United States General Accounting Office GAO Performance and Accountability Series January 1999 Major Management Challenges and Program Risks Department of Agriculture GAO/OCG-99-2 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 addresses the major performance and management challenges that have limited the effectiveness of the U.S. Department of Agriculture (USDA) in carrying out its mission. It also addresses corrective actions that USDA has taken or initiated on these challenges and identifies further actions that are needed. The management challenges USDA faces are as diverse as its missions, which include ensuring the safety of the nation’s food supply, providing food assistance for the needy, supporting the agriculture sector, and managing the national forests. Given the importance of these missions, it is critical that USDA manages the programs designed to fulfill these missions as efficiently and effectively as possible. However, over the last several years, we have highlighted problems in each of these areas that reduce program effectiveness. For example, we have identified inefficient and wasteful practices in the Forest Service that have cost taxpayers hundreds of millions of dollars. In addition, we have found significant management problems in USDA’s use of information technology. Furthermore, we have designated financial management at the Forest Service and farm loan programs as high-risk areas. This report is part of a special series entitled the Performance and Accountability Series: Major Management Challenges and Program Risks. The series contains separate reports on 20 agencies—one on each of the cabinet departments and on most major independent agencies as well as the U.S. Postal Service. The series also includes a governmentwide report that draws from the agency-specific reports to identify the performance and management challenges requiring attention across the federal government. As a companion volume to this series, GAO is issuing an update to those government operations and programs that its work identified as “high risk” because of their greater vulnerabilities to waste, fraud, abuse, and mismanagement. High-risk government operations are also identified and discussed in detail in the appropriate performance and accountability series agency reports. 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 Page 2 GAO/OCG-99-2 USDA Challenges Government Reform Committee, Dennis J. Kucinich; Senator Joseph I. Lieberman; and Senator Carl Levin. Copies of this report series are being sent to the President, the congressional leadership, all other Members of the Congress, the Director of the Office of Management and Budget, the Secretary of Agriculture, and the heads of other major departments and agencies. David M. Walker Comptroller General of the United States Page 3 GAO/OCG-99-2 USDA Challenges Contents Overview 6 Major 15 Performance and Management Issues Related GAO 40 Products Performance and 46 Accountability Series Page 4 GAO/OCG-99-2 USDA Challenges Page 5 GAO/OCG-99-2 USDA Challenges Overview Since its creation in 1862, the U.S. Department of Agriculture (USDA) has grown substantially and is now one of the nation’s largest federal agencies, employing over 100,000 people and managing a budget of almost $60 billion. Its 29 agencies and offices are responsible for operating more than 200 programs that, among other things, support the productivity and profitability of farming and ranching, protect the natural environment, ensure food safety, improve the well-being of rural America, promote domestic marketing and the export of food and farm products, conduct biotechnology and other agriculture research, and provide food assistance to those Americans who need it. Over the years, we, USDA’s Inspector General, and others have documented the performance and management problems that have inhibited the effectiveness or efficiency of USDA’s operations. In some cases, the Congress and/or USDA has taken actions to address these problems. However, a number of important challenges remain. Page 6 GAO/OCG-99-2 USDA Challenges Overview The Challenges USDA’s Field USDA’s field structure for managing its farm Structure Is programs is obsolete and inefficient. While Inefficient USDA has made progress in closing about 1,000 county office locations, its field structure still includes about 2,700 county office locations that serve a decreasing number of farmers. To improve the efficiency of its farm service operations, USDA needs to consider using alternative methods for delivering services to farmers and reconsider the level of personalized service it provides to farmers. Fundamental The increasing incidence of foodborne Changes Are Needed illness has heightened concerns about the to Improve Food federal government’s effectiveness in Safety ensuring the safety of food. This concern has resulted in, among other things, the use of more scientific approaches to meat and poultry inspections. However, while these changes are important to better ensuring the safety of our food, they do not address the fundamental problem of having the responsibilities for food safety scattered among 12 different federal agencies, which results in inconsistent oversight, poor coordination, and the inefficient allocation Page 7 GAO/OCG-99-2 USDA Challenges Overview of resources. The current highly fragmented federal system for food safety needs to be replaced with a uniform, risk-based inspection system under a single food agency. Inefficiency and Inefficiency and waste throughout USDA’s Waste Within the Forest Service’s operations and organization Forest Service have cost taxpayers hundreds of millions of Continue dollars. In particular, the Forest Service has not obtained fair market value for its goods or recovered its costs for services, cannot accurately account for a significant amount of its assets and expenditures, has generally unreliable financial statements, and has weak contracting practices. While the Forest Service has made progress in recent years, it is still far from achieving financial accountability and possibly a decade or more away from being fully accountable for its performance. Since the financial problems at the Forest Service are so pervasive and long-standing, we are now designating the Forest Service’s financial management a high-risk area. To improve its operational efficiency and effectiveness, the Forest Service must be accountable for its financial operations and performance. Page 8 GAO/OCG-99-2 USDA Challenges Overview USDA’s Farm Loan In 1990, we placed USDA’s farm loan Programs Remain programs on our high-risk list. In 1998, we Vulnerable to Loss reported that the size of USDA’s direct loan portfolio, $9.7 billion at the end of fiscal year 1997, as well as the percentage of the portfolio held by delinquent borrowers had decreased since 1995. Nevertheless, USDA continues to carry a high level of delinquent farm loan debt and to write off large amounts of unpaid loans held by problem borrowers. In addition, farm loan delinquencies may increase because of the droughts and low prices for major crops and livestock in 1998. USDA and the Congress need to continue to monitor the effects of recent lending and servicing reforms intended to improve the financial integrity of the farm loan programs. Reducing Millions of dollars in overpayments in the Overpayments in the Food Stamp Program occur because eligible Food Stamp persons are paid too much or because Program ineligible individuals improperly participated in the Food Stamp Program. For example, thousands of prisoners and deceased individuals have been included as members of households receiving food stamps. Computer matching can provide a cost-effective mechanism to accurately and independently identify households that Page 9 GAO/OCG-99-2 USDA Challenges Overview include ineligible food stamp participants. Some states have taken actions to reduce food stamp overpayments by using computer matching to identify ineligible participants. USDA can enhance the states’ effectiveness in identifying other ineligible participants and reducing overpayments by taking a lead role in promoting the sharing of information among federal and state agencies. USDA Lacks USDA has a long-standing history of Financial deficiencies in its accounting and financial Accountability Over management systems. Since 1991, because of Billions of Dollars in these deficiencies, USDA’s Inspector General Assets has issued a series of unfavorable financial audit reports on USDA and several of its component agencies’ financial statements. In addition, USDA’s ability to comply with budgetary and financial statement reporting requirements is severely hampered by its lack of adequate financial systems. USDA currently has an action plan for resolving its accounting and financial systems’ deficiencies that calls for full implementation by fiscal year 2000. Given the long-standing nature of USDA’s financial management deficiencies, complete resolution by fiscal year 2000 will be a significant challenge. In addition, as previously mentioned, because the financial Page 10 GAO/OCG-99-2 USDA Challenges Overview problems at the Forest Service are so pervasive and long-standing, we are now designating the Forest Service’s financial management a high-risk area. USDA Can Save USDA is not effectively managing its Millions by Better telecommunications systems and services. Managing Its Among other things, USDA has not Telecommunica- consolidated and optimized tions Investments telecommunications where opportunities exist to do so or established sound management practices to ensure that telecommunications resources are effectively managed and payments for unused, unnecessary, or uneconomical services are terminated. To respond to these problems, USDA has identified improvements it states could reduce its annual $200-plus million telecommunications investment by as much as $70 million each year. As a first step, USDA is developing a Telecommunications Action Plan for correcting its telecommunications management deficiencies. However, once this plan is developed, USDA will need to effectively implement it to correct deficiencies and achieve cost savings. Page 11 GAO/OCG-99-2 USDA Challenges Overview Significant Since 1993, USDA has been attempting to Weaknesses in undertake the most costly and challenging USDA’s information technology (IT) modernization in Multibillion-Dollar its history. Several management weaknesses Modernization of raise concerns regarding the extent to which Service Center USDA’s service center IT modernization effort, Information Technology Place which could ultimately cost more than Effort at Risk $3 billion, will achieve an adequate return on its investment or significantly improve customer service. These weaknesses include, for example, (1) acquiring new IT without first determining how it will operate to provide required service, (2) not managing the IT projects as investments, and (3) not developing a comprehensive plan and management structure. Among other things, USDA needs to develop a concept of operations and new mission-critical business processes for providing one-stop service to better ensure the success of its IT modernization efforts. USDA Faces Serious In May 1998, we testified that USDA will have Year 2000 a great deal of difficulty in correcting, Computing testing, and implementing its mission-critical Challenges automated information systems to work beyond 1999—that is to become Year 2000 compliant—in time. While USDA has begun to address the Year 2000 problem, it still faces significant challenges renovating and Page 12 GAO/OCG-99-2 USDA Challenges Overview replacing all its mission-critical systems in time and taking the necessary steps to ensure that vital public services are not disrupted. We have not comprehensively evaluated how effectively the strategic and annual performance plans required by the Government Performance and Results Act address USDA’s management problems. However, we have reported that USDA’s 1997 strategic plan did not address certain management problems that we had previously identified, including those related to IT programs. Regarding USDA’s performance plans, we reported on the key areas in which USDA’s performance plans could be improved to better meet the purposes of the Results Act. Specifically, we reported that USDA’s performance plans should (1) discuss mitigation strategies for each significant external factor that may interfere with the achievement of performance goals; (2) describe the procedures that will be used to ensure that the data needed to measure progress in meeting performance goals are complete, accurate, and credible; and (3) identify what, if any, limitations exist with respect to the data used for measuring performance. Page 13 GAO/OCG-99-2 USDA Challenges Overview Furthermore, we reported that neither the strategic or performance plan adequately explained how USDA is coordinating crosscutting issues both inside and outside the Department. Progress and As discussed earlier, USDA is addressing Next Steps many of its management challenges. For example, to improve the efficiency of its farm service operations, it has closed about 1,000 county office locations nationwide. Furthermore, USDA has implemented more scientific approaches to meat and poultry inspections to better ensure the safety of our nation’s food. Despite these actions, USDA still faces formidable challenges to ensure the efficiency and effectiveness of its operations. This will not be easy, in part because the challenges are as diverse as USDA’s missions. As might be expected, there is no single action USDA can take that would effectively address all of these problems. As a result, this report identifies a variety of actions USDA can take to address each individual problem. In addition, the Results Act could serve as a powerful tool to guide USDA in the many decisions it will have to make as it works toward mitigating the problems associated with these challenges. Page 14 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues Over the years, we, USDA’s Inspector General, the National Performance Review, and others have documented problems with USDA’s performance and management and recommended reforms. This report summarizes our recent findings on the effectiveness of USDA in revamping its obsolete field structure; improving the safety of our nation’s food supply; improving the effectiveness of, and reducing waste in, the Forest Service; reducing farm loan defaults; reducing overpayments in the Food Stamp Program; accounting for billions of dollars in assets and expenditures; managing its telecommunications investments; addressing weaknesses in its multibillion-dollar service center information technology modernization effort; and meeting the Year 2000 challenge. We have also indicated, where applicable, actions USDA has taken to address these management and performance problems. USDA’s Field The role of USDA’s county office structure Structure Is and the relationship of that structure to Inefficient farmers has not changed significantly since USDA began delivering programs at the local level in the 1930s. Even though improvements have been made in the transportation and communications Page 15 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues infrastructure, and the number of farmers living in rural America has declined, USDA continues to provide the same kind of personalized service in the county office that it did 60 years ago. However, this service now comes at a cost of almost $1 billion annually. While many farmers prefer this kind of service, it is questionable whether the federal government should support this service over the long term. The Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (P.L. 103-354, Oct. 13, 1994) directed the Secretary of Agriculture to streamline departmental operations by consolidating county offices. USDA has made progress in implementing the act. Between December 1994 and March 1998, it reduced the number of county office locations by more than 1,000—from 3,760 to about 2,700. Our reports have recognized this progress but have noted several concerns associated with the consolidation efforts: • USDA needs to consider alternative, more efficient means of delivering services to farmers. Currently, most farmers deal directly with USDA personnel in local county offices. USDA needs to study the costs and benefits of using alternative delivery Page 16 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues methods, such as mail, telephones, and computers, to deliver these services. Using alternative delivery methods should allow USDA to operate with fewer staff and offices, which could reduce personnel expenses by millions of dollars. Conversely, we realize that making significant changes to USDA’s field office structure to reduce government expenses and improve program efficiency could increase the administrative requirements for, and thereby the costs to, farmers who participate in farm programs. • USDA needs to better evaluate the costs and impact of its consolidation actions. More specifically, although USDA has made a number of organizational changes since 1994 to reduce its staff and streamline its operations, it does not plan to determine the extent to which these efforts have achieved the objectives of the 1994 act, other than determining the savings associated with staff reductions. As a result, USDA will not be able to assess the extent to which its efforts have been successful in achieving all the objectives mandated by the 1994 act, including the impact on the quality of services it provides. Page 17 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues Key Contact Lawrence J. Dyckman, Director Food and Agriculture Issues Resources, Community, and Economic Development Division (202) 512-5138 email@example.com Fundamental Foodborne illnesses in the United States are Changes Are widespread and costly. The magnitude of the Needed to problem is uncertain, however, because Improve Food these illnesses are underreported and health Safety officials cannot determine their source. Estimates of foodborne illnesses range widely, from 6.5 million to 81 million cases each year and result in as few as 500 to as many as 9,100 related deaths annually. According to USDA’s Economic Research Service, the costs for medical treatment and productivity losses associated with these illnesses and deaths range from $6.6 billion to $37.1 billion. The increasing incidence of foodborne illness has heightened concerns about the federal government’s effectiveness in ensuring the safety of the nation’s food supply. This concern in part helped spawn a major new approach to food safety regulation that is currently being phased in. This approach, in line with our prior Page 18 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues recommendations, requires meat and poultry plants to use a scientific system called Hazard Analysis and Critical Control Point (HACCP) to ensure the safety of their products. The new regulations also require that meat and poultry slaughter plants conduct microbial tests for E.coli, which is a general indicator of sanitary conditions. Requiring HACCP and microbial testing is without question an important step toward moving to a more scientific approach to ensuring a safer food supply. However, these requirements do not address several other fundamental problems with our current food safety system. Most importantly, the current system is highly fragmented. As many as 12 different federal agencies, administering over 35 different laws, oversee food safety. As a result, the current food safety system suffers from inconsistent oversight, poor coordination, and inefficient allocation of resources. For example: • Subtle differences in food products often dictate which agency regulates a product and what actions it takes. A case in point: USDA is responsible for inspecting plants that produce open-faced meat sandwiches and pizzas with meat toppings. It conducts these inspections at least once each operating Page 19 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues shift. On the other hand, the Department of Health and Human Services’ Food and Drug Administration (FDA) is responsible for inspecting plants that produce traditional meat sandwiches and nonmeat pizzas. It conducts inspections of plants under its jurisdiction, on average, once every 10 years. • More than one-fourth of the over $1 billion federal budget for food safety—about $271 million—could be used more efficiently if the current carcass-by-carcass slaughter inspection requirement is eliminated once HACCP-based inspection systems are in place. These statutory inspections do not optimize federal resources because they do not detect the most serious health threat associated with meat and poultry—microbial contamination. The funds currently used for these inspections could be better spent on other food safety activities, such as helping smaller slaughter plants implement HACCP or conducting better surveillance of imported foods. In summary, the highly fragmented federal food safety structure needs to be replaced with a uniform, risk-based inspection system under a single food safety agency. In the interim, the implementation of the Results Act’s planning requirements may better Page 20 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues facilitate the use of food safety resources across the federal government. Key Contact Lawrence J. Dyckman, Director Food and Agriculture Issues Resources, Community, and Economic Development Division (202) 512-5138 firstname.lastname@example.org Inefficiency and Over the last decade, we have reported that Waste Within the inefficiency and waste throughout the Forest Forest Service Service’s operations and organization have Continue cost taxpayers hundreds of millions of dollars. For example, the Forest Service has often not obtained fair market value for goods or recovered costs for services as permitted under federal law and has not always responded to reduce or contain costs pursuant to congressional request. The agency’s financial statements are generally unreliable, and significant assets and expenditures cannot be accurately accounted for. Because the Forest Service has struggled for years to improve the reliability of its financial statements without success, we are now designating the Forest Service’s financial management a high-risk area. Furthermore, the Forest Service’s weak Page 21 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues contracting practices have exposed appropriated dollars to an increased risk of fraud, waste, and abuse. These and other findings have led us, USDA’s Inspector General, and Forest Service task forces to make numerous recommendations to improve performance. We testified on March 26, 1998, that the Forest Service had not acted on some of these recommendations, had studied and restudied others without implementing them, and has left the implementation of others to the discretion of its independent and autonomous regional offices and forests, with mixed results. To improve its operational efficiency and effectiveness, the Forest Service must be accountable for its financial activities and performance. While the agency has made progress in recent years, it is still years away from achieving financial accountability and possibly a decade or more away from being accountable for its performance. Specifically, the Forest Service has identified the actions required to correct known accounting and financial reporting deficiencies and has established a schedule to attain financial accountability within the next few years. In addition, the agency has taken an important first step toward Page 22 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues becoming accountable for its performance by making clear that its overriding mission and funding priority, consistent with its existing legislative framework, has shifted from producing goods and services to maintaining and restoring the health of the lands entrusted to its care. However, it has not identified the actions required to correct decades-old problems with its data and reporting, addressed new challenges resulting from its changed priorities, or established a schedule to achieve accountability for its performance by a certain date. Strong leadership within the agency and sustained oversight by the Congress will be needed to ensure that the actions required to hold the Forest Service accountable for its performance are identified and that it adheres to schedules to achieve both performance and financial accountability. Key Contacts Victor S. Rezendes, Director Energy, Resources, and Science Issues Resources, Community, and Economic Development Division (202) 512-3841 email@example.com Page 23 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues Linda M. Calbom, Director Resources, Community, and Economic Development Accounting and Financial Management Issues Accounting and Information Management Division (202) 512-8341 firstname.lastname@example.org USDA’s Farm USDA’s farm loan programs are intended to Loan Programs provide temporary financial assistance to Remain farmers and ranchers who are unable to Vulnerable to obtain commercial credit at reasonable rates Loss and terms. In operating the farm loan programs, USDA faces the conflicting tasks of providing temporary credit to high-risk borrowers so they can stay in farming until they are able to secure commercial credit and of ensuring that the taxpayers’ investment is protected. The unpaid principal on USDA’s active direct farm loan portfolio totaled about $9.7 billion at the end of fiscal year 1997. In 1990, we placed USDA’s farm loan programs on our high-risk list because the programs (1) had an exceptionally high rate of defaults and (2) had become a continuous source of subsidized credit for nearly half of the borrowers under these programs. In the Page 24 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues 1996 Farm Bill, the Congress made fundamental changes to the programs, such as prohibiting delinquent borrowers from obtaining direct operating loans and limiting the number of times delinquent borrowers can receive debt forgiveness. In our 1997 high-risk series of reports, we noted that these changes, if implemented properly, would significantly reduce the financial risk associated with the farm loan programs. In 1998, we reported that the value of farm loans held by delinquent borrowers decreased from $4.6 billion, or 40.7 percent of USDA’s total outstanding direct farm loan principal in 1995, to $2.7 billion, or 28.2 percent, in 1997. Despite the indications of improvement in the farm loan portfolio’s financial condition, the farm loan programs remain high risk for several reasons. First, USDA continues to carry a high level of delinquent debt and to write off large amounts of unpaid loans held by problem borrowers. Moreover, these delinquencies may increase because of the droughts and low prices for major crops and livestock in 1998. Second, the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 (P.L. 105-277, Oct. 21, 1998) eased some of the lending reforms initiated under the 1996 Farm Bill. For Page 25 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues example, it expanded exceptions to the Farm Bill’s general prohibition against providing additional loans to borrowers who had prior loan losses. Finally, both we and USDA’s Inspector General have reported on continuing management problems with the farm loan programs. For example, in May 1998, we reported that USDA still has problems in complying with some of its own loan servicing standards. Similarly, in December 1998, USDA’s Inspector General identified USDA’s farm loan programs as one of its key problem areas and plans to expand its reviews of USDA’s loan-making and loan-servicing actions. USDA and the Congress need to continue to monitor the effects of recent lending and servicing reforms intended to improve the financial integrity of the farm loan programs. Key Contact Lawrence J. Dyckman, Director Food and Agriculture Issues Resources, Community, and Economic Development Division (202) 512-5138 email@example.com Page 26 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues Reducing The Food Stamp Program is one of the Overpayments in largest elements of the nation’s social safety the Food Stamp net and is the largest single program Program administered by USDA. In fiscal year 1997, over $19 billion in food stamps was provided to about 23 million recipients. Fraud and abuse in the program generally occurs because of overpayments to food stamp recipients or because of trafficking—exchanging food stamp benefits for cash or other non-food items.1 Overpayments occur when ineligible persons are provided food stamps, as well as when eligible persons are provided more than they are entitled to receive. In 1997, the states overpaid recipients an estimated $1.4 billion. That same year, the states underpaid recipients by about $509 million. Millions of dollars in overpayments have occurred because ineligible individuals improperly participated in the Food Stamp Program. For example, thousands of prisoners and deceased individuals have been included as members of households receiving food stamps. Computer matching can provide a cost-effective mechanism to accurately and 1 With regard to trafficking, USDA estimates that in 1993 (the latest year of available data) about $815 million in food stamps, approximately 4 percent of the food stamps issued, were traded for cash at retail stores. No one knows the extent of trafficking between individuals before the food stamps are redeemed at authorized retailers. Page 27 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues independently identify households that include ineligible food stamp participants. Some states already conduct data-matching programs, such as matches with the rolls of other states to find participants receiving duplicate benefits. The Congress has passed and the President has signed legislation to require the states to ensure that food stamps are not issued to prisoners and deceased individuals. USDA can enhance the states’ effectiveness in identifying other ineligible participants and reducing overpayments by taking a leading role in promoting the use of and the sharing of information among federal and state agencies. Key Contact Lawrence J. Dyckman, Director Food and Agriculture Issues Resources, Community, and Economic Development Division (202) 512-5138 firstname.lastname@example.org USDA Lacks USDA has a long-standing history of Financial deficiencies in its accounting and financial Accountability management systems. Since 1991, because of Over Billions of these deficiencies, USDA’s Inspector General Dollars in Assets has issued a series of unfavorable financial Page 28 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues audit reports on USDA and on several of its component agencies’ financial statements. For example, the Office of the Inspector General qualified its opinion on the fiscal year 1997 financial statements for the Rural Development mission area because it was unable to reliably estimate the subsidy cost of the mission area’s $53.7 billion direct loan programs, as is required for budgetary and financial reporting. In addition, the Inspector General was unable to issue an opinion on the Forest Service’s fiscal year 1997 financial statements in part because of the absence of an integrated general ledger and supporting subsidiary records and because of significant weaknesses in the financial systems. The Inspector General was also unable to issue an opinion on USDA’s fiscal year 1997 consolidated statements, primarily because of the problems described earlier and numerous material internal control weaknesses reported in the Inspector General’s fiscal year 1997 internal control review of USDA’s National Finance Center. For example, the Inspector General was unable to determine if the USDA systems maintained by the National Finance Center had adequate security in place to prevent misuse or unauthorized access to, or modification of, data. Furthermore, the Page 29 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues Inspector General noted instances in which access had been granted to individuals who should have not had access and numerous instances in which modifications were made to software programs without proper authorization and testing. In its report on USDA’s fiscal year 1997 consolidated statements, the Inspector General also cited problems with USDA’s internal controls and accounting systems, which prevented USDA from complying with the Federal Financial Management Improvement Act (FFMIA) of 1996.2 The Inspector General recommended that for USDA to comply with the act, it needs to (1) report its noncompliance with FFMIA to the Office of Management and Budget and (2) prepare a remediation plan to bring its financial management systems into substantial compliance within a 3-year period. USDA’s ability to meet budgetary and financial statement reporting requirements is severely hampered by its lack of adequate financial management systems. USDA operates 70 of these financial management systems, which include 142 applications, and a number of 2 FFMIA requires agencies to implement and maintain financial management systems that comply substantially with Federal Financial Management System Requirements, applicable federal accounting standards, and the U.S. Standard General Ledger at the transaction level. Page 30 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues mission area financial management subsystems. The data in some of these systems are neither timely nor readily accessible. Many systems were developed to address specific component agencies’ needs, with little central coordination or oversight by USDA. Standardization and data interchange were frequently not addressed when the systems were built, and, as a result, information is often incompatible with related information drawn from other systems. Generating consolidated reports and responding to queries from inside and outside USDA in this environment is often a complex and labor-intensive task. USDA has developed a plan of action for resolving its accounting and financial management systems’ deficiencies. The plan includes steps to correct deficiencies, scheduled dates of completion for each step, names of senior agency officials who are responsible for resolving each deficiency, and procedures for measuring the agency’s progress. Procedures for measuring progress include having USDA’s component agencies submit progress reports to USDA’s Chief Financial Officer and holding progress reviews with appropriate officials within the Office of Management and Budget. The plan calls for full implementation by fiscal year Page 31 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues 2000. However, because of the magnitude and long-standing history of the problems, complete resolution of USDA’s financial management deficiencies by fiscal year 2000 will be a significant challenge. As discussed above and in the section of this report on inefficiency and waste within the Forest Service, the financial management problems at that agency are particularly serious, given their pervasive and long-standing nature. Because of this, we are now designating the Forest Service’s financial management a high-risk area. Key Contact Linda M. Calbom, Director Resources, Community, and Economic Development Accounting and Financial Management Issues Accounting and Information Management Division (202) 512-8341 email@example.com Page 32 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues USDA Can Save USDA spends more than $200 million each Millions by Better year for its telecommunications systems and Managing Its services, such as the voice and data Telecommuni- communications provided by the federal cations government’s Federal Telecommunications System 2000 programs and hundreds of Investments commercial carrier networks. USDA relies on these systems to effectively administer federal programs and serve millions of constituents. Yet, as we have reported, USDA has not cost-effectively managed and planned these substantial investments. Consequently, USDA has wasted millions of dollars each year paying for unused, unnecessary, or uneconomical services. In response to our reports and recommendations, USDA has taken positive steps to begin correcting its telecommunications management weaknesses—improvements that USDA says could reduce its $200 million-plus reported annual investment in telecommunications by as much as $70 million each year. However, USDA has not achieved significant cost savings or management improvements because many of its corrective actions are incomplete or inadequate. For example, USDA has not (1) established the sound management practices necessary for ensuring that telecommunications resources Page 33 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues are managed cost effectively and that payments for unused, unnecessary, or uneconomical services are stopped; (2) consolidated and optimized telecommunications to achieve savings where opportunities exist to do so; (3) adequately planned integrated networks in support of information-sharing needs; and (4) determined the extent to which it is at risk for telephone abuse and fraud and acted to mitigate those risks, nationwide. Furthermore, it is unclear how and when these needed corrective actions will be implemented because USDA has not established time frames, milestones, and resources for making improvements. In its October 22, 1998, statement of actions on our most recent report, USDA reiterated its commitment to implementing our recommendations and strengthening the leadership and management of its telecommunications program. As a first step, USDA is developing a comprehensive Telecommunications Action Plan for correcting its telecommunications management deficiencies. In addition, after consultation with other senior USDA officials, the Chief Information Officer designated the Deputy Chief Information Officer as the senior-level official responsible for providing Page 34 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues leadership over this effort, which includes day-to-day responsibility and the requisite authority necessary for overseeing the implementation of the corrective plan of action. While these are positive steps, USDA still needs to effectively implement its action plan and take the necessary steps to correct its telecommunications weaknesses—or its estimated $70 million in annual savings will not be achieved. Key Contact Joel C. Willemssen, Director Civil Agencies Information Systems Accounting and Information Management Division (202) 512-6408 firstname.lastname@example.org Page 35 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues Significant Since 1993, USDA has been attempting to Weaknesses in modernize IT3 for its service centers—the USDA’s biggest, most costly, and most challenging Multibillion- modernization in its history. USDA Dollar experienced a failure with its initial $2.6 billion modernization program—called Modernization of Info Share—which was disbanded in 1995. Service Center Then, in 1995, USDA initiated another Information modernization effort—called the Service Technology Place Center Implementation initiative—for the Effort at Risk purpose of providing “one-stop” service to customers of the farm service, natural resources, and rural development agencies. Plans under this initiative include modernizing business processes and IT for these agencies’ 3,100 locations at estimated life-cycle costs that could ultimately exceed $3 billion. We found that USDA’s current multibillion- dollar undertaking has several weaknesses that place the entire effort at risk of not achieving an adequate return on investment or significantly improving customer service. Such weaknesses include (1) acquiring new IT without first determining how it will operate to provide “one-stop” service, (2) not managing the IT projects as investments, and 3 IT means any equipment or interconnected system or subsystem of equipment that is used in the automatic acquisition, storage, manipulation, management, movement, control, display, switching, interchange, transmission, or reception of data or information. Page 36 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues (3) not developing a comprehensive plan and management structure for an effort of this magnitude. Because USDA has failed in past efforts to plan and manage IT modernization, and because some of the same weaknesses are present with the ongoing modernization, concerns exist that USDA could again fail unless it acts to address these weaknesses. In August 1998, we recommended, among other things, that until it resolves critical weaknesses, USDA should limit IT funding for its service centers to only that necessary to bring mission-critical systems in compliance with Year 2000 computing requirements. USDA is still in the process of determining how it will address our August 1998 recommendations. Key Contact Joel C. Willemssen, Director Civil Agencies Information Systems Accounting and Information Management Division (202) 512-6408 email@example.com Page 37 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues USDA Faces If the systems that support USDA’s various Serious Year 2000 programs cannot operate reliably into the Computing next century, it will not take long for the Challenges effects to be felt. USDA’s systems support many vital public health and safety and economic activities, and if not properly fixed, tested, and implemented, severe consequences could result. While USDA and its component agencies have begun to address the Year 2000 problem, we testified in May 1998 that USDA will have a great deal of difficulty correcting, testing, and implementing all of its hundreds of mission-critical systems to work beyond 1999—that is to become Year 2000 compliant—in time. Given the enormous risk posed by the Year 2000 challenge at USDA, we also testified that USDA’s Chief Information Officer and Year 2000 Program Office needed to provide more effective leadership in overseeing USDA’s Year 2000 efforts by setting Year 2000 priorities, providing sufficient guidance, and adequately tracking progress. In response to our testimony, USDA took some actions to strengthen and improve its Year 2000 program. These actions included establishing departmental priorities for its Year 2000 efforts; issuing departmentwide Page 38 GAO/OCG-99-2 USDA Challenges Major Performance and Management Issues guidance on business continuity and contingency planning, systems testing, and independent verification and validation; and revising progress reports to more accurately reflect USDA’s progress in making mission-critical systems Year 2000 compliant. Even so, USDA faces a significant challenge renovating and replacing all its mission-critical systems in time and taking the necessary steps to ensure that vital public services are not disrupted. Key Contact Joel C. Willemssen, Director Civil Agencies Information Systems Accounting and Information Management Division (202) 512-6408 firstname.lastname@example.org Page 39 GAO/OCG-99-2 USDA Challenges Related GAO Products Making USDA’s U.S. Department of Agriculture: Field Structure Administrative Streamlining Is Expected to More Efficient Continue Through 2002 (GAO/RCED-99-34, Dec. 11, 1998). U.S. Department of Agriculture: Status of Closing and Consolidating County Offices (GAO/T-RCED-98-250, July 29, 1998). Farm Programs: Service to Farmers Will Likely Change as Farm Service Agency Continues to Reduce Staff and Close Offices (GAO/RCED-98-136, May 1, 1998). Farm Programs: Administrative Requirements Reduced and Further Program Delivery Changes Possible (GAO/RCED-98-98, Apr. 20, 1998). Farm Programs: Impact of the 1996 Farm Act on County Office Workload (GAO/RCED-97-214, Aug. 19, 1997). Improving the Food Safety: Opportunities to Redirect Safety of Our Federal Resources and Funds Can Enhance Food Effectiveness (GAO/RCED-98-224, Aug. 6, 1998). Food Safety: Federal Efforts to Ensure the Safety of Imported Foods Are Inconsistent Page 40 GAO/OCG-99-2 USDA Challenges Related GAO Products and Unreliable (GAO/RCED-98-103, Apr. 30, 1998). Food Safety: Fundamental Changes Needed to Improve Food Safety (GAO/RCED-97-249R, Sept. 9, 1997). Food Safety and Quality: Uniform, Risk-based Inspection System Needed to Ensure Safe Food Supply (GAO/RCED-92-152, June 26, 1992). Improving Forest Service: Weak Contracting Practices Efficiency and Increase Vulnerability to Fraud, Waste, and Reducing Waste Abuse (GAO/RCED-98-88, May 6, 1998). Within the Forest Service Forest Service: Lack of Financial and Performance Accountability Has Resulted in Inefficiency and Waste (GAO/T-RCED/AIMD-98-135, Mar. 26, 1998). Forest Service: Barriers to Generating Revenue or Reducing Costs (GAO/RCED-98-58, Feb. 13, 1998). Forest Service Decision-Making: A Framework for Improving Performance (GAO/RCED-97-71, Apr. 29, 1997). Page 41 GAO/OCG-99-2 USDA Challenges Related GAO Products Reducing Farm Farm Service Agency: Information on Farm Loan Defaults Loans and Losses (GAO/RCED-99-18, Nov. 27, 1998). Farm Service Agency: Status of Farm Loan Portfolio and the Use of Three Contracting Provisions for Loan Servicing (GAO/RCED-98-141, May 5, 1998). High-Risk Series: Quick Reference Guide (GAO/HR-97-2, Feb. 1997). Farm Loans: Information on the Status of USDA’s Portfolio (GAO/T-RCED-97-78, Feb. 21, 1997). High-Risk Series: Quick Reference Guide (GAO/HR-95-2, Feb. 1995). High-Risk Series: Farmers Home Administration’s Farm Loan Programs (GAO/HR-93-1, Dec. 1992). Reducing Food Stamp Overpayments: Households in Overpayments in Different States Collect Benefits for the the Food Stamp Same Individuals (GAO/RCED-98-228, Aug. 6, Program 1998). Page 42 GAO/OCG-99-2 USDA Challenges Related GAO Products Food Stamp Program: Information on Trafficking Food Stamp Benefits (GAO/RCED-98-77, Mar. 26, 1998). Food Stamp Overpayments: Thousands of Deceased Individuals Are Being Counted as Household Members (GAO/RCED-98-53, Feb. 11, 1998). Food Stamps: Substantial Overpayments Result From Prisoners Counted as Household Members (GAO/RCED-97-54, Mar. 10, 1997). Enhancing Forest Service: Barriers to Financial USDA’s Ability to Accountability Remain (GAO/AIMD-99-1, Oct. 2, Account for Its 1998). Financial Activities Forest Service: Status of Progress Toward Financial Accountability (GAO/AIMD-98-84, Feb. 27, 1998). Federal Management: Overview of Major Management Issues Facing Executive Agencies (GAO/OCG-98-1R, Jan. 9, 1998). Financial Management: Forest Service’s Progress Toward Financial Accountability (GAO/AIMD-97-151R, Aug. 29, 1997). Page 43 GAO/OCG-99-2 USDA Challenges Related GAO Products USDA Financial Systems: Additional Actions Needed to Resolve Major Problems (GAO/AIMD-95-222, Sept. 29, 1995). Better USDA Telecommunications: Strong Management Can Leadership Needed to Resolve Management Reduce Weaknesses, Achieve Savings Telecommuni- (GAO/AIMD-98-131, June 30, 1998). cations Costs USDATelecommunications: More Effort Needed to Address Telephone Abuse and Fraud (GAO/AIMD-96-59, Apr. 16, 1996). USDA Telecommunications: Missed Opportunities To Save Millions (GAO/AIMD-95-97, Apr. 24, 1995). USDA Telecommunications: Better Management and Network Planning Could Save Millions (GAO/AIMD-95-203, Sept. 22, 1995). Multibillion- USDA Service Centers: Multibillion Dollar Dollar Effort to Modernize Processes and Modernization of Technology Faces Significant Risks Service Center (GAO/AIMD-98-168, Aug. 31, 1998). Information USDARestructuring: Refocus Info Share Technology Program on Business Processes Rather Than Technology (GAO/AIMD-94-156, Aug. 5, 1994). Page 44 GAO/OCG-99-2 USDA Challenges Related GAO Products Year 2000 Year 2000 Computing Crisis: USDA Faces Challenge Tremendous Challenges in Ensuring That Vital Public Services Are Not Disrupted (GAO/T-AIMD-98-167, May 14, 1998). Page 45 GAO/OCG-99-2 USDA Challenges 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 46 GAO/OCG-99-2 USDA Challenges 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 47 GAO/OCG-99-2 USDA Challenges 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. 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Major Management Challenges and Program Risks: Department of Agriculture
Published by the Government Accountability Office on 1999-01-01.
Below is a raw (and likely hideous) rendition of the original report. (PDF)