencies. As
                  the reports that are included in our
                  performance and accountability series
                  demonstrate, a great deal of hard and
                  sustained work remains to be done.

                  On a governmentwide basis, agencies must
                  ensure that the statutory framework that the


                  Page 110    GAO/OCG-99-1 A Governmentwide Perspective
                    Major Performance and Management
                    Challenges




                    Congress has established is effectively
                    implemented and, more generally, that the
                    performance-based principles underpinning
                    that framework become the routine basis for
                    how the agencies do business. Top
                    management within agencies must provide
                    the consistent leadership necessary to direct
                    this change and to ensure that momentum is
                    maintained. OMB and other central
                    management agencies and the Congress can
                    reinforce agencies’ efforts by using program
                    performance and cost information to help
                    guide their decisions. They also have key
                    roles in supporting and overseeing agencies’
                    efforts to become more performance-based.


Leadership in the   The changes in organizational cultures and
Agencies            management systems necessary for most
                    agencies to become performance-based will
                    take years to fully implement. Our work
                    looking at management reform efforts within
                    the federal government has found that, time
                    and again, solutions have not been fully
                    implemented to address management
                    problems, in part because top leadership
                    lacked a strong and sustained commitment
                    to change.

                    Strong, visible, and sustained commitment to
                    change requires setting a clear and


                    Page 111    GAO/OCG-99-1 A Governmentwide Perspective
                     Major Performance and Management
                     Challenges




                     consistent vision of where the organization
                     is going in its effort to become more
                     performance-based, communicating that
                     vision throughout the organization, teaching
                     people what their roles are in accomplishing
                     that vision, and holding people accountable
                     for fulfilling their roles. Political appointees
                     and top career officials must work together
                     to instill a performance-based approach to
                     management and accountability throughout
                     an agency. Top career officials must assume
                     a leadership role—and be
                     accountable—because the fundamental
                     changes needed will require sustaining
                     improvement efforts well beyond the usual
                     tenure of political appointees.


Central Management   The federal government’s central
Agencies’ Roles      management agencies—OMB in
                     particular—have pivotal roles to play in
                     guiding and overseeing agencies’ efforts to
                     become more performance-based and, more
                     importantly, using the agencies’
                     performance, financial, and program cost
                     information as a basis for decisionmaking.
                     Over the last several months, OMB has
                     worked with agencies on their fiscal year
                     2000 annual performance plans. These plans
                     were developed under the Results Act and
                     submitted to OMB as part of agencies’ budget


                     Page 112    GAO/OCG-99-1 A Governmentwide Perspective
Major Performance and Management
Challenges




submissions. According to senior OMB
officials, the plans allowed for much deeper
considerations of the performance
consequences of resource decisions than
had been possible when developing the
President’s budget in the past.

OMB  and the agencies can also use the annual
performance planning process to present
agreed-upon goals and strategies for
addressing major management issues. The
agency-specific and crosscutting priority
management objectives that OMB includes in
the governmentwide annual performance
plan highlight areas needing the greatest
attention and the executive branch’s plans
for addressing those areas. Many of the areas
that we have identified as high-risk are
consistent with areas on OMB’s list of priority
management objectives. For example,
Defense Financial Management and
contracting approaches at DOE are on our
high-risk list and are among OMB’s priority
management objectives.

OMB  also has leadership responsibilities for
ensuring that agencies effectively implement
the statutory performance and
accountability framework. To help meet this
responsibility, OMB has used task forces and
interagency councils as a strategy in both


Page 113    GAO/OCG-99-1 A Governmentwide Perspective
Major Performance and Management
Challenges




developing policies that are sensitive to
implementation concerns and gaining
consensus and consistent follow-through
within the executive branch.

One example of this collaborative approach
is the continuing success of the CFOs and the
CFO Council in leading agencies in addressing
a wide range of financial and related
management issues. The CFO Council,
working with OMB, develops an annual
financial management status report and
5-year plan. The CFO Council also has an
active committee focused on Results Act
implementation, with particular attention to
integrating performance goals and
information into budget presentations.
Further, the CFO Council’s Human Resources
Committee assists CFOs in improving the
recruitment, retention, performance, and
professional development of financial
management personnel. The Human
Resources Committee, in cooperation with
JFMIP, has also defined core competencies for
federal personnel who perform financial
management functions. In addition, this
committee has recognized the importance of
establishing a standard for continuing
professional education for all financial
management employees.



Page 114    GAO/OCG-99-1 A Governmentwide Perspective
                  Major Performance and Management
                  Challenges




                  OPM, as the federal government’s central
                  personnel agency, has a leading role in
                  ensuring that the appropriate balances are
                  struck between the flexibilities afforded to
                  agencies to design their own human capital
                  systems and adherence to governmentwide
                  policies. OPM also has a role in assisting
                  agencies in augmenting their human capital.
                  For example, as we noted in our earlier
                  discussion of human capital issues, federal
                  agencies traditionally have done little in the
                  way of strategic human capital planning,
                  particularly in identifying what sort of talent
                  they need and strategies for aligning their
                  workforce capabilities with their missions
                  and goals.

                  We have long recommended that OPM (as
                  well as OMB) take a greater leadership role in
                  this area. OPM needs to guide agencies
                  toward more rigorous human capital
                  planning and to identify whether aspects of
                  federal employment policy need to be
                  modified so that the government is
                  competitive in hiring and retaining the
                  talented individuals it needs to accomplish
                  its varied missions.


Information for   In crafting its performance and
Congressional     accountability framework, the Congress was
Decisionmaking

                  Page 115    GAO/OCG-99-1 A Governmentwide Perspective
Major Performance and Management
Challenges




responding to the fact that congressional and
executive branch decisionmaking had often
been hampered by the absence of
information on the costs and results of
agencies’ programs. Results-oriented
performance information and audited
financial program and cost information can
better inform the full range of decisions the
Congress faces in its budget, appropriation,
authorization, and oversight capacities.
Congressional use of these sources of
information will spur agencies’ efforts to
implement the statutory framework by
sending the unmistakable message to the
agencies that the Congress remains serious
about performance-based management and
accountability.

We have long advocated that congressional
committees of jurisdiction hold augmented
oversight hearings on each of the major
agencies at least once each Congress, and
preferably on an annual basis. Information
on the linkages among plans, programs,
budgets, and performance results that
should become available as agencies become
more performance-based, could provide a
consistent starting point for each of these
hearings. As each agency implements the
statutory framework, this information



Page 116    GAO/OCG-99-1 A Governmentwide Perspective
    Major Performance and Management
    Challenges




    should allow more informed discussions
    about issues such as

•   the progress the agency is making in
    achieving the goals established in its
    strategic and annual plans;
•   the degree to which the agency has the best
    mix of programs, initiatives, and other
    strategies to achieve results;
•   the progress the agency is making in
    addressing high-risk areas and other major
    management challenges;
•   the efforts under way to ensure that the
    agency has the needed human capital and
    that the agency’s human capital strategies
    are linked to strategic and programmatic
    planning and accountability mechanisms;
    and finally
•   the status of the agency’s efforts to use
    information technology to achieve results.

    Across the federal government, agencies
    have been making progress over the last few
    years in implementing the statutory
    framework and making the major
    management changes that effective
    implementation of the framework entails.44
    These efforts have confirmed that
    fundamental improvements in performance

    44
     GAO/AIMD-98-127, Mar. 31, 1998 and GAO/GGD-97-109, June 2,
    1997.

    Page 117      GAO/OCG-99-1 A Governmentwide Perspective
Major Performance and Management
Challenges




and management are possible when an
organization undertakes a disciplined
approach to implementing the
performance-based management principles
that underpin the Congress’ framework. At
the same time, the efforts to date underscore
the nature and scope of the challenges that
lie ahead for most agencies if they are to
become fully effective organizations capable
of meeting the demands of the 21st century
and providing the products, services, and
results that taxpayers expect.




Page 118    GAO/OCG-99-1 A Governmentwide Perspective
Related GAO Products



Adopting a    Managing for Results: An Agenda To
Results       Improve the Usefulness of Agencies’ Annual
Orientation   Performance Plans (GAO/GGD/AIMD-98-228, Sept.
              8, 1998).

              The Results Act: Assessment of the
              Governmentwide Performance Plan for
              Fiscal Year 1999 (GAO/AIMD/GGD-98-159, Sept. 8,
              1998).

              The Results Act: An Evaluator’s Guide to
              Assessing Agency Annual Performance
              Plans, Version 1 (GAO/GGD-10.1.20, Apr. 1998).

              Agencies’ Annual Performance Plans Under
              the Results Act: An Assessment Guide to
              Facilitate Congressional Decisionmaking,
              Version 1 (GAO/GGD/AIMD-10.1.18, Feb. 1998).

              Managing for Results: Agencies’ Annual
              Performance Plans Can Help Address
              Strategic Planning Challenges (GAO/GGD-98-44,
              Jan. 30, 1998).

              Managing for Results: The Statutory
              Framework for Performance-Based
              Management and Accountability
              (GAO/GGD/AIMD-98-52, Jan. 28, 1998).

              Managing for Results: Using the Results Act
              to Address Mission Fragmentation and


              Page 119   GAO/OCG-99-1 A Governmentwide Perspective
                    Related GAO Products




                    Program Overlap (GAO/AIMD-97-146, Aug. 29,
                    1997).

                    The Government Performance and Results
                    Act: 1997 Governmentwide Implementation
                    Will Be Uneven (GAO/GGD-97-109, June 2, 1997).

                    Agencies’ Strategic Plans Under GPRA: Key
                    Questions to Facilitate Congressional
                    Review, Version 1 (GAO/GGD-10.1.16, May 1997).

                    Executive Guide: Effectively Implementing
                    the Government Performance and Results
                    Act (GAO/GGD-96-118, June 1996).


Effectively Using   Executive Guide: Leading Practices in
Information         Capital Decision-Making (GAO/AIMD-99-32,
Technology to       Dec. 1998).
Achieve Program
Results             Year 2000 Computing Crisis: A Testing Guide
                    (GAO/AIMD-10.1.21, Nov. 1998).

                    Information Security: Serious Weaknesses
                    Place Critical Federal Operations and Assets
                    at Risk (GAO/AIMD-98-92, Sept. 23, 1998).

                    Year 2000 Computing Crisis: Business
                    Continuity and Contingency Planning
                    (GAO/AIMD-10.1.19, Aug. 1998).



                    Page 120    GAO/OCG-99-1 A Governmentwide Perspective
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Executive Guide: Information Security
Management—Learning From Leading
Organizations (GAO/AIMD-98-68, May 1998).

Executive Guide: Measuring Performance
and Demonstrating Results of Information
Technology Investments (GAO/AIMD-98-89,
Mar. 1998).

Chief Information Officers: Ensuring Strong
Leadership and an Effective Council
(GAO/T-AIMD-98-22, Oct. 27, 1997).

Year 2000 Computing Crisis: An Assessment
Guide (GAO/AIMD-10.1.14, Sept. 1997).

Year 2000 Computing Crisis: Success
Depends Upon Strong Management and
Structured Approach (GAO/T-AIMD-97-173, Sept.
25, 1997).

Paperwork Reduction: Governmentwide
Goals Unlikely to Be Met (GAO/T-GGD-97-114,
June 4, 1997).

The System Assessment Framework, Version
1.1, A Guide for Reviewing Information
Management and Technology Issues in the
Federal Government (GAO/AIMD-10.1.12, May 1,
1997).



Page 121    GAO/OCG-99-1 A Governmentwide Perspective
Related GAO Products




Business Process Reengineering Assessment
Guide (GAO/AIMD-10.1.15, Apr. 1997).

High-Risk Areas: Actions Needed to Solve
Pressing Management Problems
(GAO/T-AIMD/GGD-97-60, Mar. 5, 1997).

Assessing Risks and Returns: A Guide for
Evaluating Federal Agencies’ IT Investment
Decisionmaking (GAO/AIMD-10.1.13, Feb. 1997).

1997 High-Risk Series, An Overview
(GAO/HR-97-1, Feb. 1997).

1997 High-Risk Series, Information
Management and Technology (GAO/HR-97-9,
Feb. 1997).

Managing Technology: Best Practices Can
Improve Performance and Produce Results
(GAO/T-AIMD-97-38, Jan. 31, 1997).

Information Technology Investment:
Agencies Can Improve Performance, Reduce
Costs, and Minimize Risks (GAO/AIMD-96-64,
Sept. 30, 1996).

Information Security: Opportunities for
Improved OMB Oversight of Agency Practices
(GAO/AIMD-96-110, Sept. 24, 1996).



Page 122    GAO/OCG-99-1 A Governmentwide Perspective
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Information Management Reform: Effective
Implementation is Essential for Improving
Federal Performance (GAO/T-AIMD-96-132,
July 17, 1996).

Information Security: Computer Hacker
Information Available on the Internet
(GAO/T-AIMD-96-108, June 5, 1996).

Paperwork Reduction: Burden Reduction
Goal Unlikely to Be Met
(GAO/T-GGD/RCED-96-186, June 5, 1996).

Evaluating Information Technology
Investments: A Practical Guide, Version 1.0
(Office of Information and Regulatory
Affairs, Information Policy and Technology
Branch, Nov. 1995).

Strategic Information Management (SIM)
Self-Assessment Toolkit, Exposure Draft,
Version 1 (Accession Number 153193,
Oct. 28, 1994).

Executive Guide: Improving Mission
Performance Through Strategic Information
Management and Technology (GAO/AIMD-94-115,
May 1994).

Paperwork Reduction Act: Opportunity to
Strengthen Government’s Management of


Page 123    GAO/OCG-99-1 A Governmentwide Perspective
                    Related GAO Products




                    Information and Technology
                    (GAO/T-AIMD/GGD-94-126, May 19, 1994).

                    Strategic Information Planning: Framework
                    for Designing and Developing System
                    Architectures (GAO/IMTEC-92-51, June 1992).


Establishing        Forest Service: Barriers to Financial
Financial           Accountability Remain (GAO/AIMD-99-1, Oct. 2,
Management          1998).
Capabilities That
Effectively         Financial Management: Federal Financial
                    Management Improvement Act Results for
Support
                    Fiscal Year 1997 (GAO/AIMD-98-268, Sept. 30,
Decisionmaking      1998).
and
Accountability      Financial Management: Training of DOD
                    Financial Managers Could Be Enhanced
                    (GAO/AIMD-98-126, June 24, 1998).

                    Financial Management: Fostering the
                    Effective Implementation of Legislative
                    Goals (GAO/T-AIMD-98-215, June 18, 1998).

                    Year 2000 Computing Crisis: Actions Must
                    Be Taken Now to Address Slow Pace of
                    Federal Progress (GAO/T-AIMD-98-205, June 10,
                    1998).




                    Page 124    GAO/OCG-99-1 A Governmentwide Perspective
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Department of Defense: Financial Audits
Highlight Continuing Challenges to Correct
Serious Financial Management Problems
(GAO/T-AIMD/NSIAD-98-158, Apr. 16, 1998).

Internal Revenue Service: Remaining
Challenges to Achieve Lasting Financial
Management Improvements
(GAO/T-AIMD/GGD-98-139, Apr. 15, 1998).

Financial Audit: 1997 Consolidated Financial
Statements of the United States Government
(GAO/AIMD-98-127, Mar. 31, 1998).

Financial Audit: Examination of IRS’ Fiscal
Year 1997 Custodial Financial Statements
(GAO/AIMD-98-77, Feb. 26, 1998).

The Government Performance and Results
Act: 1997 Governmentwide Implementation
Will Be Uneven (GAO/GGD-97-109, June 2, 1997).

Budget and Financial Management: Progress
and Agenda for the Future (GAO/T-AIMD-96-80,
Apr. 23, 1996).




Page 125    GAO/OCG-99-1 A Governmentwide Perspective
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Building,          Performance Management: Aligning
Maintaining, and   Employee Performance With Agency Goals
Marshaling the     at Six Results Act Pilots (GAO/GGD-98-162, Sept.
Human Capital      4, 1998).
Needed to
                   The Excepted Service: A Research Profile
Achieve Results
                   (GAO/GGD-97-72, May 1997).

                   Transforming the Civil Service: Building the
                   Workforce of the Future, Results of a
                   GAO-Sponsored Symposium (GAO/GGD-96-35,
                   Dec. 26, 1995).

                   Civil Service Reform: Changing Times
                   Demand New Approaches (GAO/T-GGD-96-31,
                   Oct. 12, 1995).

                   Federal Personnel: Federal/Private Sector
                   Pay Comparisons (GAO/OCE-95-1, Dec. 14,
                   1994).

                   Federal Employment: How Government Jobs
                   Are Viewed on Some College Campuses
                   (GGD-94-95, Mar. 10, 1994).

                   Transition Series: The Public Service
                   (GAO/OGC-93-7TR, Dec. 1992).

                   The Changing Workforce: Demographic
                   Issues Facing the Federal Government
                   (GAO/GGD-92-38, Mar. 24, 1992).


                   Page 126    GAO/OCG-99-1 A Governmentwide Perspective
Related GAO Products




Federal Recruiting: Comparison of
Applicants Who Accepted or Declined
Federal Job Offers (GAO/GGD-92-61BR, Mar. 20,
1992).

Managing Human Resources: Greater OPM
Leadership Needed to Address Critical
Challenges (GAO/GGD-89-19, Jan. 19, 1989).




Page 127    GAO/OCG-99-1 A Governmentwide Perspective
Performance and Accountability Series



             Major Management Challenges and Program
             Risks: A Governmentwide Perspective
             (GAO/OCG-99-1)

             Major Management Challenges and Program
             Risks: Department of Agriculture
             (GAO/OCG-99-2)

             Major Management Challenges and Program
             Risks: Department of Commerce
             (GAO/OCG-99-3)

             Major Management Challenges and Program
             Risks: Department of Defense (GAO/OCG-99-4)

             Major Management Challenges and Program
             Risks: Department of Education
             (GAO/OCG-99-5)

             Major Management Challenges and Program
             Risks: Department of Energy (GAO/OCG-99-6)

             Major Management Challenges and Program
             Risks: Department of Health and Human
             Services (GAO/OCG-99-7)

             Major Management Challenges and Program
             Risks: Department of Housing and Urban
             Development (GAO/OCG-99-8)




             Page 128   GAO/OCG-99-1 A Governmentwide Perspective
Performance and Accountability Series




Major Management Challenges and Program
Risks: Department of the Interior
(GAO/OCG-99-9)

Major Management Challenges and Program
Risks: Department of Justice (GAO/OCG-99-10)

Major Management Challenges and Program
Risks: Department of Labor (GAO/OCG-99-11)

Major Management Challenges and Program
Risks: Department of State (GAO/OCG-99-12)

Major Management Challenges and Program
Risks: Department of Transportation
(GAO/OCG-99-13)

Major Management Challenges and Program
Risks: Department of the Treasury
(GAO/OCG-99-14)

Major Management Challenges and Program
Risks: Department of Veterans Affairs
(GAO/OCG-99-15)

Major Management Challenges and Program
Risks: Agency for International Development
(GAO/OCG-99-16)




Page 129     GAO/OCG-99-1 A Governmentwide Perspective
Performance and Accountability Series




Major Management Challenges and Program
Risks: Environmental Protection Agency
(GAO/OCG-99-17)

Major Management Challenges and Program
Risks: National Aeronautics and Space
Administration (GAO/OCG-99-18)

Major Management Challenges and Program
Risks: Nuclear Regulatory Commission
(GAO/OCG-99-19)

Major Management Challenges and Program
Risks: Social Security Administration
(GAO/OCG-99-20)

Major Management Challenges and Program
Risks: U.S. Postal Service (GAO/OCG-99-21)

High-Risk Series: An Update (GAO/HR-99-1)




The entire series of 21 performance and
accountability reports and the high-risk
series update can be ordered by using
the order number GAO/OCG-99-22SET.


Page 130     GAO/OCG-99-1 A Governmentwide Perspective
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