oversight

Status of Open Recommendations: Improving Operations of Federal Departments and Agencies

Published by the Government Accountability Office on 1990-02-26.

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

                United States General Accounting OfWe   bwx3+L   ’
--A

G&l!0           Annual Report to the Chairmen, House
                and Senate Committees on
                Appropriations


Febr&y   1990
                STATUSOFOPEN
                RECOMMENDATIONS
                Improving Operations of
                Federal Departments
                and Agencies




GAO/OP-90-l
GAO   United States
      General Accounting Office
      Washington, D.C. 20548

      Comptroller General
      of the United States



      B-205879

       Febryary 26,199O


      The Honorable  Jamie L. Whitten
      Chairman,  Committee on Appropriations
      House of Representatives
      The Honorable  Robert C. Byrd
      Chairman,  Committee on Appropriations
      United States  Senate

      This is our annual report              summarizing     the findings     and
      open recommendations          resulting       from GAO's audits      and other
      review work in the federal              departments      and agencies     on
      which satisfactory         legislative       or administrative       actions
      have not yet been completed.                To encourage     prompt,
      responsive     actions     on its recommendations,           GAO
      systematically       follows     up on them.        This report     contains
      information     on a total       of 1,595 GAO recommendations             which
      were open as of November 30, 1989.
      The report     summaries are arranged        by the budget function
      categories     by which federal      funds are appropriated         and
      identified     in the President's       budget.     Two indexes are
      included.      The Committees     of Jurisdiction        index can be
      used to identify       GAO findings     and recommendations       made to
      agencies   for which committees         have appropriation       and
      oversight    responsibility.        GAO report    titles     are also
      listed.    The Recommendation        Addressee    Index can be used to
      identify   the same information         by agencies      to whom
      recommendations      are addressed.
      Details      on these findings        and recommendations            can be found
       in the individual         GAO reports       cited.      Although      copies of
      those reports       were previously          provided     to both the
      Congress and the agencies             involved,       this summary
       information      should be useful         to your committees           in
      reviewing      agencies'      budget requests         and operations.
      Please contact        our Office      of Congressional           Relations    if
      #you wish us to suggest           specific      questions      to be asked in
      appropriations        hearings     on the items summarized or if you
      need additional         information.
B-205879


We are sending copies of this report             to the Office      of
Management and Budget and the federal              departments     and
agencies       so they may be in a position        to answer any
inquiries       made on these issues during        the appropriations/
oversight       hearings.      Copies are also being provided         to
other     interested      congressional  committees.
   /

Cchtents


Budget Functions
                   Administration of Justice                                     1
                   Agriculture                                                   12
                   Automatic Data Processing                                     27
                   Commerce and Housing Credit                                   29
                   Community and Regional Development                            33
                   Education, Training, Employment, and Social Services          36
                   Energy                                                        51
                   Financial Management and Information Systems                  71
                   General Government                                            102
                   General Science, Space, and Technology                        178
                   Health                                                        183
                   Impoundment Control Act of 1974                               227
                   Income Security                                               229
                   International Affairs                                         255
                   Multiple Functions                                            291
                   National Defense                                              293
                   Natural Resources and Environment                             370
                   Procurement - Other Than Defense                              434
                   Transportation                                                436
                   Veterans Benefits and Services                                464



Index Section      Recommendation Addressee                                      473
                       Legislative Branch                                        473
                       Executive Branch                                          477
                       Independent Agencies                                      490
                       Other Organizations                                       494
                   Committees of Jurisdiction                                    495
                       Joint Committees                                          495
                       House Committees                                          496
                       Senate Committees                                         528




                                                                          GAO/OP-90-1
   I




qxample


m
Sa lple Entry
                               Budget Function     Administration
                                                   of Justice

                            Budget Subfunction     Federal Correctional Activities

                                           Title   Presentence Evaluatic
                                                   Responsive to the Net
                 Report Number/Document    Date    GGD8514,04/09/85
                                                   Background
                                    Background     Inorder
                                                        Lareport
                                                             onhow
                                                                 preaentmce
                                                   pychitttrie  ewluations  can be Improved.
                                                   DA0 reviewed 1.61 c~cd where offenden
                                                   were committed to the Federal Prbn
                                                   Sptsm for obervetion     and study and 83
                                                   local studies ordered during Real par
                                                   PYI 1981.


                                                   Findinga
                                       Findings    GAO found that the observation and
                                                   study pmem hlu not bean aa useful pII it
                                                   could be bx~w        the Judicial Conference
                                                   of the Unitad State and the Federal
                                                   Prinon Svatem have not’ (1) wtabliahed
                                                   criteria for the aelection of appropriate
                                                   cams for obwvtion          and study; 62)
                                                   developed and diueminstad          guidance on
                                                   the typa, of quations       that erpeti    can
                                                   he erpacted to amwer; and (3)
                                                   atab,i,hed     a ayetam to svaluak      whether
                                                   &udia      have met the needs of the
                                                   district courta GAO found that judges
                                                   did not provide study objectives snd
                                                   referral quations      in 16 of the 161 came
                                                   it examined      In addition, GAO found
                                                   that about 18 percent of all studies
                                                   ordered in FY 1981 were performed by
                                                   the Federal Frimn System GAO also


                                                   Open Recommendations to
                                                   Agencies
                                                   Recommendation:          The Judnal
                                                   Conference. through the Administratwe
                                                   ONice of the U.S. Courts and the Federal
                 Recommendations    to Agencies    Judicml C&tar, snd the Attorney
                                                   General. through the Federal Prison
                                                   System. should form a partnership            to
                                                   develop criteria for the aelection of cases
                                                   -r. r
                                                   ammodata       far obawvation      and study
                    Recommendation Addressee       Addrcmcr:      Dspertmcnt      of Justice
                                                   St.+tucv: A&ton not yet rnltiat.4         On
                (when more than one Addressee)     April 13, 19R7, the Senkncmg
                                                   Commiwion       transmitted     to Congress
                                                   draft sentencing guidelinea. Justice
                       Recommendation Status       should ba acting on this
                                                   r.,x,mmsndstion.       since the sentencing
                            Status Comments        aideline.    became effective on
                                                   k,vembar     1, 1987.
                                                   Addrcam:       Judicial Conference of ths
                                                   United States
                                                   Statw     Action not yet mltisted         On
                                                   April 13. 1937. the Sentencing
                                                   Cbmmilsion      transmitted     lo Cowrena
                                                   draft mntencing      guidelinen    The Judicial
                                                   Conference should act on this
                                                   recommendation.       since the mntencing
                                                   guidelinea became aflaetive on
                                                   November 1. 1987.




                                                                                         GAO/OP-90.1
Administration                                    of Justice



      migration             Control: A New Role for the Social Security

HRb88-4,03/16/88
Bacpground                                    SSN card, the Social Security Trust         Status: Action not yet initiated. This
                                              Funds paid for the replacement of 1.6       recommendation is under study.
Purs ant to a legislative requirement,
                                              million cards at a cost of $11.6 million.   Addressee: Department of Health and
GAO (1) explored ways to reduce the
pote tial for fraud in obtaining and                                                      Human Services
usin ii social security number (SSN)          Open Recommendations                to      Status: Action not yet initiated. This
cards; and (2) identified technological       Congress                                    recommendation is under study.
alternatives for making the card more
resisyt to counterfeiting.                    Recommendation: Congress may wish           Recommendation: The Secretary of
                                              to consider whether the cost of replacing   Health and Human Services and the
                                              SSN cards as a result of IRCA should be     Attorney General should develop a plan
Finaings                                      paid from either appropriated funds or      for annotating SSN cards for aliens who
GAO: found that: (1) the SSN application      fees charged to those requesting the        are authorized to work in this country
process was vulnerable to fraud, since        cards, rather than from the Social          on a temporary basis.
there were thousands of different             Security Trust Funds.                       Addressee: Department of Justice
documents applicants could use to             Status: Action not yet initiated.           Status: Action in process. On April 4,
support their applications; (2) support                                                   1989, SSA notified INS of a proposed
documents, such as birth certificates,        Open Recommendations                to      legend to place on the SSN card. SSA
were easy to obtain, counterfeit, or alter,   Agencies                                    plans to include the new legend on the
with,no practical way for the Social                                                      SSN card beginning in the summer of
Security Administration (SSA) to verify       Recommendation: The Attorney                1990.
them; and (31 employers were untrained        General should consider reducing the
                                                                                          Addressee: Department of Health and
in document verification. GAO also            number of employment eligibility
                                                                                          Human Services
found that: (1) designating the SSN card      documents and specifically consider
                                              making the SSN card the only                Status: Action in process. On April 4,
as the only acceptable document aliens
                                              authorized employment eligibility           1989, SSA notified INS of a proposed
could use for employment eligibility
                                              document.                                   legend to place on the SSN card. SSA
verification under the Immigration
                                              Status: Action in process. Justice has      plans to include the new legend on the
Reform and Control Act (IRCA) would
                                              started to implement a plan to reduce       SSN card beginning in the summer of
simplify employment eligibility; (2)
Immigration and Naturalization Service        the number of employment eligibility        1990.
(INS) certification of alien employment       documents.
eligibility could improve SSA                                                             Recommendation: The Attorney
procedures; (3) although magnetic strips,     Recommendation: The Secretary of            General and the Secretary of Health and
integrated circuitry, and lasers would        Health and Human Services and the           Human Services should study the cards
make SSN cards more resistant to              Attorney General should develop a plan      confiscated from illegal aliens to identify
counterfeiting, they would not preclude       for the enumeration of aliens that would    the extent and methods employed to
persons from using fraudulent                 provide that INS certify the employment     obtain and use SSN cards.
documents to obtain valid cards; (4) the      eligibility of aliens applying for an SSN   Addressee: Department of Justice
introduction of color-copiers has posed a     card, or establish an alternative method    Status: Action in process. Thi,:
significant threat to SSN card integrity;     of employment eligibility verification      recommendation is under study.
and (5) although IRCA provided that           that would be as effective.                 Addressee: Department of Health and
general revenues finance changes to the       Addressee: Department of Justice            Human Services



                                              Page 1                                                                    GAO/OP-90-l
                                             Administration of Justice




Stat&: Action in process. This               such a change on requests for                 Addressee: Department of Health and
recommendation is under study.               replacement SSN cards.                        Human Services
                                             Addressee: Department of Justice              Status: Action not yet initiated. The
Reco/nmendation: If the Attorney             Status: Action not yet initiated. Justice     Department of Health and Human
General concludes that the number of         has decided to reduce the number of           Services decided to reduce the number of
employment eligibility documents under       employment eligibility documents;             employment eligibility documents;
IRC should be reduced, he and the            however, the recommended study has            however, the recommended study has
Seer ary of Health and Human Services        not been started.                             not been started.
shoul” study the potential impact of




Domestic Terrorism: Prevention Efforts in Selected Federal
Cobrts and Mass Transit Systems
PEI$D-88-22,06/23/88
           __..-_----
Background                                   local transit officials regarded their        information on the strategies they have
In response to a congressional request,      systems as only secondary targets for         developed to prevent and respond to
GAO lprovided information on current         terrorist attack and considered accident      terrorist acts. Of special interest would
effor$ to protect against domestic           and common crime prevention more              be the extent to which agencies have
terrorism in federal court buildings and     important than terrorism prevention;          evaluated the effectiveness and
mass :transit systems.                       and (3) transit officials had generally not   intrusiveness of existing preventive
                                             tested the performance effectiveness or       measures. Consideration should be given
                                             intrusiveness of their security systems.      to how protective strategies can be
Findings                                     In addition, GAO found that: (11 no one       effective and flexible in addressing
GAO ,found that: (1) the U.S. Marshals       specific agency was responsible for           different terrorist threats, while
Service protects federal court facilities    providing federal agencies with technical     adhering to a consistent standard of
and Rersonnel against terrorist actions;     information and expertise regarding the       minimal intrusiveness on the civil
(2) the seven court districts it reviewed    planning, coordination, and evaluation        liberties of the public and employees.
implemented and enhanced most of the         of domestic antiterrorism strategies; and     Congressional committees might also
Service’s standard security measures         (2) there was a lack of uniform,              want to ensure that the antiterrorism
against terrorism; (3) although the          systematic, and comprehensive planning        programs are compatible with the
courts established emergency response        efforts to evaluate the effectiveness of      mission and operations of their
procedures, they emphasized prevention;      current antiterrorism measures.               institutions or facilities, are integrated
and CC1the courts generally selected risk-                                                 with related functions such as safety and
red&ion strategies that would not            Open Recommendations                to        emergency preparedness, and are
negatively affect the court’s openness or
the general public’s civil liberties. GAO
                                             Congress                                      coordinated with appropriate law
                                                                                           enforcement agencies.
also found that: (1) the Urban Mass          Recommendation: Congressional
                                                                                           Status: Action not yet initiated.
Transportation Administration failed to      committees that are concerned about the
address civil liberty issues in its          threat of domestic terrorism and the
technical assistance project on terrorism    preservation of civil liberties may wish
prevention and respove strategies; (2)       to request that agencies provide




                                             Page 2                                                                     GAO/OP-90-l
                                                                                                                                      -
---I---                                       Administration of Justice




D ‘partment of Justice: Status of Implementing                                                       Private
At orney Debt Collection Pilot Program
  9
GGb-89-90,08/15/89
Bat kground                                   erroneously eliminated two potentially         Status: Action not yet initiated.
Purs ant to a legislative requirement,        qualified firms from competition and
GAO evaluated the Department of               provided only limited guidance for             Recommendation: The Attorney
Justi 1 e’s pilot program for contracting     technical proposal evaluation; (4) did not     General should direct the U.S. attorney’s
with iprivate attorneys for debt collection   adequately document its contracting            offices participating in the pilot program
to determine: (1) Justice’s compliance        process; (5) obtained reasonable prices        to modify their reporting system to
with (federal competition requirements;       for the legal services; (6) could not assess   separately estimate the number of
(2) whether Justice obtained reasonable       the cost-effectiveness of its contracting      personnel that work on the same types
prices; (3) the extent to which Justice       efforts, since it collected data on costs of   of debt cases that the private attorneys
encouraged minority competition; and (4)      private attorney debt collection efforts,      will be handling.
program results.                              but did not collect comparable cost            Status: Action not yet initiated.
                                              information for participating U.S.
                                              attorney’s offices; and (‘7) misreported       Recommendation: The Attorney
Findings                                      cost information comparing private and
                                                                                             General should direct the Executive
GAO found that Justice: (1) generally         U.S. attorneys’ collection efforts.
                                                                                             Office for U.S. Attorneys to use the
followed federal competition                                                                 refined information to estimate the U.S.
requirements for identifying potential        Open Recommendations                to         attorney’s offices indirect debt collection
contractors in its first set of 5 pilot
districts, with over 1,100 law firma
                                              Agencies                                       costs.
                                                                                             Status: Action not yet initiated.
expressing interest in obtaining              Recommendation: To ensure that the
contracts and 83 submitting proposals;        Department of Justice complies with the
(2) awarded 3 of its first 18 contracts to    Federal Acquisition Regulation, the            Recommendation: The Attorney
minority firms and was considering            Attorney General should direct the head        General should direct the program
more awards to minority firms under its       of the procurement services staff to           manager to revise program results
second set of 5 pilot districts; (3)          fully: (1) evaluate all proposals before       reports to show results on cases that are
generally followed federal contractor         eliminating them from competition; and         comparable.
selection requirements, although it           (2) document the contracting process.          Status: Action not yet initiated.




                                              Page 3                                                                        GAO/OP-90-l
                                              Administration of Justice




     I


Cribinal     Justice Assistance

Cuban Refugee Resettlement: Federal Administration                                                             of
VikionQuest Projects Inadequate
HRD-89-16, 12/30/88
Ba kground                                   periods. GAO also found that NIMH did         Status: Action in process. Estimated
Purs ant to a congressional request,         not: (1) adjust program funding to reflect    completion date: 01/90. PHS started a
GA provided information on a firm’s          the varied number of participants during      review of selected NIMH grant files in
CubiI n entrant program, focusing on: (1)    different award periods; (2) adequately       April 1989. Baaed on the preliminary
the amount and sources of federal funds      document or maintain program-related          results of this review, a comprehensive
                                             proposals, budget requests and                review of the NIMH grants management
it received; (21 how it spent the federal
                                             cooperative agreements, program               office will be done to ensure that all
funds; (31 the propriety of its paying for
                                             expenditures, or monitoring reports; (3)      NIMH programs are managed in line
leases with federal funds; and (4) how
                                             develop an indirect cost rate and allowed     with Department of Health and Human
the National Institute of Mental Health                                                    Services policy.
(NIMHl carried out its administrative        the firm to charge the government $2.4
responsibilities.                            million in indirect costs it categorized as
                                             burden allocation; (4) take any               Recommendation: The Secretary of
                                             enforcement action for the firm’s failure     Health and Human Services should
Findings                                     to timely submit acceptable financial         direct PHS grants management and
                                             status reports; or (5) maintain adequate      program officials to review NIMH
GAG found that the firm: (1) received                                                      administration of all cooperative
about $1.7 million from the Social           documentation to support the propriety
                                             of the firm’s charging the government         agreements for community-based
Security Administration’s Office of                                                        treatment of Cuban entrants to
Refugee Resettlement, $16.5 million          for the costs of its leasing arrangements.
                                                                                           determine whether NIMH carried out its
from the NIMH Refugee Mental Health                                                        responsibilities in compliance with PHS
Program, and $585,000 from the               Open Recommendations               to         policies.
Department of Justice’s Community            Agencies                                      Status: Action in process. Estimated
Relations Service; (2) provided                                                            completion date: 01/90. PHS reviewed
community-based mental health services       Recommendation: The Secretary of              NIMH active and closed community-
to 245 Cuban youth resettling in the         Health and Human Services should              based treatment projects for Cuban
United States; (3) did not comply with its   direct Public Health Service (PHS)            entrants and found deficiencies similar
proposed 18-month maximum                    grants management and program                 to those GAO found at VisionQuest. The
participation limit until NIMH issued a      officials to: (1) evaluate NIMH               reviewers examined other selected
policy guideline limiting participation to   procedures, activities, and records           assistance activities and also found
6 to 9 months; (4) could not evaluate its    relating to VisionQuest’s cooperative         problems. In July 1989, the Deputy
program’s effectiveness, since it did not    agreements; and (2) obtain and develop        Assistant Secretary for Health
follow up on participants after discharge;   needed documentation to bring NIMH            Operations asked that a comprehensive
and (51 spent $196,150 more than it was      official files into compliance with PHS       review of the NIMH grants management
authorized to during three award             policies.                                     office be undertaken,




                                             Page 4                                                                   GAO/OP-90-l
---T----           -


                                                    Administration of Justice




F e d b r a L a w E n fo r c e m e n t A ctivities
      I
Imimigration R e fo r m : S yste m a tic A lie n V e rifica tio n S yste m
C o ,b ld B e I m p r o v e d
    I
IM ’IjE C -8% 4 5 B R0 9, /3 0 /8 7
Bae ground                                          also f o u n d that: (1) although INS intends            long-term corrective actions INS plans to
P u r s s ant to a legislative requirement,         to improve its data to e n s u r e accurate,             take to improve the quality a n d
G A O Iexamined the effectiveness of the            positive primary verifications, such                     completeness of the data b a s e accessed
Im m i ration a n d Naturalization                  i m p r o v e m e n t will not occur before the          by the S A V E system; a n d ( 2 1statistical
Servi e ’s (INS) Systematic Alien                   middle of 1 9 8 8 ; ( 2 1INS plans to correct            a n d trend data o n the m a g n i t u d e of
Veri 1 cation for E n titlements ( S A V E )        the deficiencies in its central system o n               primary verifications, together with
system, particularly its implementation             a case-by-casebasis d u r i n g secondary                magnitude, t u r n a r o u n d tim e , a n d
nationwide.                                         verification until it implements a                       records corrected d u r i n g secondary
                                                    nationwide verification system; a n d (3)                verification.
                                                    since the system is still in the                         S tatus: Action taken not fully
Findings                                            developmental stage, INS h a s not                       responsive. A p l a n w a s completed o n
G A O /found that: ( 1 1the S A V E system          d e t e r m i n e d its overall cost.                    M a r c h 18, 1 9 8 8 . M a n y actions called for
proviaes quick a n d positive verification                                                                   in this p l a n h a v e b e e n i m p l e m e n t e d by
of ani alien’s immigration status; ( 2 1            O p e n R e c o m m e n d a tio n s to                   INS, resulting in significant
d u r i n g a 6 - m o n t h period, INS detected
7 3 4 illegal aliens out of a b o u t 1 3 , 4 2 6
                                                    Agencies                                                 improvements in the quality a n d
                                                                                                             completeness of S A V E data. Actions
applicants for u n e m p l o y m e n t              R e c o m m e n d a t i o n : T o e n s u r e that the
                                                                                                             relating to the s e c o n d part of the
compensation benefits; a n d (3) of the             nationwide S A V E system m e e ts the
                                                                                                             r e c o m m e n d a t i o n a r e still in process. INS
1 3 , 4 2 6cases it examined, approximately         n e e d s of state a n d local officials, the
                                                                                                             b e g a n collecting data o n secondary
4,lO O ’aliensrequired secondary                    Commissioner, INS, should develop: (1) a
                                                    formal corrective action p l a n that                    verifications in D e c e m b e r 1 9 8 8 , but
verification of their legal status a n d of
those, a b o u t 9 6 percent w e r e legal. G A O   clearly identifies both short-term a n d                 results at this tim e a r e incomplete.



F e d ’eral L a w E n fo r c e m e n t A ctivities

Immigration S e rvice : I N S ’ T e c h n o logy S e lection P rocess Is
W e a k, In fo rmal, a n d Inconsiste n tly A p p lie d
P E l@ D - 8 8 - 1064, /2 2 /8 8
Background                                          Findings                                                 lacked policies r e g a r d i n g the types of
                                                                                                             items that it should test or the s c o p e a n d
In r e s p o n s e to a congressional request,      G A O f o u n d that INS: (1) lacked
                                                                                                             m e thods for the testing process; ( 4 1
G A O e x a m i n e d the m e thodologies a n d     systematic p r o c e d u r e s for selecting n e w       lacked policies r e g a r d i n g the u s e of the
practices that the Immigration a n d                technologies; (2) lacked policies                        research a n d d e v e l o p m e n t office or the
Naturalization Service (INS) u s e d to             r e g a r d i n g the p r o c e d u r e s for the        interaction b e t w e e n it a n d p r o g r a m
select technologies for the enforcement             identification of n e e d s or problems, as              offices a n d users; (5) did not consistently
of immigration law.                                 well as the identification of solutions; (3)             select or adequately review or test



                                                    P a g e5                                                                                        G A O /O P - 9 0 - I
                                               Administration of Justice




technology; (61 did not have a current or      additional purchases and show potential      the 1987 through 1988 period, a larger
complete inventory of items used in the        savings; and (111 experienced difficulties   aircraft does not appear to be justified.
                                               in applying the GAO-developed                Stattis: Action in process. INS has
      eld offices to determine how they        framework to specific cases, due to          delayed or eliminated the purchase of
                                               differences in the current INS process.      additional aircraft. INS stated that it
                                                                                            will use the GAO framework in any
       effectiveness of items used or          Open Recommendations                to       future purchase decision. GAO should
                                               Agencies                                     continue to follow up on this to see if
       ation to prospective purchasers or                                                   INS does follow the framework in this
                                              Recommendation: The Attorney                  case.
                                              General should direct the Commissioner,
                                              INS, to not purchase an additional,
                                              larger aircraft at this time. Unless load
                                              factors for the Convair 580 increase over


Fedkral Law Enforcement                 Activities
Eqbal Employment Opportunity: EEOC and State Agencies
Did Not Fully Investigate Discrimination Charges
HRD-8941, 10/11/88
Bat kground                                   deficiencies ranged from 40 percent in        Open Recommendations                to
In response to a congressional request,       one state to 8’7 percent in another; (2)      Congress
GAO: (1) reviewed six Equal                   EEOC did not have enough staff to
                                              effectively monitor FEPA; (31 although        Recommendation: The Chairmen of the
Employment Opportunity Commission
                                              EEOC and FEPA did not fully                   House Committee on Education and
(EEOC) districts’ and five states’ fair
                                              investigate filed charges, the size of the    Labor and Senate Committee on Labor
employment practices agencies’ (FEPA)
                                              backlog almost doubled between 1983           and Human Resources, and the
efforts to fully investigate discrimination
                                              and 1987, leaving more than 118,000           chairmen of other appropriate
charges; and (2) assessed how well EEOC
                                              charges awaiting investigation at the         congressional committees having
monitored state investigative work.
                                              end of 1987; (4) EEOC tried various           responsibility for EEOC, should jointly
                                              approaches, but could not successfully        establish a panel of experts to consider
Findings                                      balance the timely resolution of a large      the strategy being used to enforce
GAO ;found that, of the charges that          volume of charges with the performance        employment discrimination laws. In
EEOC and FEPA closed with no-cause            of high-quality investigations; (51 former    considering options, the panel should
determinations from January through           EEOC officials could not agree on the         determine the: (1) appropriate roles for
March 198’7, the agencies did not: (1)        best strategy for effectively and             EEOC and FEPA in investigating
verify critical evidence in 49 to 87          efficiently dealing with the volume of        charges; and (2) resources needed to
percent of the cases; (21 interview           charges EEOC received; and (6) although       carry out the roles assigned to each
relevant witnesses in at least 20 percent     the current EEOC Chairman believed            entity.
of the investigations in ‘7 of the 11         that EEOC could fully investigate             Addressee: House Committee on
offices; or (3) compare charging parties      charges and properly monitor FEPA             Education and Labor
with similarly situated employees in at       investigative work with the $20.million       Status: Action not yet initiated.
least 20 percent of thejinvestigations in     increase in EEOC funding, there was no        Addressee: Senate Committee on Labor
5 of the 11 offices. GAO also found that:     reliable work-load information to             and Human Resources
(11 the percentage of cases with serious      support his views.                            Status: Action not yet initiated.



                                              Page 6                                                                       GAO/OP-90-l
                                              Administration of Justice




                                             determine the: (11 charge case load an       recommendation simply reiterated its
                                             individual investigator should be            present procedures for reviewing FEPA
                                             expected to carry annually and fully         investigations. Further monitoring
                                             investigate; and (2) resources EEOC          would require additional unavailable
                                             would need to fully investigate charges      resources.
                                             filed.
                                             Status: Action not yet initiated. The        Recommendation: The Chairman,
                                             Chairman, EEOC, has only indicated           EEOC, should establish an independent
                                             that such a study is difficult to conduct    group to periodically conduct
                                             and that case-load decisions are left to     investigations of a sample of charges
                                             local managers. The Chairman has             filed with EEOC district offices and
                                             stated that EEOC determined these            FEPA and subject them to full
                                             resources by using FY 1988 work-load         investigations. The results of this work
                                             statistics. No special study was             should be compared with the overall
                                             conducted. The agency contact is             administrative closure, settlement,
                                             following up.                                cause, and no-cause rates obtained from
        (11 added comprehensive training
                                                                                          investigations done by the district offices
in c ’e development for all field            Recommendation: The Chairman,
                                                                                          and FEPA.
supe“a isors and managers; and (21           EEOC, should direct EEOC district
                                             offices to monitor the investigations        Status: Recommendation valid/action
continues to monitor the quality of
investigations via charging parties’         performed by FEPA more closely and           not intended. In the EEOC response to
requests for reviews of their                not accept FEPA determinations that          the requirements of 31 U.S.C. 720, the
investigations.                              are based on less than full                  Chairman stated that the Determination
                                             investigations.                              Review Program eliminated any need for
Recqmmendation: The Chairman,                Status: Recommendation valid/action          an independent study, as recommended.
EEOC, should conduct a study to              not intended. The EEOC response to this


Federal Law Enforcement                Activities

Immigration Reform: Status of Implementing                                                    Employer
Sanctions After Second Year
GGD-89-16,
_._.-.,I ._-_..- - .--.-11/15/88 -._
BaCkground                                   an unnecessary regulatory burden on          employing unauthorized aliens and
                                             employers.                                   about 4,700 violations for not completing
In response to a legislative requirement,
                                                                                          required forms; and (3) about half of the
GAG surveyed implementation and
                                              Findings                                    1.9 million employers who were aware of
enforcement of the Immigration Reform
                                                                                          the law hired at least one employee who
and Control Act’s (IRCA) employer             GAO found that: (1) although INS            had not completed the required form.
sanction provisions to determine              continued to educate employers while        GAO also found that: (1) INS did not
whether the: (11 Immigration and              increasing enforcement, 22 percent of       systematically analyze data on
Naturalization Service (INS) and other        the employers GAO surveyed were not         unauthorized aliens’ use of counterfeit
federal agencies satisfactorily carried       aware of IRCA, and 20 percent did not       documents; (2) INS did not distinguish
out IRCA; and (2) provisions caused a         clearly understand major IRCA               between employers who voluntarily
widespread pattern of discrimination          provisions; (2) as of September 1988, INS   complied with the act before receiving a
against U.S. citizens or others or created    had recorded 452 violations for             notice of inspection and those that it



                                              Page 7                                                                    GAO/OP-90-1
                                               Administration of Justice




brou/ght into compliance through               investigators to require them to follow      Recommendation: The Attorney
ins ction; and (3) INS and the                 reasonable steps, such as requesting         General should direct the Commissioner,
Dep3 rtment of Labor (DOL) did not             employer payroll records, to determine if   INS, to begin systematically evaluating
conslatently review employers’ payroll         all required I-9 forms have been            data on the extent to which
records to verify that there were no           prepared.                                   unauthorized aliens are using
other employees hired who had not              Status: Action not yet initiated. INS       counterfeit or fraudulent documents to
corn leted the required form. In               plans to revise its field manual to         complete the I-9 form, including the
addi ‘Iion, GAO found that: (11 the            incorporate the recommendation.             types of documents used.
num er of discrimination charges filed         However, due to budget constraints, the     Status: Action in process. A joint
with bthe Office of Special Counsel (OSC)      revisions have not been issued.             INS/GAO project to gather data was
and Lhe Equal Employment Opportunity                                                       initiated on May 1, 1989. An
Corn’ ission (EEOC), and data on IRCA-         Recommendation: The Attorney                apprehended alien interview was
rela d discrimination did not establish        General should direct the Commissioner,     pretested on May 30, 1989 and
a pa tern of discrimination; and (2) there     INS, to modify the General                  implemented during August and
was 1 nsufficient information to               Administrative Plan to measure              September. The GAO Atlanta office is
dete mine whether the employer                 compliance at the beginning of the          compiling the preliminary results. The
saneI ion provisions caused an                 inspection.                                 data will be provided to INS by
unnecessary regulatory burden.                 Status: Action not yet initiated. A         December 1989. However, due to budget
                                               feasibility test was conducted in August    constraints, INS has not implemented
Open Recommendations               to          1989. The agency is compiling the results   the information system needed to gather
                                               of the test and plans to have data by       the data.
Aghcies                                        December. However, the information
Recdmmendation: The Attorney                   system needed to fully carry out this
General should direct the Commissioner,        recommendation has not been
INS, to revise the guidance to INS             implemented.


Federal Law Enforcement                 Activities
Internal Affairs Investigations: Customs Service Needs to
Better Manage the Investigation Process
GGD-89-43,02/28/89
Background                                    ensuring that Internal Affairs complied      Internal Affairs notified OIG of direct
In response to a congressional request,       with established policies and procedures;    allegations from individuals; (4) some
GAO reviewed the Customs Service              (2) although procedures required             documentation indicated that Internal
Office of Internal Affairs’ policies and      documentation for each allegation            Affairs failed to notify OIG of allegations
procedures for handling allegations of        Internal Affairs received, it did not        involving senior officials; and (5) 27 of 41
employee impropriety and employee             document an allegation if the                cases completed prior to 198’7 procedural
bachground investigations.                    investigator determined that the             changes were missing required
                                              allegation was nonspecific, incomplete,      documentation, while only 6 of 20 1988
                                              or frivolous; (3) lack of documentation      cases were missing required
Finidings                                     precluded any assessment of the extent       documentation. GAO also found that: (1)
GAO found that: (11 the Department of         to which allegations went                    Internal Affairs did 6,421 background
the Treasury’s Office of Inspector            undocumented, the seriousness of the         investigations in 198’7 and 5,690 in 1988,
General (OIG) was responsible for             allegations, or the extent to which          compared to 2,534 in 1986; (21 although a




                                              Page 8                                                                     GAO/OP-90-l
                                                 Administration of Justice




back1 g of new employee investigations           prepares and maintains required              OIG does not plan to follow up until
devel ped in 198’7, Internal Affairs             documentation in case files.                 December 1990. GAO plans to follow up
elimi $ ated it by using overtime,               Status: Action in process. Customs’          in 1991.
modil’led procedures, and additional             Assistant Commissioner for Internal
         ; and (3) in 1988, Internal Affairs     Affairs issued instructions requiring        Recommendation: The Department of
                                                 such documentation. Treasury’s OIG           the Treasury’s Inspector General should
         d 5,500 employee                        plans to monitor Customs’ activities once    better ensure that Internal Affairs
         igations, resulting from its            its Office of Quality Assurance is fully     makes background investigations as
                                                 operational. OIG does not plan to follow     required by the Office of Personnel
                                                 up until December 1990. GAO plans to         Management.
                                                 follow up in 1991.                           Status: Action taken not fully
                                                                                              responsive. The Commissioner of
           quality assurance review of           Recommendation: The Department of            Customs allocated additional positions to
           Affairs since 1980; and (2) OIG       the Treasury’s Inspector General should      reduce the backlog of background
           periodic meetings and case            better ensure that Internal Affairs refers   investigations. Treasury’s OIG will
             ensure the quality of Internal      immediately all allegations of               monitor Customs actions once its Office
Affai+   investigations.                         impropriety concerning senior-level          of Quality Assurance is operational, but
                                                 officials to Treasury’s OIG.                 not before December 1990. GAO also
Opeb Recommendations                  to         Status: Action in process. Customs’          plans to follow up, but probably before
                                                 Assistant Commissioner for Internal          December 1990.
Agencies                                         Affairs reiterated existing instructions.
Recohmendation:     The Department of            Treasury’s OIG plans to monitor
the Treasury’s Inspector General should          Customs’ actions once its Office of
better ensure that Internal Affairs              Quality Assurance is fully operational.


Federal Law Enforcement                    Activities

Asset Forfeiture:                       An Update
T-GGD-89-17,
       .._-.._ 04/24/89
                ~~~
                  --..~                    __-
Background                                        percent of judicially forfeited cash,       uncontested cash seizures. Specific
                                                  resulting in default judgments; (5)         language needed for: (1) Customs’
GAO discussed how the Customs Service             neither DOJ nor Customs had policies on     revision of 19 U.S.C. 1607(a) by adding
and the Department of Justice (DOJ)               how long transfer of seized assets to       “such seized merchandise as monetary
could more quickly process seized assets.         forfeiture funds should take, and           instruments”; and (2) DOJ revision of 28
GAO noted that: (1) such seized assets as         frequently took more than 30 days to        U.S.C. 524(c) by adding similar language.
cash and real estate have increased by            accomplish transfer; and (6) property       Status: Action in process.
3,200’percent since 1979, now totalling           equity, value, and title problems made
$1.1 billion; (2) both Customs and DGJ            disposal of forfeited real estate time-     Recommendation: To ensure that large
used their asset forfeiture funds to              consuming and unprofitable.                 uncontested cash seizures are processed
finance program expenses, share with                                                          in a timely manner and adequately
state and local law enforcement                                                               monitored, Congress should amend
agencies, and fund drug enforcement
                                                  Open Recommendations              to        Public Law 100-690, Sections 6072 and
activities; (3) judicial forfeiture, required     Congress                                    7364, to require that annual forfeiture
for seized cash amourYts over $100,000,           Recommendation: Congress should             fund reports to Congress include data on
took longer than administrative                   revise existing law to allow Customs and    uncontested cash seizures over $100,000
forfeiture: (4) no one contested 89               DOJ to administratively forfeit             which are not transferred to the




                                                  Page 9                                                                    GAO/OPdO-1
                                              Administration of Justice




forfeiture fund within 120 days of            legislative recommendation is adopted         be normally obtained before a complaint
sei+ne.                                       by Congress.                                  for forfeiture is filed, and in those
StTuu: Action in process.                     Addressee: Department of the Treasury         situations where a thorough analysis of
                                              Status: Action in process. Treasury has      defendant equity/forfeitable interest
Re ammendation: Congress should               formally agreed to implement this            before seizure would jeopardize an
en ct legislation to amend civil              recommendation as soon as the                investigation, professional appraisals
for eiture law stating that the U.S.          legislative recommendation is adopted        and title searches should be done within
gov rnment guarantees clear title upon        by Congress.                                 60 days of seizure; (2) consider including
co pletion of the civil forfeiture process.                                                the estimated forfeitable interest in civil
Sta us: Action in process.                    Recommendation: To ensure that cash          complaints for forfeiture so that the
   ;                                          is transferred timely and large cash
                                                                                           financial merits of the case will be
Open Recommendations                 to       forfeitures receive priority, the Attorney
                                                                                           known before the judicial proceedings
                                              General and the Secretary of the
A encies                                      Treasury should transfer: (1) forfeited      begin; (3) establish a quick release policy
Re ommendation: The Attorney                  cash of $100,000 or more from the            whereby heavily encumbered properties
Ge era1 and the Secretary of the              holding account to asset forfeiture funds    (low or non-existent forfeitable interest)
Tre ury should: (1) ensure that, upon         within 7 days of forfeiture; and (2) all     could be timely released to innocent co-
ena1 tment of appropriate legislation,        other forfeited cash from the holding        owners or lienholders so those parties
cash cases over $100,000 which have not       account to asset forfeiture funds within     can pursue recovery of their vested
had complaints for forfeiture filed with      30 days of forfeiture.                       interests; and (4) ensure that specific
the court are reviewed for conversion to      Addressee: Department of Justice             language regarding clear title is
administrative forfeiture; and (21            Status: Action in process. Justice began     provided to key congressional
establish priority processing of              review to identify and set in motion         committees.
uncontested administrative cash seizures      steps to resolve any seized cash             Status: Action in process. Justice has
over $100,000.                                management delays.                           agreed to make some changes in this
Addressee: Department of Justice                                                           area, but is not yet sure what those
Status: Action in process. Justice has        Recommendation: The Attorney                 changes will be.
formally agreed to implement this             General should: (1) ensure that
recommendation as soon as the                 professional appraisals and title searches


Federal Litigative        and Judicial Activities

Defense Procurement Fraud: Justice’s Overall
Management Can Be Enhanced
GC;D-88-96,06/29/88                                                                   -
Baikground                                    Findings                                     procurement fraud investigations and
Pursuant to a congressional request,                                                       prosecutions; (3) stated that it needed
                                              GAO found that DOJ: (1) lacked
GAO examined the Department of                                                             more staff for such investigations and
                                              complete and timely information about
Justice’s (DGJ) overall management of                                                      prosecutions, but lacked a case-weighting
                                              case referrals and case status, since
its defense procurement fraud                 investigating agencies and DOJ               system that could help it assess and
investigations.                               attorneys frequently failed to report        justify additional resource requirements;
                                              such data to its Fraud and Corruption        and (4) lacked written management
                     J                        Tracking (FACT) System; (2) did not          plans outlining its current and future
                                              gather information about the number of       efforts in this area. GAO also found that:
                                              attorneys involved in defense                (1) turnover among attorneys and




                                              Page 10                                                                    GAO/OP-90-l
                                           Administration of Justice




supp&t staff had an adverse impact on      that will provide complete, accurate, and    provide updated information on the
investigations; (2) DOJ provided           timely information on fraud referrals        status of the service contract for the
adeqjate, timely guidance to               and cases.                                   design of a case-weighting scheme.
investigating attorneys on an as-needed    Status: Action in process. Estimated
basis;: (3) DOJ case monitoring            completion date: 04/90. The General          Recommendation: The Attorney
procedures varied according to each        Services Administration (GSA) approved       General should select those US.
case$i importance and sensitivity; (4)     the system needs assessment for the          attorney offices that investigate a large
DOJ $id not maintain written records of    FACT system on September 30, 1989.           number of defense procurement fraud
staff $Issignments or time commitments     Justice’s Criminal Division has initiated    referrals and then direct these offices
to sp cific cases; and (5) attorneys did   program changes and expects to               and the Criminal Division to prepare
not d velop general or specific written    complete them by April 1990.
                                                                                        written management plans and update
inves1 igation plans.
                                                                                        them periodically to assess progress.
                                           Recommendation: The Attorney
                                           General should develop a means for           Status: Action not yet initiated.
Opeb Recommendations             to                                                     Officials at EOUSA were contacted
                                           determining the amount of attorney
Age)lcies                                  resources being spent on defense             several times; however, they have yet to
Recohmendation:     The Attorney           procurement fraud and pursue the             provide updated information on the
Genetal should reassess the operation of   development of a case-weighting system.      inclusion of specific reporting on defense
the F’$Wl’ system with regard to defense   Status: Action not yet initiated.            procurement fraud activity within each
proc$rement fraud to determine what        Officials at the Executive Office for U.S.   U.S. attorney office’s existing law
need8 to be done to ensure that an         Attorneys (EOUSA) were contacted             enforcement plan.
interagency tracking system is in place    several times; however, they have yet to




                                           Page II                                                                    GAO/OP-90-I
Agriculture



Fhmers Home Administration:   Farm Loan Programs Have
B+come a Continuous Source of Subsidized Credit
  !
RC$D-89-3,
.-...-.+-.--------1l/22/88
Ba kground                                    to the depressed agricultural market and   graduation to non-FmHA financing are
Pur uant to a congressional request,          the lack of definition of the FmHA role    identified and graduated when their
GA reviewed the Farmers Home                  as a temporary credit source; and (6)      economic conditions permit, the
Ad inistration’s (FmHA) farm loan             FmHA borrowers received loans that no      Secretary of Agriculture should direct
grad ation policies and procedures to         other lender would provide and             the Administrator, FmHA, to monitor
detei mine: (1) whether FmHA followed         significant interest-rate subsidies at     county office compliance with
legislative mandates to graduate              government expense.                        graduation requirements.
successful borrowers; (2) the extent to                                                  Status: Action in process. FmHA is
which FmHA was a long-term source of          Open Recommendations             to        developing a more effective monitoring
credit; and (3) the amount of government      Agencies                                   system which is expected to be in place
interest rate subsidy and financial                                                      by December 1989.
advantage FmHA borrowers received.            Recommendation: To help ensure that
                                              FmHA borrowers with potential for          Recommendation: To help ensure that
                                              graduation to non-FmHA financing are       FmHA borrowers with potential for
Findings                                      identified and graduated when their        graduation to non-FmHA financing are
GAG found that: (11 many FmHA                 economic conditions permit, the
                                                                                         identified and graduated when their
borrQwers did not graduate to other           Secretary of Agriculture should direct
                                                                                         economic conditions permit, the
credit sources because they lacked            the Administrator, FmHA, to develop
                                              and convey to all FmHA units a precise     Secretary of Agriculture should direct
financial capability and few lenders
                                              operational definition of graduation and   the Administrator, FmHA, to collect and
expressed interest in refinancing their
                                              emphasize the importance of uniform        summarize accurate data on results of
debts; (2) some FmHA county offices did
                                              application of that definition.            the borrower graduation process and
not comply with all aspects of the
graduation review process; (3) FmHA           Status: Action in process. FmHA has        distribute such results to all appropriate
lacked a clear operational definition of      begun coordination to redefine             management levels so that FmHA is
graduation, preventing consistent policy      ‘graduation‘ in FmHA Instruction 1951-     kept informed of the progress made in
and practice application; (4) FmHA could      F, section 1951.252(b). This definition,   graduating borrowers to non-FmHA
not monitor or judge the success of its       when used consistently, will improve the   sources of credit.
graduated borrowers, since it did not         graduation process and subsequent          Status: Action in process. The problem
maintain reliable information on the          reporting accuracy.                        has been due to different interpretations
results of its graduation efforts; (5) many                                              of the term ‘graduation‘ by county
FmHA borrowers have remained in the           Recommendation: To help ensure that        offices. A more precise definition of the
loan programs for extended periods due        FmHA borrowers with potential for          term should help resolve this problem.




                                              Page 12                                                                 GAO/OP-90-1
                                            Agriculture




Fatmers Home Administration: Sounder Loans Would
Require Revised Loan-Making Criteria
RCEjD-89-9,02/14/89
Background                                  FmHA attempted to define those               Status: Action in process. Estimated
                                            farmers whom it could help or not help       completion date: 03/90. FmHA is
In re ponse to a congressional request,
                                            with its loans and identified borrowers’     developing a study of the use of ratios as
GAO @Ixamined the Farmers Home
                                            degree of risk; (8) FmHA withdrew the        guides for sounder credit decisions.
Admi istration’s (FmHA) loan policies
                                            proposal due to congressional and public     FmHA expects the study to be completed
and p actices to determine: (1) whether
                                            concern over inadequate information on       in early 1990 and then to present the
FmH : used adequate criteria to make
                                            the proposal’s impact and the denial of      results to Congress.
and service loans; (2) how FmHA loan
                                            further assistance; and (9) Congress
policies affected borrower equity; (3)
                                            directed FmHA to reinstate the               Recommendation: The Secretary of
whether security for FmHA loans was
adequate; and (4) the potential impact of   continuation policy that allowed existing    Agriculture should direct the
FmHA-proposed loan criteria on existing     borrowers to obtain additional loans         Administrator, FmHA, to develop
                                            without showing their ability to repay       regulations, in consultation with
borrowers.
                                            prior loans, but enacted new legislation     appropriate congressional committees,
                                            that directed FmHA to consider               that protect the government’s financial
Findings                                    reducing delinquent borrowers’ debt if it    interests by requiring that, when
GAO :found that: (11 FmHA analyses of       was financially better for the
                                                                                         servicing loans, county supervisors
its cash flow were overly optimistic,       government than liquidation.
                                                                                         obtain security of equal or greater value
since it did not allow for unexpected                                                    than the serviced loan’s outstanding
expenses or equipment replacement and       Open Recommendations               to        principal or the best security interest
often overstated borrowers’ repayment       Congress                                     available on all of the borrower’s assets.
ability; (21 FmHA used extensive loan-                                                   Status: Action in process. FmHA will
servicing techniques, such as reducing      Recommendation: Congress may wish
                                            to reconsider whether the continuation       continue to emphasize the taking of
interest rates and increasing repayment                                                  additional collateral, when available, or
periods, to keep borrowers current on       and debt-restricting policies are the best
                                            means of assisting already heavily           the best lien obtainable, to secure the
their loans; (3) lotin servicing usually                                                 unpaid balance of unsecured delinquent
increased the outstanding loan principal    indebted farmers.
                                            Status: Action not yet initiated.            loans. In addition, regulations will be
by adding unpaid interest to the
                                                                                         reviewed to determine how they may be
principal, and created long-term debts;
                                                                                         strengthened to better protect the
(4) increased debt and the declining        Open Recommendations               to        government’s interest in servicing
value of collateral assets decreased
borrowers’ equity; (5) although FmHA
                                            Agencies                                     farmer program loans.
required adequate security to ensure        Recommendation: The Secretary of
repayment for new loans, it did not have    Agriculture should direct the                Recommendation: The Secretary of
similar security requirements for           Administrator, FmHA, to develop              Agriculture should direct the
serviced loans; (6) FmHA proposed           regulations, in consultation with            Administrator, FmHA, to provide
stricter eligibility and loan criteria in   appropriate congressional committees,        adequate credit analysis training to
1987 to speed loan processing and           that improve the cash-flow analysis used     county supervisors. The training should
improve loan portfolio financial            in loan-making decisions by                  stress the importance of preparing
management; (7) althbugh the proposed       incorporating an allowance to cover          required yearend analyses of farm
criteria would have denied assistance to    contingencies and equipment                  operations for all borrowers, including
a large percentage of existing borrowers,   replacement.                                 actual performance data, and the



                                            Page 13                                                                    GAO/OP-90-l
                                             Agriculture




 development of realistic farm operating      Administrator, FmHA, to pursue the         borrowers by providing them with a
 budgets for nondelinquent borrowers.         development of more comprehensive           more realistic assessment of their
 StaLl(jw: Action in process. After           loan-making criteria that assess an        financial condition before they accept
 completion of the evaluation of training    applicant’s financial solvency,             additional credit.
 needs and effectiveness of the pilot        profitability, liquidity, and repayment     Status: Action in process. Estimated
 project self-study course, FmHA will        ability prior to making new loans. After    completion date: 03/90. FmHA has made
                                             FmHA develops new criteria and studies      efforts in the past to incorporate many
                                             the effects on borrowers, as required by    of GAO recommendations into its
                                             the Agricultural Credit Act, FmHA           regulations; however, due to public
                                             should, in consultation with appropriate    comment and concern of Congress,
                                             congressional committees, determine         FmHA has been unable to put in place a
                                             where to draw the line between those        number of sound credit standards.
                                             financially troubled farmers who could      FmHA is developing a study of the use
                                             be helped and those who could not be        of ratios as guides for sounder credit
                                             helped with FmHA financial assistance.      decisions. When the study is completed,
     mmendation: The Secretary of            This will improve the financial condition   it will be presented to Congress for
          should direct the                  of the FmHA loan portfolio and assist       consideration.




F&mers Home Administration: Implementation Issues
Cincerning Four Sections of the Food Security Act
RCl$D-89-71,06/19/89
Badkground                                  than one Department of Agriculture           Open Recommendations              to
Pursuant to a congressional request,        program; (4) as of June 1988, FmHA           Agencies
GAG reviewed the Farmers Home               approved five borrowers for the softwood
                                            timber program; and (5) FmHA charged         Recommendation: The Secretary of
Administration’s (FmHA) lack of
progress in applying the homestead          interest rates on softwood timber loans      Agriculture should require the
protection, lease/buy-back, conservation    that were generally below the maximum        Administrator, FmHA, to: (1) approve
easement, and softwood timber               rate permitted by legislation and used       future softwood timber loans at an
provisions of the Food Security Act of      simple interest in its calculations.         interest rate that equals the average
1985.’                                                                                   yield on marketable U.S. obligations
                                                                                         with periods to maturity comparable to
                                            Open Recommendations                to       the average maturities of the softwood
                                            Congress                                     timber loans; and (2) modify previous
                                                                                         FmHA instructions governing the
Findings                                    Recommendation: The law is silent on         softwood timber program to require that
                                            whether Congress intended to provide
GAO found that: (1) because of                                                           interest on future softwood timber loans
                                            benefits for the same land under the: (1)    be computed on a compound, rather
inadequate FmHA records, it could not
                                            softwood timber provision and the
fully determine why some of the                                                          than simple, interest basis.
                                            conservation reserve program; and (2)
provisions were not more widely used                                                     Status: Action taken not fully
                                            conservation easement provision and the
and could not offer suggestions for                                                      responsive. Agriculture views that the
                                            conservation reserve program. Congress
increasing activity; (2) distressed FmHA                                                 Secretary has latitude in how the
                                            may wish to consider whether both
farm program borrowers have not used                                                     program could be implemented and was
the four provisions ex$ensively; (3)        benefits for the same land should be         given discretion to determine the
FmHA allows borrowers to receive            allowed under these programs.                interest rates up to a specified
benefits for the same land under more       Status: Action not yet initiated.            maximum.



                                            Page 14                                                                  GAO/OP-90-l
                                          Agriculture




       ED-89-53,
        _-.- - 07/31/89
Badkground                                developing PBIS. GAO also noted that        basis, including the rationale and
   d
GA , discussed the Food Safety and
                                          FSIS initiatives to address PBIS
                                          equipment, software, and system
                                                                                      scientific support, for the risk factors
                                                                                      and frequencies used by PBIS to
Inspection Service’s (FSIS) Performance
                                          limitations included: (11 developing a      schedule inspection tasks.
BasQ Inspection System (PBIS), its                                                    Status: Action not yet initiated.
                                          more flexible system for inspectors to
interim automated system for managing
                                          exercise their independent judgment; (21
meat and poultry processing plant         reporting positive as well as negative      Recommendation: The Secretary of
inspections, involving individual plant   inspection findings; (3) reexamining        Agriculture should direct the
infotmation profiles and monitoring       inspection level rules; and (4) exploring   Administrator, FSIS, to periodically
plans, inspection scheduling, and an      methods to speed up system processing.      evaluate the reasonableness and
inspection findings data base. GAO                                                    adequacy of PBIS-generated inspection
note/d that FSIS: (1) lacked formal                                                   tasks to ensure that they protect public
mechanisms for tracking system            Open Recommendations              to
                                                                                      health.
progress and costs; (2) could not         Agencies                                    Status: Action not yet initiated.
implement an inspection coverage          Recommendation: The Secretary of
component that could have reduced         Agriculture should direct the               Recommendation: The Secretary of
inspection frequency; (3) did not         Administrator, FSIS, to operate PBIS as     Agriculture should direct the
systematically evaluate PBIS-generated    is and suspend additional investment in     Administrator, FSIS, to issue a directive
inspection schedules to determine their   equipment and non-maintenance-type          to inspection staff clarifying use of
reasonableness and adequacy; (41 lacked   software for PBIS until a plan is           schedules, including the degree of
a formal testing plan with measurable     developed to apply system development       discretion available to inspectors to use
objectives, criteria, and required        life-cycle principles and other             their experience and judgment in
performance data to evaluate PBIS; (5)    management controls to the current and      deciding on the inspection tasks to
did not use formal, quantitative risk     any future system.                          perform.
assessments in developing PBIS; and (6)   Status: Action not yet initiated.           Status: Action not yet initiated. The
did not apply any of the Department of                                                agency task force has recommended
Agriculture’s (USDA) established          Recommendation: The Secretary of            changes to PBIS consistent with the
 management controls for the              Agriculture should direct the               GAO recomrr mdation, but the agency
development of automated systems in       Administrator, FSIS, to document the        has not yet initiated action.




                                          Page 15                                                                    GAO/OP-90-l
                                              Agriculture




Farmers Home Administration: Implications                                                     of the Shift
Friom Direct to Guaranteed Farm Loans
RC D-89-86,09/11/89
   P
Bafkground                                    fees and face a greater chance of             profitability, liquidity, and repayment
Pursuant to a congressional request,          liquidation if they default on their loans;   ability prior to approving loan
GA< reviewed the Farmers Home                 (6) because recent congressional actions      guarantees.
Adn inistration’s (FmHA) progress in          extended direct-loan eligibility, few of      Status: Action not yet initiated.
imp ementing its congressionally              the borrowers will obtain guaranteed
aut orized shift from direct to               loans, direct-loan requests may not           Recommendation: To help control losses
guaranteed farm loans and the overall         decline, and additional funding decreases     and improve management of the
impl ct on farm credit availability,          may restrict credit availability for          guaranteed farm loan program, the
    :                                         borrowers; (‘7) guaranteed loans help         Secretary of Agriculture should direct
focusing on: (1) the impact of the shift on
borr(>wers, private lenders, and the          lenders finance borrowers who are poor        the Administrator, FmHA, to establish
govebnment; (2) borrowers’ financial          credit risks, protect lenders against         in regulations the type and amount of
conditions; and (3) whether program           potential losses, and help the                security required for a guarantee and, if
probtems contributed to losses on             government keep some farm lending in          crops are accepted as the only security,
guaranteed loans.                             the private sector and reduce outlays for     require that crop insurance be obtained.
                                              new direct loans; (8) the government’s
                                                                                            Status: Action not yet initiated.
                                              financial exposure increased recently
Findings                                      because the outstanding principal of
                                                                                            Recommendation: To help control
GAG found that: (1) the total annual          guaranteed loans outpaced the decrease
                                                                                            losses and improve management of the
authorization for guaranteed farm loans       in that of direct loans; (9) losses on
                                              guaranteed loans have grown faster than       guaranteed farm loan program, the
increased from $175 million to $3.3                                                         Secretary of Agriculture should direct
billion, while total obligations for the      guaranteed loan activities since 1984 and
                                              could exceed $115 million in 1989; and        the Administrator, FmHA, to establish a
loan8 grew from about $71 million in
                                              (10) although adverse weather caused          range of loan guarantee percentages
1983 to about $1.3 billion in 1988; (2) the
                                              some losses, inadequate assessment of         based on loan risk, with the higher
increase in guaranteed lending resulted
                                              borrowers’ financial conditions prior to      guarantee percentages going to lower-
from private lenders obtaining
                                              loan approval and insufficient oversight      risk loans.
guarantees for their financially
distressed customers; (3) only 2 percent      of loan guarantees were major                 Status: Action not yet initiated.
of FmHA direct-loan borrowers obtained        contributors to losses.
guaranteed loans, because their poor                                                        Recommendation: To help control
financial conditions made private                                                           losses and improve management of the
                                              Open Recommendations               to         guaranteed farm loan program, the
lenders reluctant to give them even
guaranteed loans; (4) the decrease in
                                              Agencies                                      Secretary of Agriculture should direct
direct FmHA loans resulted from such          Recommendation: To help control losses        the Administrator, FmHA, to enforce
factors as increased use of government        and improve management of the                 FmHA requirements for lender servicing
farm program payments instead of credit       guaranteed farm loan program, the             of guaranteed loans and place greater
to finance farm operations, fewer             Secretary of Agriculture should direct        emphasis on establishing the extent to
borrowers, and reduced FmHA                   the Administrator, FmHA, to develop, in       which lenders’ negligent servicing
authorization for farm ownership loans;       consultation with Congress, and               caused loan losses before determining
(5) although guaranteed loans help high-      implement more comprehensive                  the amounts to be paid as loss claims.
risk borrowers obtain private credit,         guaranteed-loan-approval criteria that        Status: Action not yet initiated.
they pay higher interest rates and loan       assess an applicant’s financial solvency,



                                              Page 16                                                                     GAO/OP-90-l
                                            Agriculture




Reco$mendation:      To help control        Status: Action not yet initiated.           approval decision; and (2) guidance and
lossesland improve management of the                                                    training to state, district, and county
guaranteed farm loan program, the           Recommendation: The Secretary of            officials that would enhance the
Secretary of Agriculture should direct      Agriculture should direct the               monitoring of lenders’ guaranteed loan-
the A’ ministrator, FmHA, to establish      Administrator, FmHA, to provide: (1)        servicing activities, especially
in re Pulations procedures for recovering   county supervisors with training in         guaranteed loan liquidations.
from efaulted borrowers amounts the         credit analysis to better acquaint them     Status: Action not yet initiated.
gover ment paid to lenders for              with what constitutes adequate financial
guar &nteed loan losses.                    data on which to base a guaranteed loan-

     1


Agri/cultural     Research and Services
     ,
Imgroved Management                            of Import Meat Inspection Program
N$eded
RCEbD-83-81
..____-_
    ‘ _.__..,.. 06/E/83
            -...I.- .._.._
                       -__
                         ._--.-                 -_I_-
Background                                  plants. These histories are the basis for   the new system should improve FSIS
GAOIreviewed the Department of              assigning the scope and extent of           ability to assess these risks.
Agriculture’s administration of its         inspections. GAO found that, in some
import Meat and Poultry Inspection          ways, regulations and instructions do not   Open Recommendations              to
Program.                                    conform with the system’s revised
                                            procedures, GAO and Food Safety and
                                                                                        Agencies
                                            Inspection Service (FSIS) officials found   Recommendation: The Secretary of
Findings                                    that most inspectors cited the need for     Agriculture should direct FSIS to
GAO found that, at the 10 highest-          periodic training and better                develop criteria for distinguishing
volume ports, where variances in the        communication between inspectors from       among minor, major, and critical defects
quantities of meat rejected ranged from     different ports as a way of standardizing   in canned packaged meat products.
0.1 to 1.5 percent, procedures for          inspections Despite the apparent            Status: Action in process. Estimated
controlling, sampling, and inspecting       improvement in plant conditions,            completion date: OI/91. In May 1988,
meat products differed because of: (1)      program changes are needed to better        FSIS issued a directive on Examination
regulations and instructions which were     ensure that products are imported only      Procedures for Determining the
generally outdated, unclear, and            from countries and plants meeting U.S.      Condition of Canned Product Containers.
inconsistent; (2) a lack of adequate        requirements. Recognizing the need for      These procedures apply to the domestic
supervision and training of inspection      increased attention to foreign programs’    program only. As of June 1989, FSIS was
personnel; and (3) work-load imbalance.     regulatory comparability, FSIS is           studying the directive’s effectiveness in
The Putomated Import Information            developing a new systems approach for       the domestic program and the feasibility
System compiles inspection-result           approving and monitoring foreign            of adopting similar procedures for the
histories for countries and foreign         inspection systems. GAO believes that       international program.




                                            Page 17                                                                 GAO/OP-90-l
                                             Agriculture




A&icultural       Research and Services
  I
Fbod Marketing: Frozen Pizza Cheese-Representative                                                               of
Bgoader Food Labeling Issues
RCjED-88-‘70,03/31/88
BaLkground                                   concerning the nutritional value of          Open Recommendations              to
In response to a congressional request,      cheese analog hindered attempts to           Congress
GAG provided information on: (1)             require labelling; and (4) there are no
                                                                                          Recommendation: Congress may wish
regulatory issues concerning the             common criteria for determining the
                                                                                          to bring together government, industry,
lab ‘lling of frozen pizzas whose toppings   relative nutritional values of               and consumer interests in order to
incl de a manufactured cheese analog;        manufactured and natural foods. GAO          review and rewrite the basic authority
and1 (2) related concerns about food         also found that: (1) federal labelling       for food information. Ways of doing so
labe lind issues.                            legislation and regulations have not kept    include establishing a congressional
     1                                       pace with the increase in manufactured       commission, recommending a
     I                                       food products; (2) in 1986, the industry
Fir/dings                                                                                 presidential commission, or directing an
                                             introduced about 3,400 new                   interagency task force. As a preparatory
GAG found that: (1) the Department of        manufactured food products; (3) FDA          step, Congress may wish to hold
Agriculture (USDA), unlike the Food          believes that the nutritional standards      hearings to more fully determine the
and ‘Drug Administration (FDA), does         developed years ago are too rigid; and (4)   extent of current regulatory activity,
not require disclosure of cheese analog      although labelling legislation could         agency structures that administer the
on frozen pizzas; (21 USDA withdrew its      alleviate the controversy over cheese        regulatory process, industry and
proposed labelling requirement for           analog, it would not resolve underlying      consumer responses to and reliance on
cheese analog because opponents              food labelling issues.                       the process, and agency activities or
successfully argued that it would be                                                      plans to improve the process.
costly and unnecessary; (3) controversies                                                 Status: Action in process.


Agricultural      Research and Services

USDA’s Commodity Program: The Accuracy of Budget
Forecasts
PEMD-88-8,
  .   _..- .-..
                04/21/88
                  .._._
Background                                   Findings                                     USDA: (1) developed its budget estimates
Pursuant to a congressional request,                                                      using estimates for individual farm
                                             GAO found that the USDA commodity
GAO reviewed the accuracy of the                                                          commodities for supply and demand,
                                             programs’ budget estimates: (1) were
Department of Agriculture’s (USDA)                                                        farmer participation, and market price
                                             substantially incorrect in most years,
commodity program budget forecasts for                                                    forecasts; (2) did not document how it
                                             with absolute errors totalling $64.1
1972 through 1986 to determine the                                                        used such macroeconomic forecasts; (3)
                                             billion and averaging about $4.3 billion
reasons for errors.  o                                                                    did not systematically attempt to
                                             annually; and (2) underestimated actual
                                             budget levels by an average of $3.1          identify the source of forecasting errors
                                             billion annually. GAO also found that        or implement a structured quality




                                             Page 18                                                                   GAO/OP-90-l
            -
                                              Agriculture




contr 1 program for those factors which       Status: Action in process. The Secretary    estimating process; and (3) validation of
were %ontrollable; and (41 did not inform     has clarified the role of the chairperson   estimates through alternative forecast
Congr’ as about its estimates’ limitations.   of the World Agricultural Outlook Board     methods and by peer review from both
In ad ition, GAO found that consistent        to develop long-run supply and demand       inside and outside analysts.
probl ms in USDA management of                projections, including those used as
forec ting processes included: (1)            input for budget projections, and           Recommendation: USDA should ensure
limitei or no evaluation of forecasting       described the roles of other agencies       that the forecasting process and its
methods to determine accuracy; (2) poor       involved in developing estimates and        results are documented and that forecast
or no existent data management and            overseeing the forecasting process.         results include explanations of the
recor 1 keeping regarding input data and                                                  limitations of the data, including
their se; (3) poor or nonexistent             Recommendation: USDA should                 forecast ranges based on historical error
docu entation of analysts’ forecast           establish an ongoing evaluation program     rates, alternative program
      $
production methods; and (4)                   that ensures that forecasters regularly     implementation strategies, and
decemralized managerial accountability        perform studies of forecast accuracy to     alternative assumptions regarding
that weakened problem identification          determine what caused errors and to         supply and demand.
and SQlution.                                 relate the errors to the components of      Status: Action in process. USDA has
                                              the forecasting processes, so that          improved its documentation of
                                              resources can be allocated for
0pe)l Recommendations               to        improvement.
                                                                                          supply/demand and budget forecasts to
Agencies                                                                                  facilitate post-analysis and use in future
                                              Status: Action in process. USDA has         forecasts. GAO concluded that the
Recohmendation:       The Secretary of        initiated a number of evaluation and        explanations of limitations cited by
Agriculture should assign management          quality control processes, including: (1)   USDA in its plan of action were not
responsibility for coordinating the           improved documentation; (2) a periodic      enough to understand the range of
forecasting program and for establishing      evaluation by a working group of            forecast errors GAO found through
a structured quality control program to       managers who have responsibility for        accuracy measurements.
       I                                      various activities of the commodity
a specific organization.


Agricultural       Research and Services
Biotechnology: Managing the Risks of Field Testing
Genetically Engineered Organisms
RC@D-88-2’
--._.l-- 7,
          06/13/88
Bat kground                                   Findings                                    to allow field tests and what controls to
                                                                                          impose; (4) the agencies’ advisory groups
In response to a congressional request,       GAO found that: (1) because no laws
                                                                                          reflect a wide range of relevant
GAO’reviewed federal risk management          specifically regulate genetically
                                                                                          disciplines; (5) agency approvals are
of genetically engineered organisms           engineered organisms, the agencies
                                                                                          contingent upon specific field conditions,
intended for agricultural and health          apply existing laws based on product
                                                                                          generally require plans to mitigate
uses in the environment, focusing on          usage; (2) although USDA, EPA, and
                                                                                          unexpected harm, and have the
Department of Agriculture (USDA),             FDA generally used a case-by-case
                                                                                          authority to terminate an experiment, if
Environmental Protection Agency (EPA),        approach in reviewing proposed field
                                                                                          necessary; and (6) methods to control the
and Food and Drug Administration              tests, USDA and EPA exempted certain
                       4                                                                  dispersal and impact of microorganisms
(FDA) policies.                               categories of organisms from regulatory
                                                                                          require minimizing risk while
                                              review; (3) the agencies perform
                                                                                          maximizing field test usefulness.
                                              prerelease reviews to determine whether




                                              Page 19                                                                   GAO/OP-90-l
                                            Agriculture




   n Recommendations              to        %ignificant new use” rule regulations        Status: Action in process. Estimated
Ag$ncies                                    prescribed by section 5 of the act. To       completion date: 05/90. EPA has held a
                                            avoid overregulation of lower-risk           wide range of reviews and public
Recommendation: To ensure effective         organisms that could result from this        meetings on proposed new regulations.
regu&atory coverage of genetically          action, EPA could revise section 5           EPA hopes to reach an internal decision
engineered microorganisms, the              regulations to establish a multilevel        about November or December 1989, then
Administrator, EPA, should make all         review system with less stringent            resubmit the regulations to the Office of
micr organisms covered by the Toxic
                                            requirements for organisms believed to       Management and Budget for finalization
Subs antes Control Act subject to either
                                            be of relatively lower risk.                 by early 1990.
the i remanufacture notice or


Fa m Income Stabilization
Cqop Insurance: Overpayment of Claims by Private
Cqmpanies Costs the Government Millions
RC@D-88-7,11/20/87
Background                                  systematically review the operations of      FCIC, to establish guidelines for
                                            reinsured companies.                         determining when and what
Pursuant to a congressional request,
GAO examined the Federal Crop                                                            administrative actions to take against
Insurance Corporation’s (FCIC) oversight    Open Recommendations               to        reinsured companies that do not follow
                                                                                         FCIC standards or that continue to
and control of the loss adjustment          Agencies                                     adjust claims improperly.
practices of private reinsured companies.
                                            Recommendation: In order for FCIC to         Status: Action in process. Estimated
                                            acquire the needed financial and             completion date: 0’7/90. FCIC has drafted
Findings                                    programmatic oversight and control over      guidelines. They are now being reviewed
GAO found that reinsured companies: (1)     the loss adjustment activities of            by FCIC management. If proposed
did not adjust 95 percent of 134 sample     reinsured companies, the Secretary of        guidelines are implemented, this
claims in accordance with FCIC policies     Agriculture should require the Manager,      recommendation will be closed out.
and procedures; (2) should not have paid    FCIC, to establish internal controls, such
about 31 percent of the $9.4 million in     as computerized audit or screening, over     Recommendation: In order for FCIC to
claims; (3) may have intentionally          reinsured claims prior to payment to         acquire the needed financial and
overpaid claimants; and (41 made            ensure that the claims do not contain        programmatic oversight and control over
incorrect determinations of production      obvious errors. These controls would be      the loss adjustment activities of
guarantees, actual production, payment      similar to the controls FCIC now has on      reinsured companies, the Secretary of
amounts, and program eligibility. GAO       master marketer claims.                      Agriculture should require the Manager,
also found that FCIC: (1) improperly        Status: Action in process. FCIC should       FCIC, to require repayment by reinsured
adjusted 62 percent of 3’7 sample claims;   complete implementing the requested          companies of the $3 million in overpaid
and (21 overpaid about 1 percent of those   screening process by mid-1990.               claims found, in accordance with the
claims. In addition, GAO found that                                                      terms of the reinsurance agreements.
FCIC: (1) did not properly manage the       Recommendation: In order for FCIC to         Status: Action in process. FCIC has
loss adjustment processes of reinsured      acquire the needed financial and             collected about $740,000 of the overpaid
companies; (2) had inadequate oversight     programmatic oversight and control over      claims and is continuing to process
and control over such companies; and (3)    the loss adjustment activities of            repayments for the remaining claims.
did not screen reinsured claims for         reinsured companies, the Secretary of
obvious errors, but recently began to       Agriculture should require the Manager,



                                            Page 20                                                                   GAO/OP-90-1
-+-
       i                                   Agriculture




1

Hecol pmendation: In order for FCIC to     FCIC, to determine how much of the          Status: Action in process. FCIC is in the
acqui 3 the needed financial and           $1’7.9 million in payments where drought    process of reviewing payments to
ww 6:mmatic oversight and control over     is shown as a cause of loss on irrigated    determine the overall merit of this
the lc$4 s adjustment activities of        farms is erroneous and pursue collection    recommendation.
reins! !J*ed companies, the Secretary of   of that amount.
Agric lture should require the Manager,


Farl       L Income Stabilization
Mi 1k Marketing                  Orders: Options for Change
    Il-88-9, 03/21/88
RCE1.
Bacl ground                                provided that increases in production       supervision; and (4) eliminating pricing
                                           that resulted in annual federal dairy       provisions would lessen the likelihood
GAO eviewed several aspects of federal
                                           purchases of over 5 billion pounds would    that the support price supply-demand
milk-] ricing policies to determine how:
                                           trigger a downward adjustment in the        adjuster would trigger price reductions
(1) the milk marketing order program       support price. GAO also found that: (11
affec& the US. dairy surplus problem;                                                  in the future.
                                           the two basic strategies for changing
(21 to change the program to reduce        milk marketing orders were controlling
incenbives for milk production; and (3)    production and lessening government         Open Recommendations               to
such thanges would affect the surplus      influence on milk prices; (21 the           Congress
and the program’s ability to meet dairy    production control system would limit
policy goals                                                                           Recommendation: Congress may wish
                                           the quantity of milk that producers,        to consider establishing the goal of
                                           singly and in total, could market at a
                                                                                       decreasing the federal role in milk
FiMlings                                   given price, but could increase consumer
                                                                                       pricing; working with the Department of
                                           prices, create windfalls for current
GAO found that: (1) because dairy          producers, bar entry for new producers,     Agriculture to develop and adopt
market conditions changed, the milk        and impact production in the long run;      legislation necessary to accomplish that
marketing order pricing policies no        (3) the options for reducing government     goal; and directing the Secretary of
longar applied; (2) the federal milk       influence would include establishing        Agriculture to: (1) monitor the conditions
marketing system contributed to a milk     more basing points and eliminating          in the industry that result from changes
surplus and benefited producers in some    grade A and distance differentials,         to pricing policies; and (2) act, if
regions of the country at the expense of   allocations, compensatory payments, and     necessary, to help the industry adjust.
others; and (3) recent legislation         order-pricing provisions, while retaining   Status: Action not yet initiated.




                                           Page 21                                                                   GAO/OPdO-1
                                            Agriculture




Farm Income Stabilization
Ciop Insurance: FCIC Needs to Improve Its Oversight of
Reinsured Companies
RCjED-89-10,  10/19/88
     -_..----._-
Ba kground                                  Open Recommendations               to       loss adjustment activities of reinsured
In r sponse to a congressional request,     Agencies                                    companies and to provide a better basis
GA evaluated certain Department of                                                      for judging the overall performance of
                                            Recommendation: To improve the
Agr culture Federal Crop Insurance                                                      individual companies, the Secretary of
                                            effectiveness of FCIC oversight of the
Cor I oration (FCIC) oversight activities                                               Agriculture should require the Manager,
                                            loss adjustment activities of reinsured
over private companies that insure          companies and to provide a better basis     FCIC, to develop criteria to use in
far ers against crop losses from natural    for judging the overall performance of      evaluating the results of compliance
   T                                        individual companies, the Secretary of      reviews and for determining the
disa;iters*                                 Agriculture should require the Manager,     acceptability of a company’s loss
                                            FCIC, to emphasize the use of               adjustment performance. The criteria
Fihdings                                    statistically valid random sampling         should explicitly state when FCIC will
GAG found that: (11 FCIC is considering     techniques and appropriate sample sizes,    suspend a company’s operations and the
ways to expand the scope of its oversight   where it is cost-beneficial, in selecting   circumstances under which FCIC will
reviiews, since many of its reviews are     claims for review.                          assume a company’s loss adjustment
limited because of its desire to cover as   Status: Action in process. FCIC has         function.
many companies as possible; (21 many of     drafted a handbook that addresses this      Status: Action in process. Estimated
the ‘reviews were not statistically valid   and other issues. It is now under review    completion date: 07/90. FCIC has drafted
for drawing reliable conclusions about      within FCIC. The procedures regarding       procedures that address this issue. The
the quality of a company’s overall          the use of sampling techniques in           procedures are currently being reviewed
adjustment practices because of the         gauging performance of reinsured            by FCIC management. If implemented as
manner in which FCIC selected its           companies, if implemented, will be          proposed, they will be responsive to the
samples and the limited sample size; and    responsive to the recommendation.           recommendation.
(3) FCIC did not establish basic criteria
for determining reinsured companies’        Recommendation: To improve the
acceptable loss adjustment performance.     effectiveness of FCIC oversight of the


Fahm Income Stabilization

COmmodity Certificates: Backlog of 200,000 Unreconciled
Certificates Affects Financial Reporting
RCED-89-14,10/25/88
Background                                  certificates that the Agricultural          backlog; and (3) the extent to which the
                                            Stabilization and Conservation Service      Department of Agriculture has achieved
Pursuant to a congressional request,
                                            (ASCS) has not reconciled to issuance       a mandated $230-million reduction in
GAO investigated: (1) the size of the
                                            records; (2) ASCS plans for resolving the   storage, transportation, and handling
backlog in redeemed commodity




                                            Page 22                                                                 GAO/OP-90-1
                                            Agriculture




expenditures for fiscal years 1988 and      also found that ASCS: (1) has not           will be used, the resources to be
1989. :                                     identified the root cause of the backlog    allocated, and a schedule for completion;
                                            to minimize the occurrence of future        and (3) include steps to identify and
Fin#ngs                                     exceptions; (21 did not report that a       correct the root causes of the exceptions,
                                            material weakness existed in this area in   to minimize the number of exceptions
GAO found that the ASCS Kansas City         its 1987 Financial Integrity Act report;    that may occur in the future.
Man ement Office, which is responsible      and (3) projected a $610-million            Status: Action in process. Estimated
for iss ing and redeeming certificates:     reduction in storage, transportation, and   completion date: 12/89. Training was
(11 re rted that the backlog of                                                         held in January 1989 for all state offices.
                                            handling expenditures due to a
redee ed certificates with unresolved
      i                                     significantly lower volume of               Listings of exceptions were sent to
exceptions increased from over 170,000
                                            government-owned grain.                     counties and a 95-percent response was
in January 1988 to over 204,000 in April
1988 nd would increase to about 320,000                                                 received. The Kansas City Management
by Oc ober 1988; (2) assigned 11            Open Recommendations              to        Office is evaluating the response to close
                                                                                        out certificates.
perso a nel to research and correct         Agencies
unreconciled certificates; (31
concentrated on unmatched redeemed          Recommendation: The Secretary of            Recommendation: The Secretary of
certificates because of the large backlog   Agriculture should direct the               Agriculture should direct the
in that category; (4) did not keep          Administrator, ASCS, to develop a plan      Administrator, ASCS, to report in its
detailed records on the number of           to address the remaining backlog of         Financial Integrity Act statement that a
exceptions occurring each month, but        certificates with unresolved exceptions     material weakness exists and provide an
estimated that it corrected about 25,000    that ensures the accountability for         assessment detailing: (1) the impact of
each month; and (51 did not have a plan     commodity certificates and reduces the      the backlog of certificates with
to reselve the increasing backlog, but      potential that undetected fraud could be    unresolved exceptions on its financial
outlined eight proposed backlog             occurring. This plan should: (11 clearly    statement; and (2) management’s plans
reduction plans as part of its year-end     establish priorities so that high-dollar-   to correct the problem.
closing plan, which included developing     value certificates are researched and       Status: Action in process. Estimated
software, writing off low-dollar-value      corrected first regardless of the           completion date: 12/89. This
exceptions, and assigning priorities to     exception category; (2) be as specific as   recommendation will be addressed in the
certain categories of exceptions. GAO       possible with regard to the methods that    next review cycle.


Farm Income Stabilization

Crop Insurance: FCIC Should Strengthen Actual
Production History Program Controls
RCEjD-89-19,
-_ -.- .. .-
             12/15/88
Background                                  Findings                                    overstated or understated production
                                                                                        histories; (3) clarified its guidance to
Pursuant to a congressional request,        GAO found that FCIC: (1) reinsured
                                                                                        insurance companies for implementing
GAO reviewed the Federal Crop               private companies under the APH
                                                                                        the APH program, but did not change its
Insurance Corporation’s (FCIC)              program to insure farmers’ crop
                                                                                        policies or require farmers to provide
implementation of its Actual Production     production, based on individual farmers’
History (APH) Program, focusing on                                                      actual production records during policy
                                            certifications of production history; (2)
                                                                                        writing; (4) primarily relied on insurance
whether FCIC had ad;quate controls to       found in a 1987 review of companies that
                                                                                        companies to verify farmers’
ensure the accuracy of farmers’             37 percent of policies had inaccurate
production guarantees.                                                                  certifications of production history; (5)
                                            production guarantees, primarily due to



                                            Page 23                                                                   GAO/OP-90-l
                                             Agriculture




required insurance companies to sample       Status: Action in process. Estimated        tightening the current sampling
policies and determine production            completion date: 07/90. FCIC is             procedures. For example, rather than
gua’ antee accuracy, but did not require     currently developing procedures that, if    sampling all production guarantees that
the ompanies to report the results of        implemented, will address this              are twice the local average, as is
tho e checks; (61 required verification of   recommendation.                             currently the procedure, FCIC could
gua antee accuracy only if the                                                           review all guarantees that are some
gua antee appeared to be unreasonable,       Recommendation: The Secretary of            determined percentage less than twice
and lacked criteria for establishing         Agriculture should require the Manager,     the local average. Additionally, FCIC
gua antee reasonableness; and (7) lacked     FCIC, to require that all APH               could add sampling criteria that would
gui ante for interpreting the                guarantees be verified at the time of       require review of all guarantees that
sign’ficance of the results of sample        loss. Verifications should include          could result in potential losses above an
the ks or for taking action if the           reviewing the supporting documentation      established monetary amount. Such
sam; les revealed frequent or widespread     for certified production data as well as    criteria would help ensure that
problems.                                    for the calculation of the guarantee.       production guarantees for potentially
                                             Status: Recommendation valid/action         large insurance claims are supported. A
Opbn Recommendations               to        not intended. The Department of             final alternative might be to completely
                                             Agriculture believes that                   eliminate the certification feature of the
Agbncies                                     implementation of the recommendation        APH program and require all farmers to
Recpmmendation: The Secretary of             would be too labor-intensive.               provide production data at the time a
Agriculture should require the Manager,                                                  policy is written.
FCIC, to establish criteria for              Recommendation: The Secretary of            Status: Action in process. Estimated
intetpreting the significance of the         Agriculture should require the Manager,     completion date: 07/90. FCIC is
frequency of errors found during the         FCIC, to monitor the frequency of           currently developing procedures to
required sampling of APH guarantees          certification-related errors and reduce     address this issue. If implemented, they
and/for deciding the actions that should     reliance on the certification process if
                                                                                         will go far toward implementing the
be taken if tolerances for acceptable        such errors do not decrease. The latter
                                                                                         recommendation.
levels of errors are exceeded.               could be achieved by significantly


Import-Export            Issues

Transportation of Public Law 480 Commodities-Efforts
Needed To Eliminate Unnecessary Costs
NSIAD-85-74, 06/18/85
Ba&kgro&d-                                   Findings                                    negotiate with any preferred vessel
                                                                                         owner, which did not ensure the lowest
GAO ussessed the Department of               GAO found significant problems              possible rates; and (3) could serve as
Agriculture’s (USDA) and the Maritime        indicating that USDA may be paying          vessel brokers, which could lead to
Administration’s (MARAD) management          higher ocean freight differentials than     favoritism in rate negotiations. USDA
of the expenditure of U.S. funds for         necessary. USDA control over the            did not consistently follow the standard
ocean transportation of agricultural         bidding and negotiation process for         provision for calculating differentials, or
commodities.                                 ocean transportation contracts was          applied the standard in a manner that
                                             inadequate because foreign countries: (1)   reduced costs to foreign countries at the
                     Y
                                             used closed bids which could be             expense of higher USDA payments. GAO
                                             submitted late or were based on             also found that MARAD did not verify
                                             knowledge of submitted bids; (2) could      data used in calculating guideline rates



                                             Page 24                                                                   GAO/OP-90-l
                                             Agriculture




becaube it assumed that vessels returned     cost plus a reasonable profit. Also, vessel   requiring certification that nonliner U.S.
to the$ United States without cargo.         owners should be required to have their       flag vessels do not, scrap or carry cargo
Howeker, vessels may carry cargo on the      independent accountants semiannually          on a return voyage. The regulations
retur$ voyage, which allows them the         certify that vessel costs and operating       should also provide that the guideline
potential to earn excessive profits.         data are accurate.                            rate will be recalculated and the
Addit onally, since MARAD had not            Status: Action in process. Estimated          transportation rate adjusted if a vessel
prepa ed guidelines for passenger liners     completion date: 01/90. The Department        obtains backhaul cargo or is scrapped or
becau e of the difficulty in separating      of Transportation (DOT): (1) requested        sold overseas.
reven i es, it did not know whether          that vessel owners provide a certified
                                                                                           Status: Action in process. Estimated
trans ortation rates for liners              listing of actual costs of voyages; (2)
                                                                                           completion date: 01/90. DOT: (1) is
repre ented cost plus a reasonable profit.   established a final rule for calculating
      1                                                                                    finalizing a rule for full cargo shipments
                                             fair and reasonable rates for less-than-
                                             full ship-load dry bulk cargoes               which provides for recalculation of rates
Opeb Recommendations               to                                                      if a vessel is scrapped or sold overseas;
                                             transported on U.S. flag liners; and (3)
Ageecies                                     has submitted a proposed final rule for       (2) intends to recalculate rates if
    ,                                                                                      returning U.S. vessels carry other
Reco@mendation: The Secretary of             calculating rates for full cargo
Trandportation should direct the             shipments.                                    preference cargo; and (3) plans to
Admibistrator, MARAD, to devise and                                                        analyze the feasibility of adjusting rates
institbte a method for assessing whether     Recommendation: The Secretary of              for commercial, nonpreference cargo.
transportation rates for liners represent    Agriculture should issue regulations


Impbrt-Export        Issues

Imported Meat and Livestock: Chemical Residue Detection
and the Issue of Labeling
RCED-87-142,09/30/W
Background                                   because FSIS met its 1986 testing quotas      Open Recommendations              to
GAO reviewed the Department of               by May 1, 1986, it did not test meat          Agencies
Agriculture’s (USDA) effectiveness in        imported after that date for the full
                                             range of residues; (4) FSIS did not           Recommendation: To develop an import
detecting prohibited chemical residues                                                     residue testing plan that is sensitive to
and foreign matter in imported meat          always remove from the U.S. food
                                             market, the remainder of lots that            conditions regarding chemical use in
item@ and live animals.                                                                    foreign countries, the Secretary of
                                             showed chemical violations; (5) in 1986,
                                             about 60 percent of imported live             Agriculture should direct the
Findings                                     animals came from Mexico, which has           Administrator, FSIS, to implement a
                                             been ineligible to export meat to the         continuous, systematic effort to identify
GAO: found that: (1) although the Food
                                             United States since 1984 because of           and evaluate chemicals in use abroad
Safety and Inspection Service (FSIS)
developed an annual plan in 1986 which       chemical residues; (6) FSIS does not have     that are not used in the United States.
included 406 chemicals for consideration     current information to adequately test        Status: Action in process. FSIS is
and 100 for testing, it lacked detailed,     for chemicals used in Mexico; and (7)         reviewing country responses to the
current information on the chemicals         mandating quality control reports and         Residue Control Program Questionnaire.
used abroad; (2) FSIS plans to require       country-of-origin labelling of meat could     USDA anticipates that identifying all
foreign countries that*want to export        result in increased food costs and may        agricultural chemicals and drugs in
meat to the United States to submit an       constitute a nontariff trade barrier.         exporting countries will take at least 5
annual residue testing plan to USDA; (3)



                                             Page 25                                                                    GAO/OP-90-1
                                            Agriculture




years and will require resources outside    poultry products. Several compound          years and will require resources outside
FSISi                                       evaluations have been completed in          FSIS.
      I                                     another effort.
Recopmendation:        The Secretary of                                                 Recommendation: The Secretary of
Agrioulture should direct the               Recommendation: If chemical use in          Agriculture should direct the
        istrator, FSIS, to systematically   foreign countries is identified, FSIS       Administrator, FSIS, to update risk
             status of methods for          should: (11 evaluate the chemicals to       profiles of countries eligible to export
            harmful chemicals in            determine which ones pose a potential       meat products to the United States to
            meat and muscle tissue to       hazard; (2) develop methods for their       better ensure the safety of imported
            basis for deciding on the       detection if methods are lacking; and (3)   meat.
additional research needed to develop       include them in the import plan for         Status: Action in process. FSIS is
more ~effective methods.                    testing.                                    reviewing country responses to the
Stat ‘8: Action in process. Joint method    Status: Action in process. FSIS is          Residue Control Program Questionnaire.
meetI ngs with FDA and EPA continue.        reviewing country responses to the          USDA anticipates that identifying all
FSIS FDA, and EPA will continue to          Residue Control Program Questionnaire.      agricultural chemicals and drugs in
meet Iseveral times per year. FSIS will     USDA anticipates that identifying all       exporting countries will take at least 5
             EPA to evaluate methods for    agricultural chemicals and drugs in         years and will require resources outside
            pesticide levels in meat and    exporting countries will take at least 5    FSIS.




                                            Page 26                                                                 GAO/OP-90-l
Ahtomatic                          Data Processing



Co ’ puter Systems: Navy Needs to Assess Less Costly Ways
to f mplement Its Stock Point System  ‘-’
IMTlbC-89-2, 12/14/88
Bat ground                                    (MAISRC), before it completed studies of   provides all requisite information to
Pursu nt to a congressional request,          alternative SPAR configurations            MAISRC, the Secretary of Defense
GAO xamined the Navy’s Stock Point            involving fewer hosts and more             should direct the Secretary of the Navy
ADP eplacement Project (SPAR),                satellites; (4) lacked criteria for        to study implementation alternatives for
focusii g on whether the Navy had: (1)        designating stock points as host sites,    SPAR as a whole (all 38 planned sites).
studied less costly alternatives to its       but replicated the number of host          This study should include an analysis of
SPAR iimplementation plan; and (2)            systems currently planned; (5) planned     the estimated hardware,
identified for elimination other Navy         to eliminate two supply systems when it    telecommunications, and operating costs
supply; systems that might duplicate          implemented SPAR; and (6) has not          associated with various host/satellite
SPAR.’                                        complied with a previous                   configurations and examine the
                                              recommendation that it and DOD             feasibility of fewer host systems than the
                                              establish a system design completion       38 in its current plan. The results of this
Findings                                      review. GAO believes that the Navy         analysis should be provided to MAISRC
GAO found that the Navy: (1) developed        could reduce SPAR implementation and       as a prerequisite to its approval to
SPAR to improve and modernize stock           operational costs by increasing the        acquire and implement the entire SPAR
point operations by replacing the             number of satellite sites and decreasing   system.
existing automated system with new            the number of host sites.                  Status: Action in process. Estimated
hardware and software at 38 host and 65                                                  completion date: 12/89. The Navy has
satellite stock points; (2) estimated SPAR    Open Recommendations             to        begun a study of implementation of
life-cycle costs at about $2.3 billion; (3)   Agencies                                   alternatives in the Pacific Northwest
planned to request approval from the                                                     area. DOD estimates the study will be
Department of Defense’s (DOD) oversight       Recommendation: To ensure that the         complete in December 1989.
authority, the Major Automated                Navy pursues the most cost-effective
Information System Review Council             approach for implementing SPAR and




Computer Procurement: Hardware Upgrades for Navy
Inventory Control System Should Be Delayed
IMTEC-89-67, 09/29/89
Background                                    to justify the upgrade; and (2) Navy’s     Navy Aviation Supply Office (ASO) and
GAO reviewed the Navy’s plans for a           thoroughness in evaluating ways to         the Navy Ship Parts Control Center
                                              improve the performance of its existing    (SPCC).
$22.1-million upgrade f’o its Uniform
Inventory Control Point System (UICP),        UICP resources. UICP supports
focusing on the: (1) data the Navy used       inventory management functions for the




                                              Page 27                                                                  GAO/OP-90-1
                                            Automatic Data Processing




_-
Fihdings                                    estimates double-counted the work-load     million computer upgrade of UICP until
                                            increase associated with use of a new      the project office has adequately justified
GAO found that: (11 the Navy UICP
                                            query language and were not supported      the need for the new hardware.
pro&t office estimated that it would                                                   Justification should include: (1) valid
                                            by actual work-load trends; and (5) the
need to double its processing capacity by   Navy could improve its use of existing     work-load projections and complete
1% 1 and increase AS0 and SPCC              resources by rescheduling some             application design information to
storage capability by 27 percent and 48     processing work, moving some               forecast resource requirements; and (2)
percent, respectively; (2) the estimates    applications to other computers,           thorough performance evaluations to
overstated growth projections by            reducing processing time for system        ensure that existing UICP system
inappropriately aggregating work-load       management applications, modifying         resources are being effectively used
estimates, ignoring distinctions between    system processing priorities, and         before the purchase of additional
usage volume at various times of the        improving the UICP job entry system.       hardware is approved. In the interim,
day; using incomplete applications                                                    hardware purchases should be approved
deskn data, and failing to consider                                                    on a case-by-case basis only if the project
recent capacity enhancements; (3) the
                                            Open Recommendations              to
                                                                                      office clearly demonstrates that current
UICP software development schedule          Agencies                                  AS0 and SPCC operations would be
slip ed by 17 months, for which the         Recommendation: The Secretary of          jeopardized if the purchases were
Na 9 y failed to account in its growth      Defense should direct the Secretary of    delayed.
estimates; (4) revised work-load            the Navy to defer the planned $22.1-       Status: Action not yet initiated.




                                            Page 28                                                                  GAO/OP-90-l
COmmerce and Housing Credit


Fedebal
    / Financing             Bank
Firjancial Audit: Federal Financing Bank’s Financial
Stapements for Fiscal Years 1985 and 1984
    )
AI?&-87-31,09/30/87
Bat ground                                   have adequate safeguards for its assets,       Open Recommendations              to
GAO xamined the Federal Financing            properly recorded transactions, or             Agencies
Bank’ financial statements as of             reliable financial reporting; and (3) did
                                             not have the formal accounting policies        Recommendation: The Secretary of the
Septe ber 30, 1985 and 1984, its system                                                     Treasury should direct the Bank’s
of inte nal accounting controls, the         and procedures manuals to maintain
                                             correct records for its business activities.   president, the Treasury Under Secretary
relate statements of income and
                                             GAO also found that the financial              for Finance, to maintain the general
changi s in retained earnings, and the
changes in its financial position for the    statements presented fairly the bank’s         ledger and subsidiary ledgers on a
years then ended.                            financial position as of September 30,         routine basis and perform periodic
                                             1985 and 1984, and the results of its          reconciliations of the ledgers.
                                             operations and the changes in its              Status: Action in process. The Bank
Findings                                     financial position for the years then          began maintaining a general ledger in
GAO found that the Bank: (1) had             ended, in conformity with generally            1987; however, not all of the subsidiary
significant weaknesses in its internal       accepted accounting principles applied         ledgers have been updated.
accounting control system; (2) did not       on a consistent basis.


Other Advancement of Commerce

Commercial Fishing Vessel: Administration                                                   of the
Colintino Rose II Loan Guarantee
RCEb-89-105,05/03/89
Background                                   Findings                                       subsequently had to expend funds
                                                                                            totalling $1.9 million for repairs and
In response to a congressional request,      GAO found that NMFS: (1) approved a
                                                                                            reconstruction; (6) did not document its
GAO reviewed the National Marine             loan guarantee for $875,000 to finance         internal controls over fund
Fisheries Service’s (NMFS) actions           the vessel’s purchase; (2) approved            disbursements; and (‘7) improved its
concerning its loan guarantee of a           additional loan funds and then                 internal controls over regional loan-
commercial fishing vessel, focusing on:      refinanced the original loan after the         making decisions, but did not clarify the
(1) the approval of the original loan        owners encountered loan repayment              conditions under which a vessel must be
guarantee; (2) efforts to resolve the loan   problems; (3) did not ensure that the          surveyed.
default; (3) the vessel’s construction and   original borrower met loan guarantee
whether it was fit for its intended          requirements; (4) did not document its
purpose; and (4) NMFS disbursement of        consideration of alternatives to resolve
                                                                                            Open Recommendations              to
funds, including those for vessel repair.    the default; (5) did not ensure that the       Agencies
                                             vessel was originally constructed              Recommendation: The Assistant
                                             according to specifications, and               Administrator for Fisheries, NMFS,



                                             Page 29                                                                     GAO/OP-90-l
                                                                                                            -
                                               Commerce and Housing Credit




should direct the Chief, Financial             documented. The guidance should be           is appropriate to obtain a certified
Services Division, to ensure that              issued by December 1989.                     architect’s or engineer’s certification.
justi@cationa of the actions selected to                                                    Status: Action in process. Estimated
resolve default situations are                 Recommendation: The Assistant                completion date: 12/89. NMFS is
documented.                                    Administrator for Fisheries, NMFS,           preparing guidance to clarify the
Statue: Action in process. Estimated           should direct the Chief, Financial           conditions under which it is appropriate
completion date: 12/89. NMFS is in the         Services Division, to clarify the            to obtain a certified architect’s or
pro&s of writing guidance to ensure            regulations by stipulating in program        engineer’s certification. The guidance
that~ justifications of the actions selected   guidance the conditions under which it       should be issued by December 1989.
to resolve default situations are

    I



Posltal Service

Pdstal Service: Discipline Practices Vary
GdD-89-79, 05/19/89
Batikground                                    infractions, 59 percent of the supervisors   Senior Assistant Postmaster General,
In response to a congressional request,        considered all disciplinary actions          Human Resources, to define major and
GAG reviewed the U.S. Postal Service’s         regardless of the infractions; (6) 82        minor offenses to clarify when
(USPS) disciplinary policies, focusing on      percent of the supervisors did not           predisciplinary discussions should be
whether they provided a USPS-wide              consider unresolved prior infractions, 55    given in lieu of discipline.
program of discipline with uniform             percent considered the original penalty,     Status: Action in process. USPS stated
disciplinary actions for similar               and 45 percent considered the revised        that it is expanding the use of modified
infractions.                                   penalty; (7) although policy required        discipline procedures being tested at
                                               progressive discipline, it did not provide   various facilities. These procedures
                                               a definition of a specific progressive       specify the circumstances under which
Findings                                       sequence; (8) about 50 percent of the        predisciplinary discussions are required.
GAO found that: (11 USPS policy did not        supervisors believed that progressiveness    The procedures deal with the problems
indicate which infractions were                was limited to a letter of warning,          of distinguishing between major and
considered minor, how many discussions         followed by suspensions of increasing        minor offenses and the handling of
to hold before taking disciplinary action,     length, followed by removal; (9)             subsequent, but different, infractions by
or whether discussions should precede          arbitrators cited lack of progressiveness    the same employee.
disciplinary action for subsequent but         as a basis for reducing about 10 percent
different infractions; (2) about 68 percent    of arbitrated grievances; and (10) there     Recommendation: To enhance the
of the supervisors required discussions        was no specific instruction that required    consistency and predictability in the
for each new infraction regardless of          officials who reviewed proposed              enforcement of USPS work rules, the
past discussions for different infractions;    suspensions and removals for document        Postmaster General should direct the
(3) some employees received more               adequacy to examine penalties for            Senior Assistant Postmaster General,
opportunities to correct their behavior        consistency.                                 Human Resources, to clarify whether
befare receiving discipline than others,                                                    predisciplinary discussions should
since supervisors handled discussions          Open Recommendations               to        precede disciplinary action for
differently; (4) employees who engaged                                                      subsequent, but different, infractions
in the same category of misconduct and
                                               Agencies                                     committed by the same employee.
who had the same number of prior               Recommendation: To enhance the               Status: Action in process. USPS stated
infractions often had different penalties;     consistency and predictability in the        that it is expanding the use of modified
(51 although there was no precise              enforcement of USPS work rules, the          discipline procedures being tested at
instruction for how to consider prior          Postmaster General should direct the         various facilities. The procedures deal



                                               Page 30                                                                   GAO/OP-90.1
---    1.
                                             Commerce and Housing Credit




with tl       problems of distinguishing     consider only like infractions or all past    Postmaster General should direct the
betwee       major and minor offenses and    infractions, what time frame of past          Senior Assistant Postmaster General,
the ha.     lling of subsequent, but         infractions should be considered, and         Human Resources, to issue guidance to
differe     ‘t infractions by the same       whether to consider grieved past              require concurring officials to expand
employ      e.                               infractions that were reduced or are          their reviews of proposed suspensions
                                             pending.                                      and removals to include the consistency
           lendation: To enhance the         Status: Action not yet initiated. USPS        of the penalties.
consist r rcy and predictability in the      stated that it plans to remind its            Status: Action not yet initiated. USPS
enforcE lent of USPS work rules, the         supervisors of guidance on how to
        f
Postmr 1: ter General should direct the      consider prior infractions.
                                                                                           stated that it plans to require concurring
                                                                                           officials to ensure the appropriateness
Senior ~Assistant Postmaster General,
                                                                                           and consistency of discipline.
Humar 1Resources, to develop uniform         Recommendation: To enhance the
rules fcI r considering prior infractions,   consistency and predictability in the
includibg guidance on whether to             enforcement of USPS work rules, the


Post& Service

Postal Service: Sites for New Post Offices May Be Larger
Than Needed
GGD-89-130,09/29/89
Background                                   its site selection committees to document     Open Recommendations               to
Pursuant to a congressional request,         reasons for selecting more costly sites;      Agencies
GAO reviewed 246 sample sites that the       (4) frequently purchased sites that were
                                             larger than it needed, when less costly       Recommendation: The Postmaster
US. Postal Service acquired during 1987                                                    General should instruct the operating
under its real estate acquisition program    sites were available; (5) cited valid
                                             operational factors, in those site            divisions to use judgment based on local
to determine the extent to which USPS:                                                     community conditions, rather than a
(1) had a choice among competing sites       selection files which included
                                             documentation, to justify the purchase of     standard 50-percent growth factor, in
when acquiring land; (2) purchased only                                                    developing 20-year site size
the land it needed to meet operational       larger or more costly sites; (6) frequently
                                             only had one contending site, due to its      requirements.
and customer service requirements; and
                                             policy of advertising for sites larger than   Status: Action not yet initiated.
(3) purchased the most economical
alternative among competing sites.           its actual requirements; (7) generally
                                             followed site appraisal procedures before     Recommendation: The Postmaster
                                             purchasing sites and attempted to             General should issue guidelines
Findings                                     negotiate lower prices when the offer         standardizing the advertising practices
GAO found that USPS: (1) projected           price exceeded the appraised market           of the five postal regions for soliciting
community service needs over a lo-year       value; and (8) generally accepted without     sites for facility projects so that
period, and then routinely added a           negotiation sites offered at prices equal     managers do not advertise for more land
standard 50-percent growth factor, to        to or lower than the appraised market         than needed. Advertisements should
determine its site needs; (2) routinely      value.                                        identify 20-year site requirements and
added to 20-year land requirements to                                                      say that site offers should be large
allow for possible site xestrictions                                                       enough to meet the site requirements
without knowing whether it could meet                                                      plus whatever additional land is needed
those requirements without the                                                             to accommodate any site use restrictions.
additional allowance; (3) did not require                                                  If a range of sizes is used, that range



                                             Page 31                                                                    GAO/OP-90-l
                                           Commerce and Housing Credit




should be centered on the net usable 20-   net usable requirements or more costly      by the appraised value or a lower offered
year site requirements.                    than other contending sites.                price, and that negotiations may start
Status: Action not yet initiated.          Status: Action not yet initiated.           below either. Further, the department
                                                                                       should instruct managers to ensure that
                                           Recommendation: The Postmaster              acquisition files contain complete
                                           General should direct the facilities        documentation of the negotiation process
                                           department to clarify USPS policy by        in all projects.
    ons for purchasing sites larger than   specifying that the negotiation process     Status: Action not yet initiated.
                                           on freely offered property is not limited




                                           Page 32                                                                 GAO/OP-90-l
 Cdmmunity and Regional Development


Combunity         Development
Enterprise              Zones: Lessons From the Maryland                                          Experience
PEtiD-89-2, 12/15/88
Bacqground                                     distressed areas; (2) program-related       inducements, and government
Pursuant to a congressional request,           increases in employment could lead to       assistance; and (6) participating
          died the enterprise zone             net increases in economic activity and      employers were more likely to be
           in Maryland to identify issues     program cost offsets; (3) the Department     influenced by financial incentives in
          ossible development of a federal    of the Treasury estimated that a federal     making hiring and investment decisions.
            focusing on: (1) program cost     program could cost $4.75 billion over the
         (2) employment growth; (3)           first 6 years of operation and assumed       Open Recommendations                to
             ffects on workers; (4)           that the program would redistribute, but
                                              not increase, economic activity; (4) the
                                                                                           Congress
              in welfare dependence; and
(51 the effectiveness of tax incentives and   employment growth experienced in the         Recommendation: The GAO assessment
other local development strategies.           three Maryland zones investigated was        of the Maryland experience does not
                                              not attributable to the program, making      show that enterprise zones are effective.
                                              cost offsets or reductions in welfare        If Congress decides to introduce a federal
Findings                                      dependence unlikely; (5) participating       program along those lines, the program
GAO found that: (1) both Maryland and         employers were more likely to consider       should be a modest demonstration rather
proposed federal legislation sought to        market access and site characteristics       than the large effort proposed in several
establish zones to promote private            than such program benefits as relaxed        bills.
industry investment in economically           regulatory practices, financial              Status: Action in process.


Community        Development

Urban Action Grants: Lansing, Michigan’s Grant Requires
Action
RCED-89-85,04/ 11/89
k&ground                                      Findings                                     permission to expand the project to
Pursuant to a congressional request,                                                       include office space leasing after failing
                                              GAO found that: (1) HUD approved the
GAO iinvestigated a Lansing, Michigan,        $3.3-million grant for financing the         to lease space to a large research
Urban Development Action Grant                purchase and installation of fixed capital   institute which would have attracted
project, focusing on whether changes to       equipment in a technology and research       similar firms; (4) the developer also
the project’s scope complied with the         center to be constructed in a township       estimated that the project would only
Department of Housing and Urban               near Lansing; (2) after concluding that      create 60 new jobs from conventional
Development’s (HUD) regulations and           the industrial revenue bonds being used      office leasing, and not the 600 it believed
procedures.                                   for financing covered the project’s costs,   possible with research firms; (5)
                                              HUD reduced the grant amount to              township officials objected to the grant
                                              $889,785, the minimum amount needed          reduction and sought to terminate the
                                              to protect the bonds’ tax-exempt status;     grant; (6) HUD regulations and
                                              (31 the project developer requested          procedures allowed for such revisions,




                                              Page 33                                                                    GAO/OP-90-l
                                            Community and Regional Development




-
which HUD believed were not unusual;        Open Recommendations               to         purchase the capital equipment with the
(7) I/IUD had not released the grant        Agencies                                      Urban Development Action Grant funds.
fun& to Lansing, since its officials had                                                  If either the City of Lansing or the
not ~submitted required documentation;      Recommendation: The Secretary of              developer does not meet the new
and: (8) Lansing and HUD officials          Housing and Urban Development should          deadlines, HUD should take all actions
agr ed to establish new deadlines for the   direct HUD officials to implement their       needed to resolve this matter, including
dev loper to purchase the equipment         plan to set new deadlines for the City of     termination of the grant, if appropriate.
and Lansing officials to submit the         Lansing to submit the remaining               Status: Action not yet initiated.
req ! ired documentation.                   documentation and for the developer to


Cobmunity        Development

Hbmelessness: HUD’s and FEMA’s Progress in
Itiplementing the McKinney Act
RCED-89-50,   05/
__~, _. ..-. ~~    11/89
               ..-....-....
Background                                  some communities with few homeless             than August of each year. It should also
Puhuant to a legislative requirement,       persons. GAO also found that a national       consider other funding alternatives, such
GAD evaluated the Federal Emergency         survey of 1987 Emergency Food and             as advance appropriations or forward
                                            Shelter program recipients indicated          funding, in which funds are
Management Agency’s (FEMA) and the
Department of Housing and Urban             that: (1) recipients cited unemployment,      appropriated sooner than the months
Development’s (HUD) disbursement and        low wages, decreases in available             just preceding the year in which they
use :of appropriations for homeless         subsidized housing, and increased             are available for obligation, or are
assistance programs.                        housing costs as significantly                available for obligation for periods other
                                            contributing to homelessness; (2) 40          than the traditional fiscal year.
                                            percent of grant recipients provided          Status: Action not yet initiated.
Findings                                    shelter, with 26 percent going to
GAO found that: (1) FEMA increased its      children under 16 years of age and 63
                                            percent to 17- through 55-year-olds; (3) 70   Open Recommendations               to
ability to provide year-round funding for
its Emergency Food and Shelter              percent of recipients believed that           Agencies
program by extending its spending           overall demand for services increased         Recommendation: The Secretary of
period and establishing plans for grant     between 1987 and 1988; (4) 46 percent         Housing and Urban Development should
approval and review for more timely         believed that FEMA funds enabled them         ensure the completion of departmental
distribution; (2) HUD was generally         to provide more assistance; and (5180         efforts to: (1) develop methods for
timely in reviewing and approving funds     percent were satisfied with FEMA              measuring the success of the Supportive
for its programs, although it disbursed     requirements and guidelines.                  Housing Demonstration program in
only a limited amount of funds due to                                                     facilitating the movement of homeless
lengthy funding periods, recipients         Open Recommendations               to         persons to independent living within a
working on a reimbursable basis, and        Congress                                      reasonable amount of time; and (2)
lack of applications; (3) poverty and                                                     establish procedures for reviewing work
unemployment data used to allocate          Recommendation: To enable
                                                                                          done by those processing grant
FEMA and HUD funds did not always           Emergency Food and Shelter program
                                                                                          applications to ensure that program
reflect community nyeeds;and (41 HUD        recipients to receive funds in a timely
                                                                                          guidelines are consistently interpreted
distributed Emergency Shelter grant         manner, Congress should consider
                                                                                          and applied.
funds to communities in proportion to       providing FEMA with its Emergency
their homeless populations, including       Food and Shelter appropriation no later       Status: Action not yet initiated.




                                            Page 34                                                                    GAO/OP-90-1
                                             Community and Regional Development




ReUHlj mend&ion: After the                   program should be determined using           make the CHAP requirements more
constrvction phase of the program has        known cost escalation factors and the        specific. They may, for example, help
been cbmpleted, the Secretary of             experience gained from the first-year        identify the number and types of
Housidg and Urban Development should         program funding process.                     homeless persons throughout the United
direct program officials to recompute the    Status: Action not yet initiated.            States, help identify shortfalls in needed
total afnount of rental assistance                                                        services, and help ensure that all
paymehts, taking into account the public     Recommendation: The Secretary of             homeless assistance and related
housin’ authority administrative             Housing and Urban Development                programs are coordinated effectively.
allowa ce and the HUD-estimated              should, in requesting and reviewing          Status: Action not yet initiated.
inflati n factor. Future awards under        future Comprehensive Homeless
the Sef tion 8 single room occupancy         Assistance Plan (CHAP) submissions,


Disafter Relief and Insurance
Disaster Assistance: Response to West Virginia’s                                                    November
1985 Flood Shows Need for Improvements
RCEiM3-5,02/04/88
Baclkground                                  media weather warnings; (2) some flood       supplemental assistance payments
Pursubnt to a congressional request,         victims did not receive or recognize         without reinspecting claimed damage;
GAO neviewed the November 1985 West          warnings; and (3) the National Weather       and (7) FEMA instructed the state t.o
Virgiiia flood, focusing on: (1) state and   Service’s (NWS) Integrated Flood             build 647 mobile home foundations, of
local disaster planning and                  Observing and Warning System                 which only half were used.
preparedness; (2) the effectiveness of       (IFLOWS) was ineffective for those
existing warning systems and planned         counties unable to maintain it. In
                                             addition, GAO found that: (1) although
                                                                                          Open Recommendations               to
improvements; (3) the federal                                                             Agencies
government’s responsiveness to victims’      the Small Business Administration was
needs; and (41 the type and amount of        revising its procedures to reduce loan       Recommendation: The Director, FEMA,
assist&ce the government provided to         processing time, federal agencies            should pursue development of standards
flood $ictims.                               generally took too long to complete and      for how long the public assistance
                                             approve applications for initial and         application process should take to better
                                             supplemental public assistance and           enable FEMA to identify opportunities
Findings                                     frequently underestimated amounts            to expedite the process.
GAO found that, of West Virginia’s 55        necessary for initial assistance; (2) West   Status: Action in process. FEMA is
countjes: (1) less than half participated    Virginia averaged 26 days to pay
                                                                                          developing standards for evaluating the
in thi Federal Emergency Management          recipients; (3) the Soil Conservation
                                                                                          public assistance application process
AgenOy’s (FEMA) Emergency                    Service and the Army Corps of
                                                                                          that incorporate the November 1988
Mankement Assistance (EMA)                   Engineers began cleanup work almost
                                             immediately after the flood, but without     legislative revisions to the public
Program; (2) some may withdraw from
EMA because of program changes; and          the required request from FEMA; (4)          assistance program. Final regulations
(3) all had poor emergency plans,            FEMA spent about $27 million in              incorporating a maximum standard for
according to FEMA guidelines. GAO also       individual assistance programs; (5)          approving or rejecting public assistance
found that: (1) primary county flood         family grant program limits did not          projects are at OMB for approval. FEMA
warning systems consisted of civil           meet the basic needs of about a third of     expects them to be published about
defense sirens and loudspeakers and          the flood victims; (6) FEMA issued some      December 1989.




                                             Page 35                                                                    GAO/OP-90-l
 Education, Training, Employment,                                                                           and
 Social Services

Elbmentary,       Secondary, and Vocational             Education
Sbmmer Youth Jobs Program: Congressional Action Has
Iqcreased Emphasis on Remedial Education
HljiD-88-118, 09/30/88              ____-
Brickground                                  program administrators believed that        components, using standardized
                                             remediation improved their summer           educational achievement tests.
Pursuant to a congressional request,
                                             programs; and (6) although local            Status: Action in process.
GAP discussed local programs’
implementation of the requirement to         administrators had anticipated service
                                             reductions in several aspects of their      Recommendation: Although nearly all
prokide youth with remedial education                                                    service delivery areas have added
as part of the 1987 Summer Youth             summer programs due to the cost of
                                             adding remediation, fewer than expected     remediation to their programs, the
Employment and Training Program.                                                         proportion of youths receiving services
                                             programs actually reported making such
                                             reductions.                                 varies greatly. Congress may wish to
Fibdings                                                                                 consider requiring that DOL define some
                                                                                         minimal amount of remediation that
GAG found that: (1) the number of            Open Recommendations              to        must be provided during the summer.
youths provided remedial education in        Congress                                    Status: Action in process.
the 1937 program increased from 55,000
to 212,000; (2) the money localities spent   Recommendation: Although most local         Recommendation: Although nearly all
on remediation expanded from $37             program administrators believe the          service delivery areas have added
million to $64 million; (3) although every   remediation component of the summer         remediation to their programs, the
program it surveyed provided                 youth program has been successful, the      proportion of youths receiving services
remediation, the number of youths            component’s overall effectiveness is        varies greatly. Congress may wish to
served and the intensity of remediation      unknown. Congress may wish to consider      consider requiring that all youth in the
varied greatly; (4) the majority of          requiring the Department of Labor           program who are in need of remedial
programs planned to further expand           (DOL) to evaluate all or a sample of        education receive such remediation.
remediation in 1933; (5) 60 percent of       these programs’ remediation                 Status: Action in process.


Elementary,       Secondary, and Vocational             Education
Implementation                    of the Carl D. Perkins Vocational
Education Act
T-HRD-89-8, 03/07/89
Background                                   provide vocational education to             modernized program activities as
GAO discussed the implementation of          underserved groups, some allocation         students outside such areas; (3) some
the Carl D. Perkins Vocational               mechanisms directed funds to more           states designated relatively wealthy
Education Act, focusing on the allocation    affluent areas; (2) vocational education    areas as economically disadvantaged and
of program funds to”economically             students in disadvantaged areas were        provided greater per-capita funding to
depressed areas. GAO found that: (1)         less likely to receive as much funding on   these areas than to some poorer
although funds were generally used to        a per-capita basis for improved or          communities; (4) the funds allocation




                                             Page 36                                                                  GAO/OP-90-1
                                             Education, Training, Employment, and Social Services




formula for disadvantaged populations        Status: Action not yet initiated.            Open Recommendations                to
shifted funds from poor communities to                                                    Agencies
more affluent ones because it included       Recommendation: If Congress wants to
nonp r, academically disadvantaged           target additional Perkins Act funds to       Recommendation: To improve program
stude ts; (5) disadvantaged and              poor communities, it could amend the         oversight of the Perkins Act, the
handi i apped population funds could be      act to remove ‘academically                  Secretary of Education should require
reallo ated from poorer to wealthier         disadvantaged‘ students who are not          states to substantiate to federal program
comm nities; and (61 complete and            poor from the fund allocation formula        officials their criteria for designating
reliab e data on vocational education        for the disadvantaged population.            local areas as ‘economically depressed‘
enroll ent and spending were                 Status: Action not yet initiated.            for funding allocation purposes and
unav ilable at either the national or                                                     submit supporting state enrollment and
state evel.                                  Recommendation: If Congress wants to         funding data.
                                             target additional Perkins Act funds to       Status: Action not yet initiated.
Ope1 Recommendations                to       poor communities, it could amend the
Con@ess                                      act to require that any Perkins fund         Recommendation: To improve program
                                             redistributions for the disadvantaged        oversight of the Perkins Act, the
Reco mendatlon: If Congress decides                                                       Secretary of Education should direct the
                                             and handicapped populations be made in
to inc;t ease funding for Perkins Act                                                     Assistant Secretary for Vocational and
program improvement activities, it           approximately the same proportions
                                             between poorer and wealthier areas as        Adult Education to analyze the
should ensure that the act’s targeted                                                     reasonableness of state criteria for such
special populations also benefit from any    the original allocations.
                                             Status: Action not yet initiated.            designations using enrollment and
increased program improvement                                                             funding data submitted by the states.
activities.
                                             Recommendation: To reduce the                Status: Action not yet initiated.
Status: Action not yet initiated.
                                             frequency with which disadvantaged and
                                             handicapped allocations are returned by      Recommendation: To improve program
Recommendation: If Congress wants to                                                      oversight of the Perkins Act, the
target additional Perkins Act funds to       localities, Congress could allow states to
                                             establish minimum grant amounts              Secretary of Education should provide
poor communities, it could amend the
                                             appropriate for their circumstances or       the leadership needed to complete
act to require states to allocate at least
                                             establish a minimum dollar level for         development of a national vocational
as much Perkins funding for each
vocational student in economically           local disadvantaged and handicapped          education data system.
depressed areas as in other areas of the     population grants.                           Status: Action not yet initiated.
states.                                      Status: Action not yet initiated.


Elementary,       Secondary, and Vocational             Education
Vocational Education: Opportunity                                        to Prepare for the
Future
HRD-89-55,
  t
              05/10/89
       - ~.-.--.-.-___
Background                                   extent to which the act provides access      communities within each state; and (2)
Pursuant
C”‘L)UcI“L to  a L;““i
           C” c1 congressional request,      to quality vocational education programs     availability at the federal level of
GAO reviewed the implementation of           for designated populations, encourages       vocational education data for legislative
the Carl D. Perkins
              Perkir Vocational              modernization and improvement of state       and executive oversight.
Education Act, foe  focusing on the: (1)     and local programs, and directs funds to
                                             the most economically depressed



                                             Page 37                                                                    GAO/OP-90-l
                                             Education, Training, Employment, and Social Services




Fibdings                                     Status: Action not yet initiated.            minimum grant amount applicable for
                                                                                          all states in allocating Perkins
GAO reviewed 6 states and 20 localities      Recommendation: If Congress wants to         disadvantaged and handicapped funds to
and found that: (1) they generally used      direct more funding to poorer                localities; or (2) allow states to establish
program funds appropriately, but some        communities, consideration should be         their own minimum grant amount.
vocational education students in             given during the Perkins Act                 Status: Action not yet initiated.
disadvantaged areas were less likely to      reauthorization process to requiring the
receive funding for improved or              states to allocate at least as much
modernized program activities than           Perkins Act funding to each vocational       Open Recommendations                 to
students outside such areas; (2) all six     education student in areas that are          Agencies
states allocated more than half of their     economically depressed as those in other
basfc state grants to economically                                                        Recommendation: The Secretary of
                                             parts of the state.                          Education should require states to
depressed areas, as the act required, but    Status: Action not yet initiated.
some states designated relatively                                                         substantiate to federal program officials
wealthy areas as economically depressed                                                   the rationale used for selection of areas
                                             Recommendation: If Congress wants to         to be designated as economically
and gave them greater per-capita             direct more funding to poorer
funding than some poorer communities;                                                     depressed as well as submit supporting
                                             communities, consideration should be         state enrollment and funding data to the
(31 the funds allocation formula for         given during the Perkins Act
disadvantaged populations shifted funds                                                   same officials.
                                             reauthorization process to removing
from poor communities to more affluent                                                    Status: Action not yet initiated.
                                             students who are academically
on& because it included nonpoor,             disadvantaged, but not poor, from the
academically disadvantaged students; (4)     formula for allocating Perkins funds for     Recommendation: The Secretary of
a large number of school districts in four   disadvantaged populations.                   Education should direct the Assistant
states returned funds for the                Status: Action not yet initiated.            Secretary for Vocational and Adult
disadvantaged and handicapped to the                                                      Education to perform analyses of the
states, and one state reallocated funds to   Recommendation: If Congress wants to         reasonableness of states’ economically-
more affluent areas in the state; and (5)    direct more funding to poorer                depressed-area criteria, using enrollment
the Department of Education has not          communities, consideration should be         and funding data submitted by the
developed a national vocational              given during the Perkins Act                 states.
education data system, making                reauthorization process to requiring that    Status: Action not yet initiated.
congressional oversight and program          any redistributions of formula-driven
administration more difficult.               Perkins Act funds for the disadvantaged      Recommendation: The Secretary of
                                             and handicapped populations be made          Education should provide the leadership
Open Recommendations               to        between wealthier and poorer                 needed to complete development of a
                                             communities in approximately the same        national vocational education data
Congress                                     proportions as originally allocated.         system, using common terms and
Recommendation: If Congress decides          Status: Action not yet initiated.            definitions, in cooperation with affected
to increase Perkins Act funding for                                                       vocational education organizations, such
program improvement, it should ensure        Recommendation: To minimize returns          as the Council of Chief State Schools
that the act’s targeted special              of formula-driven disadvantaged and          Officers, and with the assistance of the
populations benefit from any increased       handicapped allocations, Congress may        National Center for Education Statistics.
program improvement activities.              wish to: (1) establish an overall            Status: Action not yet initiated.




                                             Page 38                                                                     GAO/OP-90-l
      ,
                                             Education, Training, Employment, and Social Services




Eler$entary, Secondary, and Vocational                  Education
Spgcial Education: Congressional Action Needed to
Improve Chapter 1 Handicapped Program
HRC/-89-54, 05/23/89
Bacqground                                   proportional share of program funds          handicapped children by allocating
                                             than states that served only more            program funds to states on the basis of
Pursuknt to a legislative requirement,
                                             severely handicapped; (31 45 states          their percentage of the nation’s total
GAO reviewed the Chapter 1
                                             counted less-than-severely handicapped       handicapped children counted in the
Hand’capped Program and its
relati i nship to the Education of the       children in preschool programs under         Chapter 1 Handicapped Program and
Hand’capped Act (EHA) program,               their Chapter 1 programs, and 48             part B of EHA programs.
        i                                    percent of the children in the programs      Status: Action not yet initiated.
focusing on: (1) the extent to which the
                                             who were 5 years old or younger were
Depar#ment of Education provided
                                             not severely handicapped; (4) because        Recommendation: Congress should
guidance to the states to determine
eligibi;lity under Chapter 1; (2) whether    states often transferred most of the         restructure the Chapter 1 Handicapped
states implemented programs consistent       preschool children counted in state-         Program to better ensure that states
with congressional intent regarding the      supported programs who had less than         focus program services on severely
transfer of students from state-operated     severe handicaps to regular schools and      handicapped children by eliminating the
or -supported programs to local public       continued them in the program                funding transfer provision contained in
schools; (3) the extent of education that    indefinitely, the states received higher     the Education Amendments of 1974.
handicapped children received in             funding levels than they would have
                                                                                          Status: Action not yet initiated.
settings with nonhandicapped children;       under EHA; (5) two-thirds of the state
(41 whether Chapter 1 afforded all           officials did not consider funding
                                                                                          Recommendation: Congress should
handicapped children and their parents       transfer an incentive to
                                                                                          restructure the Chapter 1 Handicapped
the same rights and procedural               deinstitutionalize severely handicapped
                                             children; (6) although handicapped           Program to better ensure that states
guarantees as under EHA programs; (51                                                     focus program services on severely
the specific services provided under         children in both programs received the
                                             same procedural safeguards to ensure         handicapped children by requiring that
Chapter 1 compared with those under                                                       Chapter 1 Handicapped Program funds
EHA programs; and (6) efforts to ensure      appropriate educational services,
                                             services provided to children under          be used to serve only severely
that all eligible handicapped students                                                    handicapped children (as identified by
received services.                           Chapter 1 were more frequent and
                                             intense than those provided under EHA;       each state) in state facilities and public
                                             and (‘7169 percent of the state program      schools.
Findings                                     coordinators had no objection to             Status: Action not yet initiated.
GAO found that: (1) although Congress        combining the programs because of their
created the Chapter 1 Handicapped            similarity, provided that the funding        Recommendation: Congress should
Program to service mostly severely           authority for both programs remained         enact legislation to combine the Chapter
handgcapped children in state                separate.                                    1 Handicapped and EHA programs. If
institutions, neither the legislation nor                                                 the Chapter 1 Handicapped Program is
it.8 implementing regulations specifically   Open Recommendations              to         merged under the EHA program,
limited services to the severely                                                          Congress should also consider a separate
handicapped; (21 because the legislation
                                             Congress                                     Chapter 1 Handicapped funding set-aside
based program funding on the number of       Recommendation: Congress should              for the states to use to serve only
children served, some states served          restructure the Chapter 1 Handicapped        severely handicapped students.
many children with less than severe          Program to better ensure that states         Status: Action not yet initiated.
handicaps and received more than a           focus program services on severely



                                             Page 39                                                                     GAO/OP-90-l
                                               Education, Training, Employment, and Social Services




    /
    en Recommendations                to       Program on severely handicapped                  Handicapped Program must receive
                                               children, the Secretary of Education             some benefit from program funds.
    I                                          should eliminate from program                    Status: Action not yet initiated.
                                               regulations the provision requiring that         Education’s action is contingent upon
                                    for
                                               each child counted under the Chapter 1           congressional action.
        using the Chapter 1 Handicapped


        mentary, Secondary, and Vocational                Education

D segregation Activities: Administration of Education
G ant Funds at the Cleveland School District
H&D-89-83,08/29/89
 ..,   -.-   ~...._.._
                   . . -.--. -_-.---                                                        -                                     ~---
Bajckground                                    specifications of the 1978 court order and       Recommendation: The Secretary of
Pursuant to a congressional request,           subsequent federal grant agreements; (4)         Education should direct the Cleveland
GAbreviewed      Department of Education       requested and received excessive                 School District to review its procurement
grants awarded to the Cleveland, Ohio,         advances of federal grant funds and              system to ensure compliance with
Schbol District, for desegregation             accrued interest on those advances, but          federal procurement regulations.
activities, to determine: (1) the total        did not report or remit that income to           Status: Action not yet initiated.
amount of federal funding the school           Education; (5) obligated and spent first-
district received; (2) the school district’s   year grant funds during the second year,         Recommendation: The Secretary of
compliance with a 1978 desegregation           without Education approval, and spent            Education should work with school
court order and grant agreements; (3)          more than $1.5 million in ESAA 1979-             district officials to determine the
the’school district’s compliance with          1980 and 1981-1982 funds during the              amounts of interest earned on excessive
federal grant conditions and restrictions;     1985-1986 school year; and (6) did not           cash balances from federal grant
and (41 whether Education adequately           comply with some federal procurement             programs over the years, which should
monitored and administered the grant           requirements. GAO also found that                be returned to Education.
agreements.                                    Education did not adequately monitor             Status: Action not yet initiated.
                                               and administer the grant agreements.
Findings                                                                                        Recommendation: To determine
                                               Open Recommendations              to             whether Education’s grant management
GAO found that the school district: (1)
                                                                                                weaknesses seen in Cleveland’s Magnet
received a total of $30.2 million in           Agencies                                         School program grants are prevalent in
federal funds from 1978 through 1987 for
desegregation activities; (2) used federal     Recommendation: The Secretary of                 other grant programs and other school
funds derived from the Emergency               Education should direct the Cleveland            districts, the Inspector General,
School Aid Act (ESAA) and Magnet               School District to return the $1,553,000         Department of Education, should review
School Assistance programs consistently        of ESAA funds that remained in its               Education’s grant administration policies
with the 1978 court order; (3) spent other     accounts when the authorization for              and practices, especially relating to cash
federal funds on desegregation activities,     ESAA expired in 1982.                            management and grant closeouts.
but did not comply with all of the             Status: Action not yet initiated.                Status: Action not yet initiated.




                                               Page 40                                                                       GAO/OPdO-1
-’

                                             Education, Training, Employment, and Social Services




Highkr Education
Gubranteed Student Loans: Legislative and Regulatory
Changes Needed To Reduce Default Costs
HRI$8%76,09/30/8'7
Bacqground                                   Open Recommendations to                      Proposed Rulemaking (NPRM) is
Pursu nt to a congressional request,         Congress                                     December 1989.
GAO xamined needed legislative and           Recommendation: Congress should
regula ory changes for the Department                                                     Recommendation: The Secretary of
                                             amend the Higher Education Act by
of Ed cation’s Guaranteed Student Loan                                                    Education should amend the Guaranteed
                                             requiring that a borrower’s promissory
Progr i m, focusing on: (1) guaranty                                                      Student Loan Program regulations by
                                             note specify that, upon default, the loan
agenci s’loan collection practices and                                                    requiring that guaranty agencies share
                                             interest rate will change to a variable
procet urea; (2) ways to reduce default                                                   all borrower payments to offset
                                             rate with a ceiling of 12 percent, unless
costs; (3) the amount of time defaulters                                                  collection costs on reinsured loans with
                                             existing state law allows for a higher
have tc repay loans; and (4) whether                                                      Education.
                                             rate to be charged.
guaranty agencies are promptly               Status: Action not yet initiated.            Status: Action in process. Estimated
remitting Education’s share of                                                            completion date: 12/89. Education’s
collections.                                 Recommendation: Congress should              latest estimate of issuing NPRM is
                                             amend the Higher Education Act by            December 1989.
Findings                                     providing the Department of Education
                                             with the authority to require that           Recommendation: The Secretary of
GAO found that: (1) new regulations          guaranty agencies use the National           Education should amend the Guaranteed
require all guaranty agencies to             Student Loan Data System to verify           Student Loan Program regulations by
standardize collection practices and         borrower eligibility after the system is     requiring that guaranty agencies post
follow specific actions to collect           established.                                 borrower payments in the same manner
defaulted loans; (2) 1986 legislation        Status: Action not yet initiated.            that federal agencies are required to in
should help to reduce defaults and                                                        accordance with the Federal Claims
increase collections by requiring                                                         Collections Standards.
                                             Open Recommendations to                      Status: Action in process. Estimated
guaranty agenciee to report repayment
patterns to credit bureaus and requiring     Agencies                                     completion date: 12/39. Education’s
defaulters to pay reasonable collection      Recommendation: The Secretary of             latest estimate of issuing NPRM is
costs; (3) the establishment of a National   Education should: (1) amend the              December 1989.
Student Loan Data System should help         Guaranteed Student Loan Program
to further reduce costs by providing         regulations to require that guaranty         Recommendation: The Secretary of
means to verify eligibility; (4) Education   agencies submit Education’s share of         Education should amend the Guaranteed
collected about $38 million in income tax    collections on reinsured loans within 30     Student Loan Program regulations by
refund offsets from loan defaulters in       days; and (2) explore a mechanism to         requiring that guaranty agencies
1985; :(5) new regulations require           assess penalties, similar to those           capitalize interest on defaulters’ unpaid
guaranty agencies to share all default       included in the Prompt Payment Act,          costs when they fail to follow their
payments made on reinsured loans with        against agencies that submit their           repayment agreements.
Education: and (6) guaranty agencies         payments late.                               Status: Action in process. Estimated
allow longer repayment periods than          Status: Action in process. Estimated         completion date: 12/89. Education’s
Education and have 60 days to remit          completion date: 12/89. Education’s          latest estimate of issuing NPRM is
default collections to education.            latest estimate of issuing a Notice of       December 1989.




                                             Page 41                                                                   GAO/OP-90-1
                                              Education, Training, Employment, and Social Services




    I



Hijgher Education

Gbaranteed Student Loans: Lenders’ Interest Billings
Olf’ten Result in Overpayments
H&D-88-72.08/31/88
B ckground                                   promptly; (2) required only summary           Open Recommendations              to
 i                                           information from lenders regarding bills,     Agencies
GAG reviewed lenders’ billings under
                                             since supporting documentation was too
the iGuaranteed Student Loan Program                                                      Recommendation: The Secretary of
                                             voluminous for it to validate; (3) limited
to +termine whether the Department of                                                     Education should revise the Guaranteed
                                             its verification of bills to checking
Education was incurring excessive costs      mathematical accuracy and                    Student Loan Program regulations to
rel ‘ted to its payment of interest and      completeness; (4) conducted fewer than       require the Office of the Inspector
spe“dial-allowance subsidies, focusing on    500 on-site reviews of the 14,000            General to assist program officials in
the [extent to which: (1) lenders erred in   participating lenders in 1986; and (5)       developing audit standards for the
bill”ng Education for interest and           charged lenders interest on overbillings     guaranty agencies to use in reviewing
spe1ial-allowance payments; (2) lender       from the date it notified lenders of the     lender billing systems and practices.
billing errors resulted in federal           error, but lacked authority to charge        Status: Action in process. Education
overpayments; and (3) Education              interest from the date of the actual         distributed review guides to agencies for
established adequate procedures to           overpayments.                                conducting audits, supplemented by 3-
detect billing errors and prevent
                                                                                          day training sessions. It is currently
overpayments.
                                             Open Recommendations               to        revising the guide to incorporate
                                             Congress                                     additional improvements.
Firidings
                                             Recommendation: Congress should
GAG found that, from its review of 16                                                     Recommendation: The Secretary of
                                             amend the Higher Education Act to
lenders’ accounts over one quarterly                                                      Education should revise the Guaranteed
                                             authorize the Secretary of Education to
billing period: (1) all 16 lenders           assess lenders’ interest due to lender       Student Loan Program regulations to
submitted erroneous billings to              billing errors from the date of              stipulate that Education and guaranty
Education, resulting in a net                overpayment of interest and special          agency audits of lenders include tests of
overpayment of at least $1.8 million; (2)    allowance.                                   the accuracy of lender loan accounts and
18 percent of loan accounts contained        Status: Action not yet initiated.            billing statements to provide a
errors or lacked adequate documentation                                                   statistically valid basis for recovering
to support the billed amount; (3) errors     Recommendation: Congress should              overpayments.
typically resulted from lenders              amend the Higher Education Act to            Status: Action in process. Estimated
miscalculating loan principal balances       require lenders to: (1) specify to their     completion date: 12/89. Education sent a
and ‘interest subsidies or continuing to     independent auditors that the                letter to guaranty agencies in September
bill Education after borrowers began         verification of loan accounts and interest   1988 requiring them to ensure that
repaying; and (4) three of the lenders       and special-allowance billing should be      billings are verified, and repayments
voluntarily repaid Education for             included in periodic independent             sought, using statistically valid methods.
overbillings. GAO found that Education:      financial audits; and (2) provide that       Education has proposed regulations to
(1) relied on lenders to maintain current    errors identified are promptly reported      require agencies to use statistical
and complete loan files, submit accurate     to Education and the guaranty agency.        techniques in lender reviews.
billings, and make adjustments               Status: Action not yet initiated.




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                                             Education, Training, Employment, and Social Services




Oth&r Labor Services

Thb H-2A Program: Protections for U.S. Farmworkers
PElbjD-89-3,10/21/88
Bat ground                                   presence of foreign workers would            consider converting units of payment to
In re ponse to a congressional request,      depress the prevailing wages; (3) DOL set    a common base to ensure that prevailing
      .”                                     an adverse-effect wage rate as a             wage findings are calculated on the
GAO eviewed the: (1) wage and
nonw ge protection that the Department       minimum wage to offset wage depression       largest possible number of workers
of La or’s (DOL) regulations afford U.S.     and generally indexed it to a large-scale    surveyed.
farm orkers under the H-2A Program,          wage survey; and (4) because the             Status: Action in process. The DOL
whit i allows for the admission of foreign   legislative mandate was so broad, DOL        work group’s recommendations for
agric$ltural workers; and (2) quality of     could interpret adverse effect in several    changes to the prevailing wage survey
the D/epartment of Agriculture (USDA)        ways. In addition, GAO found that: (1)       are completed and will go for DOL
survegs DOL used to set minimum              DOL practices provided weak protection       review and public comment.
wage$ and to certify a shortage of U.S.      for U.S. workers; (2) some growers
work&s.                                      preferred foreign workers because they       Recommendation: To improve the
                                             could recruit more selectively; (3) DOL      prevailing wage surveys, the Secretary
                                             referred few U.S. workers at the wages       of Labor should: (1) provide guidance on
Finqlings                                    and working conditions offered; and (4)      handling discrepancies, since the
GAOjfound that: (1) USDA never               government welfare and unemployment          handbook directs interviewers to verify
measbred the precision of the annual         benefits were not a critical factor, since   employer-supplied information with
hourliy wage rate estimates that DOL         the potentially employable among those
                                                                                          employee-supplied data; (2) remove the
used to set statewide minimum wages;         collecting the benefits constituted only a
                                                                                          present cells for average hourly
(2) there may be unacceptably large          small part of the needed labor force.
                                                                                          earnings, based on combining
error margins for at least three regions                                                  information from several interviewed
of the country; (3) the USDA surveys         Open Recommendations              to         workers, unless required for other than
measured a general farm wage that was
lower than the average U.S. wage for
                                             Agencies                                     verification of employer data, and
                                                                                          supplement interview records with forms
workers employed in the same crop            Recommendation: To ensure that the
                                                                                          that record individual wage information
activities as H-2A workers; and (4) the      wage minimums set by DOL to protect
                                                                                          from workers and any calculations
techriical quality of the 15 wage surveys    U.S. workers from the adverse effects of
                                                                                          performed by the interviewer; (3) revise
conducted during 1987 varied because of      the H-2A program are reasonably
the inconsistent counting of                 accurate, the Secretary of Labor should:     the survey summary form to better alert
undocumented workers, low response           (1) negotiate with USDA to provide           ETA regional and national offices of
rater+, unsystematically compiled            routine analysis of error margins            problems that reduce the quality of the
employer lists, analytical                   surrounding the wage estimates on            survey; (4) confer with state officials
misc$culations, inadequate survey            which statewide minimum hourly wage          about the problems affecting quality for
quality indicators, poor interview           rates are based and improve the survey       particular surveys and, if necessary,
schedule quality, and inadequate             as necessary to maintain reasonably          provide or facilitate training or technical
mon+ing.      GAO also found that: (1)       small margins of error around such           aid; and (5) be especially watchful that
since DOL determined the prevailing          estimates; (2) provide greater oversight     mail surveys are adequate and, if not,
wage only with regard to the most            and guidance to the state agencies           provide guidance on ways to increase
common unit of payment, differing            conducting the prevailing wage surveys,      response rates or, alternatively, require
payment units could result in                including revising the survey handbook       other methods of data collection.
inaccuracies; (2) wag& minimums based        and forms to improve consistency of          Status: Action in process. The DOL
solely on prevailing wages would not         procedures and ability to monitor            work group, formed to consider the
grant relevant protections because the       quality of implementation; and (3)           recommendations for the prevailing



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                                               Education, Training, Employment, and Social Services




---m
wage surveys, has not yet finished its         protections under the current law by         Status: Action in process. DOL has
work                                           finding means to incorporate referred        developed a project design to selectively
                                               workers’ accounts of reasons for not         monitor referred workers’ accounts, and
ReccJmmendation: The Secretary of              being hired or being fired.                  pilot projects have been funded in
Labor should improve worker                                                                 several states for 1989 or 1990.



Soc~iai Services
Idmigration  Reform: Verifying                                     the Status of Aliens
Applying for Federal Benefits
HRjp-88-7, 10/01/87
Background                                     the courts prohibited denial of assistance   requesting and approving waivers, were
Pursuant to a legislative requirement,         to aliens; and (‘7) the federal and state    published October 1988.
GAG reviewed the problems states               governments do not collect data on alien     Addressee: Department of Health and
encountered in verifying with the              program applicants and verification          Human Services
Immigration and Naturalization Service         costs, making savings estimates difficult    Status: Action in process. The
(INS! the eligibility of alien applicants      and unprojectable.                           Department of Health and Human
for various federal aid programs.                                                           Services (HHS) completed a study which
                                                                                            indicated the IRCA verification
                                               Open Recommendations               to        requirements were cost-effective for the
Finbings                                       Agencies                                     AFDC and Medicaid programs. No
GAO found that: (1) four of the six states     Recommendation: The Secretaries of           criteria, other than those set forth in the
it reviewed estimated costs and savings        Agriculture, Education, Health and           law, have been provided. Final rules
of about $127,000 and $3.1 million,            Human Services, Housing and Urban            have been held up by a pending
respectively, in unemployment                  Development, and Labor should begin          Medicaid court case.
compensation as a result of alien              developing criteria and methodologies        Addressee: Department of Housing and
verification pilot projects; (2) in 1983,                                                   Urban Development
                                               for granting waivers and ensure that
California realized over $19 million in                                                     Status: Action in process. Estimated
                                               states and other administering agencies
savings before it abandoned its                                                             completion date: 03/90. The Department
                                               begin developing, through such means as
verification program as a result of a                                                       of Housing and Urban Development
                                               pilot tests, empirical performance data      (HUD) sees no reasonable basis to grant
lawsuit; (3) New York realized about
                                               related to Immigration Reform and            waivers and believes that the telephone
$62,000 in savings but included
                                               Control Act (IRCA) verification              access method would be cost-effective
erroneous payments; (4) only Colorado
                                               procedures for use in deciding waivers.      even for the smallest administering
verified the eligibility of alien applicants
for the Medicaid, Food Stamp, and Aid          Addressee: Department of Agriculture         entities. On October 19, 1988, HUD
to Families with Dependent Children            Status: Action in process. Estimated         issued proposed rules describing alien
(AFDC) programs, but state officials did       completion date: 12/89. The Food and         verification. HUD expects its Office of
not favor continuance of the pilot project     Nutrition Service (FNS) completed a          the General Counsel to issue final rules
because they believed that savings were        study of the cost-effectiveness of IRCA      in March 1990.
small and few aliens sought benefits; (51      verification procedures for the Food
the SSXstates it reviewed realized             Stamp Program. FNS concluded that            Recommendation: The Secretaries of
savings of about $579,000 in education         IRCA procedures did not appear cost-         Agriculture, Education, Health and
assistance programs; 61 there was no           effective compared to the usual food         Human Services, Housing and Urban
alien verification for housing programs        stamp verification procedures. Interim       Development, and Labor should increase
in the six states, since federal law and       final regulations, including criteria for    efforts to provide guidance to



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                                            Education, Training, Employment, and Social Services




admimstering entities on IRCA               1988, HUD issued proposed rules for          verification costs. Final regulations are
requirements, the criteria and              administering entities on the IRCA           expected to be published in December
procebures for granting waivers, and the    verification requirements. Final rules       1989.
types of verification costs that will be    are expected by March 1990. Guidance         Addressee: Department of Health and
reim ursable.                               on waivers is not anticipated until some     Human Services
Addr ssee: Department of Agriculture        experience with the process has been         Status: Action in process. In its
Statu : Action in process. Estimated        gained.                                      response to the requirements of 31
camp etion date: 12/89. The Department                                                   U.S.C. ‘720, dated May 23, 1988, HHS
of Ag iculture (USDA) issued an interim     Recommendation: The Secretaries of           plans to develop updated estimates of
rule n implementation requirements          Agriculture, Education, Health and           avoided costs by using alien data
and imbursable verification costs on        Human Services, Housing and Urban            captured in ongoing program reports
Otto i r 7, 1988. USDA expects a final      Development, and Labor should develop        and data supplied by INS. Normal
rule o be published in December 1989.       and implement plans for capturing data       program and financial procedures will
USD does not plan to develop criteria       on numbers of alien applicants, savings,     be used to monitor verification
and rocedures for requesting waivers        and costs of verification with INS and       implementation and associated costs
     a
other than those set forth in the law.      for monitoring the system to ensure that     charged to AFDC and Medicaid
Addrkee:      Department of Health and      administering entities use the most          programs.
Human Services                              effective and economical verification
                                                                                         Addressee: Department of Housing and
Statys: Action in process. HHS has          means.
                                                                                         Urban Development
provided some interim guidance on           Addressee: Department of Agriculture
                                                                                         Status: Action in process. HUD
IRCA verification requirements, but has     Status: Action in process. Estimated
                                                                                         procedures will include minimal
not i$sued rules covering waiver criteria   completion date: 12/89. The USDA
                                                                                         recordkeeping requirements to capture
or reimbursable verification costs.         interim rule guiding state food stamp
Proposed regulations are under review                                                    sufficient data. HUD believed that
                                            agencies opting to implement IRCA
by the Office of Management and                                                          existing systems would be sufficient for
                                            verification procedures before October 1,
Budget.                                     1988, requires them to submit for review     monitoring and stated that
Addressee: Department of Housing and        and approval a state plan attachment         administering entities were responsible
Urban Development                           and budget projection statement that         for determining the most effective
Status: Action in process. Estimated        provides data on the numbers of alien        means of administering its programs,
completion date: 03/90. On October 19,      applicants, expected savings, and            including verification.



Social Services

Foster Care: Incomplete Implementation                                               of the Reforms
and Unknown Effectiveness
PEMD-89-17, 08/14/89
Background                                  Findings                                      foster children; (2) 48 states met
                                                                                          minimum ACYF compliance standards,
Pursuant to a congressional request,        GAO found that: (1) the Administration
                                                                                          while 31 states reached maximum
GAQ assessed the extent to which the        on Children, Youth, and Families              standards, which did not require states
incentive funding structure of federal      (ACYF) revised grant eligibility              to meet all 18 elements; (3) 27 states
child welfare services grants encouraged    requirements to encourage states t0           meeting minimum standards
states to implement reforms to reduce       revise programs to meet 18 standards          experienced problems in timely
widespread abuses of the foster care        involving individual case development,        completing case reviews; (4) the lack of a
system.                                     review, and dispositional hearings for        systematic evaluation of the reforms’



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                                             Education, Training, Employment, and Social Services




effects has prevented linking the reforms    Open Recommendations               to        reexamine HHS standards for certifying
to the significant decrease of the           Congress                                     states’ compliance with the section 427
estimated national case load and median                                                   requirements to ensure that receipt of
                                             Recommendation: Congress may want            incentive funds is contingent, from 1989
length of stay for foster children; (5)
                                             to consider funding additional               onward, on the states meeting all of the
alth/ough litigation against welfare
                                             information development to improve the
agencies has cited the reform legislation                                                 law’s requirements. In particular, HHS
                                             knowledge base about how case
and iprovided another legal avenue for                                                    should require states to demonstrate the
                                             monitoring and delivery of services can
monitoring foster care, federal incentives                                                implementation of all the required
                                             best promote the goals of the Child
were still needed to ensure the briefest     Welfare Services grants in total.            elements of the case review system.
possible temporary placements, the           Specifically, it might be more desirable     Status: Action not yet initiated.
fewest possible temporary placements,        to target any additional money for the
frequent contact between foster parents,     federal agency to conduct sound              Recommendation: The Secretary of
caseborkers, and natural parents, health     evaluations of promising state and local     Health and Human Services should
and educational screening, and states’       programs and to disseminate the              promptly comply with the legislative
con&rued compliance with the reforms;        guidance resulting from those                mandates of Public Law 99-509
and 6) the Department of Health and          evaluations to the states.                   regarding the development of an
Hu an Services (HHS) has not yet             Status: Action not yet initiated.            adoption and foster care information
esta lished a legislatively mandated                                                      system.
    ”
national information system which could                                                   Status: Action in process. A draft notice
help/ to obtain and analyze current
                                             Open Recommendations              to         of proposed rulemaking is in final
national information about state and         Agencies                                     negotiations and clearances.
local agency foster care practices and       Recommendation: The Secretary of
procedures.                                  Health and Human Services should


Social Services

Foster Care: Delayed Follow-Up of Noncomplying                                                        States
May Reduce Incentive for Reform
PEMD-89-16,09/13/89
Bat kground                                  reviewed states’ certifications of their     followed its stated practice of promptly
                                             compliance with provisions to receive        reviewing a state’s compliance for the
Pursuant to a congressional request,
GAO reviewed the extent to which the         incentive funds; (2) ACYF typically          fiscal year following the year it had
Administration for Children, Youth and       recouped overpayments to noncompliant        failed, ACYF has not conducted follow-
Families (ACYF) provided incentive           states by reducing the successive year’s     up reviews for six states which failed
funds to states which instituted ACYF-       payments; (3) 15 states have failed          compliance reviews between 1983 and
mandated reforms under its Child             annual compliance reviews at least once      1985.
Welfare Services grants program.             since enactment of the requirements in
                                             1980; (4) ACYF did not record or recoup      Open Recommendations               to
                                             a 1984 $832,216 overpayment to Ohio; (5)
Findings                                     final appeals decisions rendered in April
                                                                                          Agencies
GAO found that: (1) ACYF disbursed           1989 allowed ACYF to recoup a 1984           Recommendation: The Commissioner,
incentive funds to alkstates that            $1,034,619 overpayment to Illinois and a     ACYF, should: (1) promptly conduct and
certified their compliance with              1983 $250,335 overpayment to Maryland;       complete the postponed rereviews of
provisions and then retrospectively          and (6) although ACYF generally              those six states that failed a review



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                                              Education, Training, Employment, and Social Services




     I


between 1933 and 1985, in order to            immediately following the end of the         Recommendation: The Commissioner,
ensure that incentive funds are               fiscal year due for review.                  ACYF, should promptly recoup the
expended in compliance with the law;          Status: Action not yet initiated.            overpayments made in 1983 to Maryland
and (2) conduct periodic reviews                                                           and in 1984 to Illinois and Ohio.
promptly in the future, that is,                                                           Status: Action not yet initiated.


Training     and Employment
E ergency Jobs Act of 1983: Funds Spent Slowly, Few Jobs
Cr” ated
HRjINS%1,12/31/86
Badkground                                    moderate attempt to hire persons             Status: Recommendation valid/action
In response to a congressional request,       unemployed at least 15 of the 26 weeks       not intended.
GAG provided information on federal           before passage of the act, while only half
agencies’ and local governments’ use of       made an attempt to provide employment        Recommendation: In considering any
funds the Emergency Jobs                      to unemployed persons, regardless of         future job creation legislation in
Appropriations Act of 1983 provided,          how long they had been unemployed; (7)       response to an economic recession,
specifically: (1) when they spent the         unemployed persons obtained a                Congress should require that these
funds; (2) how many people they               relatively small percentage of the           programs and activities obligate and, to
employed; (3) how many unemployed             created jobs; and (81 the funds also         the extent practicable, spend funds
persons received jobs; (4) what efforts       provided for the construction of public      within a specified time period following
they, made to provide employment to the       libraries and roads, humanitarian            the end of the recession or after
unemployed; and (5) what benefits, other      assistance, including food and health        enactment of the legislation to ensure
than’ employment, they provided.              services for the indigent, and the           that jobs are created when most needed,
                                              rehabilitation of public buildings and
                                                                                           allowing federal departments and
                                              facilities, such as schools and parks.
Findings                                                                                   agencies involved some discretion in
                                                                                           granting exceptions where they are in
GAG found that: (1) most programs and         Open Recommendations               to        the best interest of the government.
activities failed to spend their funds
before June 1984, when economic
                                              Congress                                     Status: Recommendation valid/action
                                              Recommendation: In considering any           not intended.
 recovery began; (2) public works
programs spent their funds much more          future job creation legislation in
slowly than public service programs; (3)      response to an economic recession,           Recommendation: In deliberating any
34,000 people found jobs as a result of       Congress should emphasize programs           future job creation legislation, Congress
the act; (4) an estimated 131,000 people      and activities that historically have been   may wish to consider requiring federal
could have found jobs if agencies and         able to quickly spend funds or that have     departments and agencies that receive
local governments had spent all of the        projects available for immediate             funds to maintain specific expenditure,
available funds during the first year; (5)    implementation to provide jobs when the      employment, and other information
only’ 35 percent of the unemployed found      economy needs them the most, placing         needed to evaluate the program and to
jobs as of September 1984; (6) in ‘7 of the   less emphasis on public works programs       improve congressional oversight.
 10 programs GAO surveyed, only 20            and activities that traditionally have       Status: Recommendation valid/action
percent of the project officials made a       spent funds slowly.                          not intended.
                       Y




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                                               Education, Training, Employment, and Social Services




Training and Employment
OaHA’s Monitoring                             and Evaluation                 of State Programs
T-HiRD-88-13,04/20/88                                                                      -
Background                                     California standards; (3) the number of         OSHA program. OSHA stated it would
                                               safety and health inspections OSHA              not provide financial incentives to states.
GAO;discussed the Occupational Safety
and Health Administration’s (OSHA)             performed in California decreased
                                               because it was unable to fill staff             Recommendation: OSHA should
efforts to: (11 monitor and evaluate state-
                                               positions; and (4) in 1988, total funding       require that states establish quality
operated safety and health programs;                                                           assurance programs and then
and (2) resume enforcement within the          for worker protection activities in
                                               California decreased from $33 million to        periodically review those efforts.
priva e sector in California. GAO found                                                        Status: Action in process. Estimated
that SHA: (11 lacked effective                 $16 million.
                                                                                               completion date: 10/91. As part of its
moni oring and evaluation procedures;                                                          state program review, OSHA will
(2) re,ied
      P primarily on its computerized          Open Recommendations               to           consider establishing a requirement for
management information system to               Agencies                                        quality assurance programs in state-
asses4 state program quality; (3) did not                                                      administered programs.
provide for the collection and analysis of     Recommendation: OSHA should
information that directly related to state     establish desired performance levels for        Recommendation: OSHA should work
program quality; and (41 did not               use by state programs and consider              with states to help them evaluate their
establish performance levels or                providing incentives for states to attain       programs’ impact on worker safety and
incentives for states to use in attaining      them.                                           health.
occupational and health safety. GAO            Status: Action in process. Estimated            Status: Action in process. Estimated
also found that: (11 diversion of its staff    completion date: 10/91. OSHA has begun          completion date: 10/91. As part of its
resources to provide enforcement in            a comprehensive review of its state plan        state program review, OSHA will
California hampered OSHA inspection            monitoring and evaluation program. In           develop guidance for the regional offices
efforts nationwide; (21 OSHA                   its study, OSHA will consider developing        on evaluating and reporting on program
occupational safety and health standards       desired performance levels for the states       impact studies that the states might
were limited in scope compared with            where such levels are established for the       conduct.


Training and Employment
Unemployment                      Insurance: Trust Fund Reserves
Inadequate
HRD-88-55, 09/26/88
Background                                     future recessions on reserve balances           Findings
GAO ,assessedthe current financial             and borrowing needs; and (31 the effects
                                                                                               GAO found that: (1) although the June
status of states’ unemployment                 of recent federal policy changes on the
                                                                                               1987 reserve levels were at an all-time
insurance systems, focusing on: (11            systems’ financial conditions and benefit
                                                                                               high of $19.4 billion, they were
trends in trust fund &serve balances           eligibility.
                                                                                               inadequate to finance benefits that
and borrowing; (21 the possible effects of                                                     states would need to pay during a




                                               Page 48                                                                       GAO/OP-90-l
                                              Education, Training, Employment, and Social Services




recessijon; (2) the reserves would last       percentage of the unemployed eligible        Recommendation: Because current
about k months in a severe recession,         for benefits, from nearly 55 percent in      policy regarding federal lending to state
while recent recessions have averaged 12      1952 to 32 percent in 1986. GAO believes     trust funds has had the effect of
month, and the Department of Labor            that the failure of most state               encouraging an erosion of benefits to
recomi-nended 18 months as a state            unemployment insurance funds to              many workers, Congress may wish to
mini&m; (3) by 1983, no state fund had        maintain adequate reserves has eroded        craft any measure to improve reserve
adequate reserves and 23 were insolvent;      the system’s self-financing feature and      adequacy in a manner that does not
(4) imdroved economic conditions helped       increased the potential for massive          further erode benefit eligibility.
states to reduce federal indebtedness,        borrowing.                                   Status: Action not yet initiated.
altho u gh reserves remained inadequate
to covbr recession-level benefit              Open Recommendations               to        Recommendation: Congress may wish
paym ‘nta; (5) state trust funds will not                                                  to consider program changes that would
accu 4 ulate adequate reserves even if
                                              Congress                                     help offset the fiscal burden that falls on
the current economic expansion                Recommendation: Congress may wish            states with chronically high
conti nlues; (6) federal policies increased   to establish a standard for the level of     unemployment rates.
the co ts of insolvency to states to          reserves to be maintained by state           Status: Action not yet initiated.
encou 1age them to repay federal loans        unemployment insurance trust funds.
promy/tly; and (7) states reduced the         Status: Action not yet initiated.


Traihing and Employment
Job Training                Partnership                 Act: Participants,                  Services, and
Outcomes
T-HRD-88-31, 09/29/88 ____-
                         -._____-
Background                                    rates, those who received occupational        guidance on program targeting is
                                              training generally received higher-           desirable.
GAO discussed ita review of the Job
                                              skilled jobs with higher wages; (5)           Status: Recommendation valid/action
Training Partnership Act (JTPA),
                                              although on-the-job training (OJT)            not intended.
focusing on the: (1) characteristics of       allowed JTPA participants to earn wages
individual participants; (2) kinds and        while training, over 40 percent of those
intensity of services they received; and      were lower-skill occupations; (6) 85
                                                                                            Open Recommendations               to
(3) occupations in which they received        percent of the OJT contracts for training     Agencies
employment after leaving the program.         exceeded the Department of Labor’s            Recommendation: The Department of
GAO;found that: (1) in the two job            suggested training time; and (7)              Labor should exercise more explicit
readipess groups, the program served          contracts that provide excessive OJT          oversight and provide clearer guidance
significantly fewer school dropouts than      may provide employers with a wage             on what duration of OJT is appropriate
amodg the eligible population; (2) JTPA       subsidy, since JTPA participants
par&pants spent an average of 18                                                            for specific occupations.
                                              reimburse employers for one-half of
weeb enrolled in the program, but little                                                    Status: Recommendation valid/action
                                              their wages while in training.
of that was basic education or work                                                         not intended. Follow-up on the same
experience; (3) the less job-ready                                                          recommendation, contained in HRD-89-
                                              Open Recommendations                to        52, will be carried out in 1990.
 participants received less intensive
training and more jo6 search assistance;      Congress
 (4) although those who received only job     Recommendation: Congress may wish
 search assistance had higher placement       to consider whether some additional



                                              Page 49                                                                     GAO/OP-90-l
                                              Education, Training, Employment, and Social Services




Training and Employment
Jab Training Partnership Act: Services and Outcomes for
Participants With Differing Needs
HFijD-89-52,
  I       -._.06/09/89
       _.._-....--
Bat kground                                   higher or moderate skill training,           part of the administration’s   bill to
 Purfiuant to a congressional request,        including the less job-ready, tended to      amend JTPA.
GAO provided information on the Job           obtain jobs at the same level of training;
Traibing Partnership Act (JTPA)               (2) on-the-job training contracts            Recommendation: The Secretary of
 pro&am, focusing on: (1) participants’       frequently exceeded the Department of        Labor should collect data necessary to
 readiness to enter the job market; (2) the   Labor’s (DOL) suggested training time;       measure differences in program
types and intensity of services               (3) DOL did not collect adequately           outcomes associated with higher and
 part/cipants received according to their     detailed information regarding JTPA          moderate skill occupational training.
job tjeadiness; (3) participant               participants and services; and (4) JTPA      Status: Action in process. Agency action
                                              and program guidance lack the                on this recommendation is included as
employment outcomes; and (4)
diffqrences among JTPA service delivery       necessary specificity to ensure that those   part of the administration’s bill to
                                              most in need of services are                 amend JTPA.
arena3@DA).
                                              appropriately served.
                                                                                            Recommendation: The Secretary of
Findings                                      Open Recommendations              to         Labor should monitor the effect of more
 GAO found that SDA: (1) generally            Congress                                     intensive training on the number of
 served more and less job-ready                                                            participants the program can serve and
 participants in about the same               Recommendation: Congress should              on program outcomes, including
 proportion as their incidence in the         consider amending JTPA to require            placement rates experienced by the less
 eligible population; (2) did not target      states and SDA to collect and report         job-ready receiving higher skill training.
services to any particular job readiness      data on who are being served, the kinds      Status: Action in process. Agency action
group; (3) tended to underserve the           and intensity of services they receive,      on this recommendation is included as
 eligible high school dropout population      and the outcomes they attain.                part of the administration’s bill to
 and offered little remedial education; (4)   Status: Action in process.                   amend JTPA.
 provided fewer and less intensive
services to less job-ready participants       Open Recommendations              to         Recommendation: The Secretary of
than they did to more job-ready               Agencies                                     Labor should provide guidance to SDA to
 participants; and (5) provided placement                                                  ensure that the length of on-the-job
assistance only or lower-skill or non-        Recommendation: The Secretary of             training contracts are commensurate
occupational training to over 50 percent      Labor should increase JTPA emphasis          with the skill level of the job involved.
of participants, who either did not get a     on higher and moderate skill                 Status: Action in process. Agency action
job or obtained a low-skill job in a low-     occupational training,                       on this recommendation is included as
or n&growth occupation. GAO also              Status: Action in process. Agency action     part of the administration’s bill to
found that: (1) participants receiving        on this recommendation is included as        amend JTPA.




                                              Page 50                                                                     GAO/OP-90-l
Emdrgency Energy Preparedness
M$re Assurance Is Needed That Strategic Petroleum
Reserve Oil Can Be Withdrawn as Designed
RCEjD-85-104,09/27/85
Bat ground                                   in pipelines and pumping equipment           long enough to adequately assess
                                             that may affect the ability to achieve the   equipment reliability.
Purs ant to a congressional request,
                                             designed drawdown rate and, although
GAO ondu.cted a review to determine
                                             marine growth and debris have reduced        Open Recommendations               to
whet er the Department of Energy
(DOE: will be able to withdraw Strategic     the amount of water available to force       Agencies
Petro eum Reserve (SPR) oil at the           oil out of storage, DOE has not
                                             determined the impact. DOE contractor        Recommendation: To ensure that the
desig c ed rate and sustain that rate over                                                SPR system has the capability to provide
time. :DOE has been implementing a           reports state that there is a high degree
                                             of corrosion in one major oil pipeline       a readily available supply of oil, the
threeiphase plan to develop a 760-million                                                 Secretary of Energy should direct the
barre! SPR at six sites in Louisiana and     and uncertainty about the quality of
                                                                                          Manager, Oak Ridge Operations Office,
Texas, of which 483.5 million barrels        some of the buried pipe’s ability to hold
                                                                                          to test the raw water systems to ensure
were in storage.                             up under the pressure required for
                                                                                          that drawdown is not limited by
                                             drawdown. DOE has been aware of              inadequate water supplies, after making
                                             maintenance, support, and repair             the planned modifications to the Bryan
Finflings                                    problems, but has been slow in initiating    Mound and West Hackberry raw water
GAO jfound that DOE is continuing to         corrective actions. DOE used a computer      lines and the intake channel at Bryan
develop additional storage capacity at       model to simulate SPR capabilities for       Mound.
three of the sites and is using a process    an extended drawdown; however,               Status: Action in process. Estimated
known as leaching to remove salt             because of the operational problems and      completion data: 12/89. DOE continues
deposits at another site. While SPR was      delays in corrective actions, GAO            to modify the raw water system at
designed so that oil could be withdrawn      believes that reliance on the computer,      Bryan Mound. A new 36-inch pipeline
at any time, DOE has established             which assumes ideal operating                will be completed in 1989 and tested the
specific withdrawal rates to be achieved     conditions, is questionable. Although        following quarter. The drawdown
at the completion of each phase.             tests showed that oil could be withdrawn     criteria at West Hackberry will be tested
Operational and technical problems exist     from the sites, the test duration was not    in 1989.


Emergency Energy Preparedness
Naval Petroleum Reserve-l: Data Inaccuracies Complicate
Prbduction and Ownership Issues
RCED-87-105BR,
_-_---...--_-.-- 03/24/87
Background                                   Reserve (NPR-1) meets the requirements       omissions on the Department of Energy’s
In response to a congtessional request,      of the Naval Petroleum Reserves              (DOE) final settlement of each owner’s
GAO examined: (11 whether the rate of        Production Act; and (2) the effects of       account.
oil production at the Naval Petroleum        production data inaccuracies and




                                             Page 51                                                                   GAO/OP-90-I
-t
                                               Energy




Fi xdings                                      DOE acknowledged its production data         Status: Action in process. Estimated
                                               problems and took action to correct its      completion date: 03/90. DOE continues
GA D found that production data for
                                               data entry and computer program errors       to work toward correcting data
NE R-l showed that: (1) the allocation of
                                               and allocation factors for commingled        inaccuracies and recordkeeping problems
oil, gas, and water produced from
                                               wells, it was not concerned about the        at NPR-1. Computer programming and
COTImingled wells was inaccurate; (2)
COTIputer-generated reports were               potential effects of these problems on       data entry errors are being located by
ins !curate because of programming and         divestiture of the government’s share of     the unit contractor. Also, an ongoing
datL entry errors; (3) DOE made                NPR-1 or the ability to produce at the       study may give DOE better data it needs
uricxplained changes to records; (4) since     maximum efficient rate.                      to properly manage the field.
proluction data were inaccurate,
praiuction rates may not have met              Open Recommendations               to        Recommendation: The Secretary of
sta utory requirements; and (5) there          Agencies                                     Energy should ensure that the
WI    an absence of effective internal                                                      government’s interests concerning the
con  ;rols that could have prevented or        Recommendation: The Secretary of             allocation of past production and
lim ted the impact of these problems. In       Energy should give priority attention to     remaining recoverable reserves are
adcition, the methods that DOE used to         correcting the production data               protected in any proposed sale of NPR-1.
determine the production of various            inaccuracies, establishing an allocation     Status: Action not yet initiated. The
P ,a and strata in commingled wells            system that more accurately reflects the     latest proposal to sell NPR-1 occurred in
con ,pounded production inaccuracies and       source of petroleum production in            February 1989. Proposed legislation to
adc KI to the uncertainties about oil          commingled wells, and developing a           authorize the sale is being reviewed by
pro luction from each pool and                 system to better define production           the Office of Management and Budget.
con putation of owners’ shares. Although       ownership.


Emergency Energy Preparedness

Nbval Petroleum Reserve No. 1: Examination                                                      of DOE’s
R&port on Divestiture
RCED-88451,
..-. _..I.._“..._._-
                     08/25/88
Baickground                                    estimated the reserve’s value from an        ownership of the reserve; and (2)
                                               industry perspective but did not provide     proposed sales date of September 30,
In response to a congressional request,
                                               adequate information on the                  1989, would not allow sufficient time to
GAO examined: (1) the Department of            government’s ownership interest in           complete a new study, negotiate an
EneFgy’s (DOE) report on the proposed          NPR-1; (3) covered such issues as defense    agreement with the joint owner, and
diveietiture of Naval Petroleum Reserve        requirements, foreign ownership, and         complete the sales process. GAO believes
1 (I\iPR-1); and (2) whether DOE could         state claims to certain NPR-1 lands, but     that DOE should study leasing NPR-1 as
lea& the reserve instead of selling it.        discounted the Department of Defense’s       a way to protect government interests.
                                               need for access to an oil reserve for
Findings                                       national security reasons; and (4) did not
,.A”      1..                                  consider leasing as an alternative to        Open Recommendations              to
tiAW round tnat    tr“le report did not        either selling or keeping NPR-1. GAO         Agencies
justify the sale of NPR-1 acsseta, since it:   also found that the report’s: (1)
(1) lacked a comprehensive study of all                                                     Recommendation: To provide better
                                               marketing plan would not sufficiently
 producing pools at NPR-1 to estimate                                                       information on whether an NPR-1 sale is
                                               promote competition or maximize sales
the reserve’s value, but relied instead on                                                  in the public interest and on whether a
                                               revenue because it provided an undue
 1987 long-range-production data; (2)          advantage to the firm that had joint         divestiture determination by Congress




                                               Page 52                                                                   GAO/OP-90-l
                                              Energy




could be formulated, the Secretary of         validation factors would vary from those    of maximizing competition. However,
 Energy should revise the June 30,1987,       of private purchases engaged in a           Congress has not authorized an NPR-1
 report: to Congress by assessing the value   competitive sales process. GAO              sale.
to the (government of retaining and           continues to believe that DOE
produ ing NPR-1, using revised                information on the sale of NPR-1 sale       Recommendation: In the event that
estim 4 tee for reserve data, production      has neither been in the public interest     Congress elects to authorize an NPR-1
sched les and operating costs from the        nor assisted in the legislative process.    sale, the Secretary of Energy should
compr hensive reserve study,                                                              ascertain the validity of small and
gover ment-generated oil and gas price        Recommendation: To provide better           independent refiners’ claims that they
foreca ts, and a discount rate based on       information on whether an NPR-1 sale is     would be excluded from bidding on a
the go ernment’s borrowing costs.             in the public interest and on whether a     portion of NPR-1, and, if the claims are
Statu : Action taken not fully                divestiture determination by Congress       valid, determine: (1) how that fact might
respo sive. DOE advised GAO that funds        could be formulated, the Secretary of       affect the competitive bid process
are n available to revise its report. It      Energy should prepare an analysis of the    envisioned; and (2) alternate means of
does n1 t believe that government             feasibility and the potential benefits to   ensuring supplies of light oil to these
borro+ing costs are a basis for               the government of leasing NPR-1 and         users.
establishing discount rates, when             determine what actions would be             Status: Action not yet initiated. DOE
bush&s-type investments are analyzed.         required to enter a leasing program.
                                                                                          stated that its multi-market divestiture
GAO dontinues to believe that DOE             Status: Action taken not fully
                                                                                          approach, coupled with antitrust
infornjation on an NPR-1 sale has             responsive. DOE does not believe that
                                                                                          provisions in legislation authorizing a
neitheir been in the public interest nor      leasing NPR-1 is a viable alternative,
                                                                                          sale, would ensure continued availability
assistid in the legislative process.          since it is not a common practice in
                                              divestitures of developed reserves in the   of NPR-1 oil in California’s open market.
Recommendation: To provide better             private sector. GAO continues to believe
inforqation on whether an NPR-1 sale is       that the benefits from leasing NPR-1        Recommendation: In the event that
in the, public interest and on whether a      must be known before Congress can           Congress elects to authorize an NPR-1
divestbture determination by Congress         consider legislation authorizing an NPR-    sale, the Secretary of Energy should
could be formulated, the Secretary of         1 sale.                                     examine the impact of the possibility
Energy should assess where the private                                                    that a single large company could buy
sector’s assumptions concerning the           Recommendation: In the event that           all or most of NPR-1, determine what
valuation factors would likely differ and     Congress elects to authorize an NPR-1       Department of Justice involvement in
then: II) develop sensitivity analyses to     sale, the Secretary of Energy should        the sale might do to the timely nature
show the magnitude of these differences       ensure that the maximum amount of           envisioned for completing the sale and, if
on the NPR-1 net present value; and (2)       data DOE has on NPR-1 is available to       necessary, assess the impact on the sale
identify the advantages of private versus     all potential bidders so as to minimize     of restricting any one bidder to a certain
goverflment ownership.                        any advantages that Chevron may have        maximum share of NPR-1.
Statup Action taken not fully                 over other bidders in the sales process.    Status: Action not yet initiated. DOE
responsive. DOE does not believe that         Status: Action not yet initiated. DOE       believes that an antitrust review
the rr)port convincingly demonstrated         agreed that potential purchasers should     provision by the Department of Justice,
that tihere are compelling reasons that       be provided with comprehensive              in any proposed legislation, would
the government’s assessment of                information about the reserves as a way     address this problem.




                                              Page 53                                                                  GAO/OP-90-l
                                            Energy




Energy Information,          Policy, and Regulation
Nticlear Nonproliferation: Department of Energy Needs
Tighter Controls Over Reprocessing Information
RC$D-87450, 08/1’7/8’7
Bactkground                                 proliferation or security risk obtained     nationals who visit or work at its
                                            copies of these documents, some of which    facilities each year.
In response to a congressional request,
                                            contained information on improved
GAG examined Department of Energy
                                            methods of purifying plutonium to           Open Recommendations                 to
(DO@ activities that may assist foreign     weapons-useable levels; (3) DOE has not
countries in the development of nuclear     applied for a Freedom of Information        Agencies
weapons material, focusing on DOE           Act (FOIA) exemption for applied            Recommendation: The Secretary of
controls over: (1) dissemination of         technology related to reprocessing, since
infor b ation related to the reprocessing                                               Energy should seek an exemption from
                                            its position is that it should honor such   FOIA for all reprocessing technology
of spjent nuclear fuel; (2) cooperative     requests; and (4) the Nuclear Non-
reser/rch activities it conducts with                                                   developed by DOE. Such an exemption
                                            Proliferation Act of 1978 (NNPA) does       can take the form of a revision to section
foreign countries; and (3) involvement of   not support the DOE method of
foreign nationals in sensitive nuclear                                                  148 of the Atomic Energy Act or a
                                            determining when to conduct sensitive
activsties and research.                                                                provision specifically exempting
                                            nuclear technology transfers with other
                                            countries. GAO also found that: (1)         reprocessing data from FOIA.
                                            foreign nationals comprised 30 percent      Status: Action in process. In January
Findings                                                                                1989, the DOE Office of Defense
                                            of masters program enrollments and 50
GAO found that: (1) in 1984 and 1985,       percent of doctoral program enrollments     Programs asked the Office of General
DOE produced 258 documents related to       in U.S. university nuclear engineering      Counsel to seek a FOIA exemption for
the reprocessing of spent nuclear fuel      programs in 1985; and (2) DOE does not      certain information, including
that were available to anyone who           have effective administrative control       reprocessing data. The General Counsel
wanted them; (2) countries posing a         over the 15,000 to 20,000 foreign           had not yet responded to this request.


Energy Information,          Policy, and Regulation
Nuclear Security: DOE Needs a More Accurate and
Efficient Security Clearance Program
RCED-88-28,12/29X7
Background                                  load: and (31 the accuracy of DOE           increased costs, and posed security
In response to a congressional request,     clearance data bases.                       concerns; (2) clearance staffs lacked
GAG reviewed the Department of                                                          resources to complete some clearance
Energy’s (DOE) personnel clearance and      Findings                                    steps; (3) DOE has not fully implemented
security program, including: (1) the                                                    steps to reduce clearance levels that are
timeliness of the pro&as for granting,      GAO found that: (1) because DOE             too high or to terminate unnecessary
suspending, and revoking clearances; (2)    personnel security clearance processes      clearances; and (4) contractors failed to
factors that affect the clearance work      were lengthy, they lowered productivity,    obtain pre-employment information




                                            Page 54                                                                   GAO/OP-90-l
                                                Energy




(PEI) on job applicants before hiring           and (4) DOE did not always validate          Secretary of Energy should ensure
them. GAO also found that DOE security          data-base information.                       contractor compliance with security
cleara ’ce files were inaccurate because:                                                    clearance PEI requirements.
(1) Do “e created new data bases without        Open Recommendations               to        Status: Action in process. DOE-wide
            the data; (2) field offices often                                                compliance evaluations are underway.
        o enter new data; (3) contractors’,
                                                Agencies
               and headquarters’ data           Recommendation: To improve the
        id not communicate effectively;         effectiveness of the PEI process, the


Energy Information,             Policy, and Regulation

Energy Regulation: Opportunities for Strengthening
Hy$lropower Cumulative Impact Assessments
RCEb-88-82,03/10/88
Bacl@round                                      in assessments through several public        Open Recommendations               to
In response to a congressional request,         meetings and workshops, whereas EIS          Agencies
GAO examined the Federal Energy                 required only one public meeting; (2)
                                                although FERC was not legally required       Recommendation: The Chairman,
Regulatory Commission’s (FERC)                                                               FERC, should formally announce FERC
responsibilities under the Federal Power        to formally notify the public of its
                                                decision to use EIS as it did before using   plans for using CIAP, EIS, or some other
Act for assessing the cumulative impact
                                                CIAP, its failure to do so could appear to   procedure to carry out future
of hydroelectric power projects on
                                                be a withdrawal from its earlier efforts     assessments and provide interested
natural resources, specifically: (1) FERC
                                                to encourage public involvement in the       parties with an opportunity to comment
plans for using the River Basin
Environmental Impact Statement                  assessments; (3) interested parties felt     on such plans.
Procedure (EIS) as an alternative to the        that FERC had inadequate data on the         Status: Action in process. Estimated
Cluster Impact Assessment Procedure             extent to which other land and water         completion date: 12/90. FERC stated
(CIAP); and (2) deficiencies in FERC            uses could adversely affect resources to     that it would decide on the cumulative
impact assessment procedures and                carry out a reasoned evaluation; and (4)     impact procedures to be used in major
whether the development of                      although Congress amended the act to         river basins. GAO plans to review such
comprehensive plans can address these           require FERC to consider the extent to       decisions to see if they clearly set forth
deficiencies.                                   which hydroelectric projects were            the procedures to be used in each basin.
                                                consistent with federal and state            As of September 1989, FERC informed
                                                comprehensive plans, FERC had no             GAO that no new decisions had been
Findings                                        further plans for implementing the           made regarding the use of cumulative
GAO found that: (1) FERC designed               amendment other than issuing                 impact procedures in major river basins.
CIAP to ensure early and extensive state        requirements for comprehensive
and federal resource agency involvement         development.




                                                Page 55                                                                    GAO/OP-00-l
                                              Energy




Ebergy Information,            Policy, and Regulation
Nuclear Health and Safety: Oversight at DOE’s Nuclear
Facilities Can Be Strengthened
RICED-8843’7,07/08/88
Bgckground                                    functions of the office were not             establish meaningful safety standards
Ins response to a congressional request,      legislatively mandated, DOE could            and implementation policies to guide
GAO examined the Department of                relegate these issues to a level that        continued operation of existing facilities
Energy’s (DOE) environment, safety, and       would not provide top management             and to use as baseline safety criteria for
health (ES&H) activities, including: (1)      attention; (3) although DOE created an       developing its future strategy for the
the possibility that DOE could reduce         advisory committee on nuclear facility       defense complex. This revision should
the visibility and management it              safety, it did not meet GAO criteria for     include a formal process to: (1) clearly
cu rently gives to safety and health          effective and independent oversight; and     identify the commercial standards,
   1                                          (4) since DOE did not determine what         guides, and codes that should be applied
issues; (2) legislatively mandated
in#ependent oversight of DOE nuclear          commercial safety standards were             to DOE nuclear facilities; and (2) justify
facilities; and (3) unclear safety            applicable to its nuclear facilities, it     when a standard is not met.
standards.                                    could not determine if its facilities were   Status: Action in process. Estimated
                                              safe compared to commercial nuclear          completion date: 12/89. DOE stated that
                                              facilities.                                  24 separate DOE Operating Orders are
Findings                                                                                   under revision in response to this
GAO found that: (1) DOE created an            Open Recommendations               to        recommendation. Target completion date
Assistant Secretary for ES&H in 1985 to       Agencies                                     is December 1989, but some slippage is
oversee the operations and contractors                                                     expected.
responsible for its nuclear defense           Recommendation: The Secretary of
faoilities; (2) since the health and safety   Energy should revise DOE orders to


Energy Information,            Policy, and Regulation

Nuclear Health and Safety: DOE Needs to Take Further
Actions to Ensure Safe Transportation of Radioactive
Materials
RCED-88-195,09/27/88
Background                                    Findings                                     criticality, and acceptance testing and
Pursuant to a congressional request,                                                       maintenance conditions; (2) these
                                              GAO found that: (1) the Nuclear
GAO reviewed the Department of                                                             concerns prompted DOE to revamp
                                              Regulatory Commission (NRC) identified
Energy’s (DOE) regulation of its program                                                   container certification procedures,
                                              safety-related concerns with DOE-
                                                                                           consolidate certification responsibility at
for transporting high-level radioactive       certified containers for transporting
materials.                                                                                 national headquarters, and remove
                                              radioactive material, involving structure,
                                                                                           many of the containers from the
                                              containment, shielding, thermal,




                                              Page 56                                                                    GAO/OP-90-l
                                            Energy




.-!

transpbrt program; (3) a DOE                Open Recommendations                to        Recommendation: The Secretary of
contractor’s review identified inadequate   Agencies                                      Energy should: (I) promptly conduct an
documentation that the containers                                                         independent review of all available
                                            Recommendation: In accordance with
complibd with safety requirements, the                                                    documentation to ensure that package
                                            the provisions of DOE Order 5480.3, the
use of nonconservative analyses, and                                                      designs approved for transporting
                                            Secretary of Energy should promptly
calculation errors; (4) DOE continued to                                                  nuclear explosives, nuclear components,
                                            develop written guidance for addressing
use the containers up to 3 months after     and resolving safety-related concerns         and special assemblies meet all
the contractor identified these problems;   raised about the packages used to ship        applicable safety regulations; and (2)
(5) DO used three containers for            nonweapons, high-level radioactive            consolidate certification responsibilities
severa years without ever obtaining         materials. This guidance should include       for these packages with the centralized
certifi ation; (6) DOE used four            provisions for approving the continued        package certification program at DOE
contai ers with only 60-day approvals       use of these packages by an organization      headquarters.
for se ral years; and (7) DOE regarded      that does not manage their use.               Status: Action not yet initiated.
inade i ate demonstration and               Status: Action not yet initiated.             According to the DOE audit liaison, the
certification as documentation problems     According to the DOE audit liaison, the       agency’s response letter to the
not af+cting container safety.              agency’s response letter to the               recommendation was prepared for the
                                            recommendation was prepared for the           Secretary’s signature in November 1988;
                                            Secretary’s signature in November 1988;       however, in the change of
                                            however, in the change of                     administrations, it has not yet been
                                            administrations, it has not yet been          signed.
                                            signed.


Energy Information,          Policy, and Regulation

Federal Electric Power: Controversy Relating to
Construction of Transmission Lines
RCED-89-43,12/06/88
Background                                  improving the reliability of the federal      estimated cost or resulting line capacity,
GAO reviewed the Western Area Power         transmission system; (2) the projects         it did not adequately document the
Administration’s (WAPA) justifications      usually increased WAPA transmission           extent of or reasons for its participation.
for conducting a joint transmission line    capacity; (3) WAPA sold its excess
construction project with other utility     transmission capacity to other utilities      Open Recommendations                to
                                            in the past and expected to do so in the
companies, particularly its proposed
                                            future to increase its revenue; (4) private
                                                                                          Congress
Craig(Bonanza line project, to
determine: (11 the extent of WAPA           utility companies expressed concern over      Recommendation: The House
participation in the project’s costs and    the Craig/Bonanza and Tracy/Livermore         Subcommittee on Water and Power
the resulting line capacity; and (2)        transmission line projects because of the     Resources should consider examining: (1)
whethkr WAPA construction activities        potential for WAPA to deliver excess          WAPA transmission construction
comply with its legislative authority.      power to their markets through                activities to improve system reliability;
                                            wheeling arrangements with other              and (2) how WAPA may use
                                            suppliers, which could result in a loss of    transmission capacity beyond that
Findings               y                    their customers; and (5) although WAPA        needed for its power marketing
GAO found that: (1) WAPA justified its      indicated that its participation in the       activities.
construction projects on the basis of       Craig/Bonanza project was based on            Status: Action not yet initiated.




                                            Page 57                                                                      GAO/O&‘-90-l
-
                                            Energy




@en Recommendations               to        implement procedures to direct its           Status: Action in process. Estimated
Agencies                                    involvement in joint transmission            completion date: 03/90. WAPA is
                                            construction projects, including a           developing a formal policy and
Rejommendation:    The Secretary of         requirement for documenting the basis        implementing procedures to comply with
Energy should direct the Administrator,     for and the extent of its participation in   the recommended action.
WAPA, to establish a formal policy and      individual projects.


Erjergy Information,         Policy, and Regulation

Energy Management: DOE Should Improve Its Controls
Oiver Work for Other Federal Agencies
RCjED-89-21,
 .-,L          02/09/89
   .._ - .._-~~-.---_____.~
BFkground                                   operations office organizationally moved     information to be submitted to DOE on
                                            one contractor group from DOE                all the acceptance criteria in the DOE
In response to a congressional request,
                                            oversight after DOE raised concerns          WFO order; (2) the reviews that must be
GAb reviewed the Department of
Energy’s (DOE) controls over the            about the appropriateness of the group’s     performed by DOE personnel before a
products and services it provided to non-   non-DOE work; and (‘7) DOE did not           WFO project is approved; and (3) DOE
                                            perform a formal evaluation to               monitoring of WFO projects in process to
DOE entities, primarily other federal
                                            determine whether the private sector         ensure that the contractor is adequately
agencies, to determine whether DOE: (1)
had adequate controls over the work it      could conveniently or cheaply perform        performing the work and that the
performed; (2) properly implemented         the group’s work.                            commitment between DOE and the
those controls; and (3) controls                                                         sponsor is being met.
conformed to pertinent laws and             Open Recommendations               to        Status: Action not yet initiated. The
regulations.                                Agencies                                     Assistant Secretary will work with the
                                                                                         field offices and program offices to
                                            Recommendation: The Secretary of             establish the minimum standards, which
Findings                                    Energy should direct the Assistant           will be incorporated into DOE directives.
GAO found that: (1) although existing       Secretary for Management and
DOE policies concerning non-DOE work        Administration to review DOE field           Recommendation: The Secretary of
generally conformed with the legislative    offices’ work for others (WFO) orders to     Energy should direct the heads of the
criteria, inconsistent controls at the      ensure that they: (1) incorporate all the    DOE field offices to ensure that the
field-office level did not effectively      requirements of the DOE-wide policies;       revised financial policy order is
ensure control; (2) three of the four       and (2) do not exclude entities that are     implemented consistently to ensure that
operations offices responsible for the      not excluded from the DOE-wide order.
                                                                                         each WFO agreement contain the
work performed for non-DOE entities         Status: Action not yet initiated. The
                                                                                         required standard clauses and sponsor
inconsistently implemented DOE              Assistant Secretary for Management and
                                                                                         certifications.
controls; (3) implementation varied         Administration will review field offices’
                                                                                         Status: Action not yet initiated. The
between the three offices because DOE       orders on work for others to ensure that
                                            they conform to DOE policy.                  Assistant Secretary for Management and
had no established oversight standards;
                                                                                         Administration will request written
(4) DOE did not track its own indirect
oversight costs or recover them from        Recommendation: The Secretary of             assurance from each DOE field element
other federal agencies; (5) DOE did not     Energy should direct the Assistant           that the requirements of the revised
specifically request monitoring staff       Secretary for Management and                 financial policy order have been
allocations from the Office of              Administration to establish minimum          implemented. Also, compliance reviews
Management and Budget; (6) an               standards for: (1) the amount of             by the Controller’s Office will ensure




                                            Page 58                                                                   GAO/OP-90-l
                                            Energy




-.-_
that field offices properly implement the   for its personnel costs associated with       Recommendation: The Secretary of
revised /order.                             WFO oversight.                                Energy should direct the Assistant
                                            Status: Action not yet initiated. DOE         Secretary for Management and
Recomtiendation:      The Secretary of      Order 21IO.lA will be amended to clarify      Administration to separately identify
Energy should direct the heads of the       DOE policy to require recovery of actual      WFO oversight staffing needs in the
DOE fi Id offices to ensure that their      costs from WFO projects.                      next DOE request for personnel to the
responsi ble contracting officers make                                                    Office of Management and Budget
specific ~written determinations and        Recommendation: The Secretary of              (OMB).
certifications for WFO projects as          Energy should direct appropriate DOE          Status: Action not yet initiated. WFO

       4
require by the DOE WFO order.
Status: Action not yet initiated. The
Assista t Secretary for Management and
                                            officials to establish a system to identify
                                            DOE personnel costs associated with
                                            WFO so that these costs can be
                                                                                          oversight staffing will be included in the
                                                                                          next DOE request for staffing resources
                                                                                          to OMB.
Admini tration will emphasize, in a         recovered from other federal agencies.
formal ommunication to the managers         Status: Action not yet initiated. DOE         Recommendation: The Secretary of
of the oI erations offices, the             will develop and implement an
                                                                                          Energy should formally determine
requirement that contracting officers       appropriate system to identify DOE
                                                                                          whether the work performed by Data
certify hat specific determinations         personnel costs associated with WFO.
regardi l g proposed WFO projects have                                                    Systems could be provided as
been made.                                  Recommendation: The Secretary of              conveniently or cheaply by a commercial
                                            Energy should direct appropriate DOE          enterprise. If so, the Secretary should
Recomhendation:      The Secretary of       officials to determine the amount of          terminate the Data Systems work. If the
Energy ,should direct the heads of the      DOE staff resources needed to effectively     work cannot be provided by a
DOE field offices to ensure that the        review, approve, and monitor WFO in           commercial enterprise, the Secretary
offices incorporate the recommended         the context of the minimum standards          should immediately assign it to a DOE
minimum standards.                          recommended at each field office that         headquarters group for programmatic
Status: Action not yet initiated. The       performs WFO, and take the necessary          oversight.
Assistant Secretary for Management and      steps to allocate staff accordingly.          Status: Action not yet initiated. The
Administration will include the             Status: Action not yet initiated. As part     Assistant Secretary for Management and
standards, after they are developed, in     of a staffing review for the fiscal year      Administration will coordinate a review
the appropriate directives.                 1991 budget, the Assistant Secretary for      of the work performed by Data Systems.
                                            Management and Administration will            If it is determined that any work would
Recommendation: The Secretary of            direct DOE elements to identify the           be more appropriately performed by the
Energy should direct appropriate DOE        needed staff resources. Following the         private sector, steps will be taken to
officials to revise DOE policy to require   budget decisions, DOE officials will be       terminate the work.
other federal agencies to reimburse DOE     directed to allocate staff accordingly.


Energy Information,          Policy, and Regulation

En&gy Management: States’ Use of Oil Overcharge Funds
for Legal Expenses
RCED-89-60,
-.._-_-..-^
            03/21/89
Background                                  connection with the Exxon, Stripper           Findings
Pursuant to a congressi6nal request,        Well, and Diamond Rock oil overcharge
                                                                                          GAO found that: (1) 49 states paid $13.1
GAO provided information on states’         cases.
                                                                                          million of the $15.4 million they
payments of legal fees they incurred in



                                            Page 59                                                                    GAO/OPdO-1
                                             Energy




incurred for such legal expenses as          other cases; (5) states collectively used    (8) states’ receipts and expenditures of
retaining their own law firms,               9.6 percent of Diamond Shamrock funds        future crude oil overcharge funds will be
co@ultants, and attorneys general; (2) 5     to pay for legal expenses, although 12       governed by the provisions of the
stcltes incurred legal expenses exceeding    states used at least 46 percent of those     Stripper Well settlement.
$1 ‘million, while 18 states incurred        funds for legal expenses; (6) the
expenses of less than $50,000; (3) states    Department of Energy (DOE) has issued
will use Stripper Well and Diamond           inconsistent guidance on the appropriate
                                                                                          Open Recommendations               to
ShImrock oil overcharge funds to pay         expenditure of oil overcharge funds and      Agencies
fott $11.3 million and use state funds for   has not sought clarification from the        Recommendation: To resolve past
th& remaining expenses; (4) the Exxon        courts on whether states could use funds     inconsistencies, the Secretary of Energy
dehision prohibited states from using the    from the other cases to pay the legal fees   should direct the Under Secretary to
ovhrcharge funds for legal expenses,         they incurred in the Exxon case; (‘7) DOE    provide clear policy guidance to the
while the Stripper Well settlement           required states to report annual             states on the use of Stripper Well and
alllowed states to use up to 5 percent of    expenditures of Stripper Well and            Diamond Shamrock funds for Exxon
th$ funds, and the Diamond Shamrock          Diamond Shamrock funds but did not           legal expenses.
seqtlement allowed states to use all of      require states to identify the cases for
                                                                                          Status: Action not yet initiated.
tht funds, for legal expenses incurred in    which they incurred legal expenses; and

  ,
Ehergy Information,           Policy, and Regulation

Electricity Supply: What Can Be Done to Revive the
Nuclear Option?
RCED-89-67,03/23/89
background                                   health, and safety problems                  nuclear power; and (7) NRC and DOE
                                             strengthened public opposition to            attempts to reform the licensing process,
Pqrsuant to a congressional request,
GAO studied the future of nuclear            nuclear power; (3) utility representatives   standardize plant designs, improve
power, focusing on: (1) problems             believed that power plants generally had     reactors and testing models, and select a
preventing new initiatives in commercial     strong safety records; (4) utility           repository site lacked the necessary
nuclear power; (2) actions which could       representatives believed that they faced     support and funding.
revive nuclear power; and (3) the status     increased financial risk in building new
of government and industry efforts to        power plants due to the Nuclear              Open Recommendations               to
revitalize the use of nuclear power.         Regulatory Commission’s (NRC) two-step
                                             licensing process, states disallowing the    Congress
                                             recovery of construction costs, and the      Recommendation: Congress should
Findings                                     Department of Energy’s (DOE) slow            review the nuclear option within the
GAO found that: (1) public and utility       progress toward building a nuclear waste     broad context of the nation’s energy
concerns about the feasibility of using      repository; (5) utilities’ increasing        security concerns and the changing
nuclear power have risen due to oil          reliance on such alternatives as             nature of the electric utility industry. As
embargoes, recession, inflation,             imported electricity and oil- and gas-       it reviews the nation’s nuclear energy
decreased electricity demand, industrial     powered generators raised serious            policy, Congress should consider
accidents, and poor utility management;      energy security concerns; (6) utility        enacting legislation to reform the
(2) although public opinion largely          representatives believed that continued      licensing process into a more predictable
supported nuclear bower’s critical role in   safe, efficient plant operations and a       procedure and promoting utilities’ use of
the nation’s energy future, worst-case       strong federal nuclear energy policy         NRC-preapproved standardized designs.
industrial accidents and environmental,      would increase public acceptance of          It could also reevaluate the goals and



                                             Page 60                                                                    GAO/OP-90-I
                                             Energy




.--
objectives of existing federal nuclear       Status: Action not yet initiated.
research and development efforts.


Ener$y Information,           Policy, and Regulation

Nu lear Regulation: License Renewal Questions for
Nu hlear Plants Need to Be Resolved
RCEQ-89-90,04/03/89
    ..-. -.. ..--..__.
                    -.-.-____-                                                                                                   -
Back round                                   regulatory problems, it has made little     Open Recommendations               to
    le;                                      progress in reaching definitive             Agencies
Pursu nt to a congressional request,
GAO r“i,viewed the effects of aging on       regulatory criteria; (3) NRC research on
                                                                                         Recommendation: The Chairman, NRC,
nuclear power plants, focusing on: (1) the   the effects of aging on nuclear plants
                                                                                         should: (1) accelerate the schedule for
Nuclear Regulatory Commission’s (NRC)        has not identified any generic age-         developing license renewal regulations
program to develop a license renewal         related conditions that would require       and stipulate the basis that will be used
policy and accompanying regulations;         nuclear plants to shut down, but has        to evaluate renewal applications and the
and (21 efforts by the Department of         identified some conditions that might       types of records, engineering analyses,
Energy (DOE) and the electric utility        require repair, replacement, or special     and other historical information needed
industry to extend the lives of nuclear      treatment; (4) NRC identified some age-     to support a request for continued
plants.                                      related degradation that could affect the   operations; and (2) resolve the
                                             continued operation of 12 plants; and (5)   outstanding technical, environmental,
                                             DOE and the utility industry have           and procedural uncertainties.
Findings                                     conducted life extension studies at four    Status: Action in process. The
GAO found that: (1) many utilities will      plants and have not identified any age-     Commission agreed that NRC should
have to decide whether to renew licenses     related degradation or technical            accelerate its efforts to resolve license
for older nuclear plants or construct new    obstacles associated with plant hardware    renewal issues and requested the staff to
plants; (2) although NRC has developed 3     to preclude continued operations.           complete a final rule by April 1992. At
possible license renewal policy options                                                  the time GAO completed audit work,
and identified 15 unresolved technical,                                                  NRC expected to issue a final rule by
environmental, and procedural                                                            1991.


Energy Information,           Policy, and Regulation
Nticlear Regulation: NRC’s Restart Actions Appear
Reasonable-But     Criteria Needed
RCED-89-95,05/04/89
 _._.. -. -.-._-..--.---_                                                                                                        -
Background                                   uses to allow nuclear powerplants to        Pennsylvania, plant’s operating history;
In response to a congr&ssional request,      restart operations after a shutdown to      (2) NRC rationale for allowing the plant
                                             correct safety or management problems,      to continue operations despite its history
GAO assessed the criteria that the
                                             focusing on: (1) the Peach Bottom,          of problems; (3) the extent to which NRC
Nuclear Regulatory Commission (NRC)




                                             Page 61                                                                  GAO/OP40-1
                                             Energy




wpuld consider outstanding maintenance       5 other plants; (3) between 1970 and                agreed that NRC could restart the plant
items before allowing the plant to           198’7, NRC issued eight notices of                  subject to completion of certain
restart; and (4) the manner in which         violation against the Peach Bottom plant            equipment modifications and procedural
NFC add ressed public comments.              and the utility paid civil penalties                changes.
                                             totalling $485,000; (4) at the time of
F~indings                                    shutdown, NRC ordered the utility to                Open Recommendations               to
                                             reduce its backlog of maintenance
GAO found that: (1) although NRC did
                                             repairs, and the utility subsequently
                                                                                                 Agencies
nc’t have criteria for setting out the
a dtions that either it or the utility       found that it had a larger backlog, but it          Recommendation: To ensure that each
should take after a shutdown, NRC            had reduced the backlog signficantly by             plant’s readiness to restart is assessed,
a&ions included approval of the utility’s    March 1989; (5) NRC and the utility held            the Chairman, NRC, should develop
c rective action plan, several               nine meetings to allow public comment               criteria that include, at a minimum a
inT pections, independent reviews, public    on restart activities; (6) as a result of the       review and approval of the utility’s
mbetings, and restart approval; (2) the      shutdown, NRC permitted inspections of              corrective action plan, inspections to
PCach Bottom plant was in a lower            commercial powerplants without                      ensure the actions are taken,
r 4 ge of licensee performance               advance notice to the utility and                   independent review of NRC actions, and
eyaluations than 16 other plants             published a policy statement concerning             public participation.
reviewed, had more marginally                the conduct of nuclear powerplant                   Status: Action not yet initiated. NRC
sa/tisfactory ratings than 9 other plants,   operations, including employees’                    expects to develop restart criteria during
arid had more inspection violations than     behavior; and (7) an independent review             fiscal year (FYI 1990.


Epergy Information,           Policy, and Regulation

Energy Management: Appeals Procedures for State and
Local Assistance Programs
RCED-89-127,05/10/89                                                                         -
Background                                   with broader applicability than just                possible bias, since DOE-appointed
Pursuant to a congressional request,         energy conservation grant programs; (4)             personnel heard appeals; (8) DOE
GAO examined the Department of               no state had used the administrative                allowed OHA to continue to hear grant
Energy’s (DOE) administrative review         review procedures applicable to the                 program appeals until it completed its
procedures for its state and local energy    energy conservation grant programs,                 study of OHA authority; and (9) DOE
conservation grant programs.                 since most states had not experienced               suspended the study, which lacked
                                             problems that required formal                       written objectives and a timetable for
                                             resolution; (5) two states appealed                 completion. in March 1989.
Findings                                     support office decisions to the DOE
GAO found that: (1) DOE published            Office of Hearings and Appeals (OHA)                Open Recommendations               to
regulations for administrative review        based on guidance from program officials
                                             about appropriate appeal routes; (6)
                                                                                                 Agencies
procedures for its energy conservation,
energy extension, and weatherization         many state and DOE officials were not               Recommendation: To resolve
a&tance programs; (2) the procedures         aware of or familiar with the                       uncertainties related to the procedures
included hearings before DOE-appointed       administrative review procedures; (7)               states may use to appeal support office
panels or operations office managers and     state officials characterized the                   decisions, the Secretary of Energy should
appeal to the Secretary; (3) federal         procedures as inadequate, citing                    clarify the current types of decisions
regulations provided other appeal routes     confusing and misleading wording and                appealable under the energy




                                             Page 62                                                                           GAO/OP-90-l
                                              Energy




conservation, energy extension, and           states may use to appeal support office      states may use to appeal support office
weatherlization administrative review         decisions, the Secretary of Energy should    decisions, the Secretary of Energy should
procedures and revise the procedures to       formalize the objectives of the Under        ensure that officials in the Office of
eliminate the perception of bias in           Secretary and General Counsel joint          State and Local Assistance Programs,
review panel selection for the energy         study on appeals procedures and              support offices, and state program offices
conservation and energy extension             establish a schedule for its timely          have a clear understanding of the
progra a.                                     completion.                                  administrative review procedures, when
Status: “i IAction not yet initiated.         Status: Action not yet initiated.            to use these procedures, and when to use
                                                                                           the other routes available to states to
Recom endation: To resolve                    Recommendation: To resolve                   appeal support office decisions.
uncerta T nties related to the procedures     uncertainties related to the procedures      Status: Action not yet initiated.


           Information,        Policy, and Regulation

Nuclear Regulation: NRC’s Decommissioning                                                     Procedures
and1 Criteria Need to Be Strengthened
RCEb89-119, 05/26/89
Background                                    licensees did not initially decontaminate    determine whether to terminate a
In response to a congressional request,       their facilities to meet NRC guidelines;     license; and (2) a professional group that
GAO assessed Nuclear Regulatory               (5) although NRC required licensees to       also developed residual radiation
Commission (NRC) actions to ensure that       decontaminate facilities below its           standards proposed some levels 3 to 50
operators of fuel cycle facilities provide    guidelines, 11 of 19 decommissioning         times higher and some levels 3 to 5
                                              plans would not meet that requirement;       times lower than NRC guidelines.
for eventual decommissioning, including:
(1) the actions that licensees take to        (6) although NRC required licensees to
comply with NRC residual radiation            retain records on the radioactive wastes     Open Recommendations                to
                                              they buried, five of the eight cases
guidelines; and (2) NRC assessments of
                                              reviewed involved buried waste on-site,
                                                                                           Agencies
facilities prior to terminating licenses. -
                                              but four of the licensees did not keep or    Recommendation: To enhance NRC
                                              complete disposal data; (7) NRC did not      regulatory oversight of nuclear facilities’
Findings                                      require licensees to monitor                 decommissioning efforts, the Chairman,
GAO found that: (1) NRC fully or              groundwater or soil contamination from       NRC, should require licensees to
partially released two sites for              buried waste, but five licensees found       specifically list in one document all land,
unrestricted use where radioactive            groundwater contaminated with                buildings, and equipment involved with
contamination was higher than its             radioactive substances at levels higher      their licensed operations.
guidelines allowed; (2) it could not          than drinking water standards allowed;       Status: Action not yet initiated. At
determine whether similar situations          and (8) although NRC believes that it        August 3,1989, hearings, the Chairman,
occurred at six other sites because           can require former licensees to conduct      NRC, indicated that the recommended
licensee cleanup information was              additional cleanup activities, it does not   action would be taken.
sometimes incomplete, ambiguous, or           have regulations to address the actions it
nonexistent, and NRC did not always           can take. GAO also found that: (11           Recommendation: To enhance NRC
have information about licensee               because the Environmental Protection         regulatory oversight of nuclear facilities’
decontamination activities; (31 NRC           Agency was responsible for developing        decommissioning efforts, the Chairman,
regulations did not spectfy how long          residual radiation standards, but did not    NRC, should ensure that the licensees
either it or licensees should retain          expect to finalize them until 1992, NRC      decontaminate their facilities in
decontamination information; (4)              used guidelines it developed to              accordance with NRC guidelines before



                                              Page 63                                                                    CAO/OP30-1
                                              Energy




NRC fully or partially releases a site for    NRC, should ensure that licensees             NRC, indicated that the recommended
unrestricted use.                             appropriately monitor buried waste sites      action would be taken.
Status: Action not yet initiated. At          to determine the extent of
August 3, 1989, hearings, the Chairman,       environmental contamination.                  Recommendation: Since NRC believes
NRC, indicated that the recommended           Status: Action not yet initiated. At          that it has authority to require
action would be taken.                        August 3,1989, hearings, the Chairman,        additional cleanup activities after
                                              NRC, indicated that the recommended           terminating a license and to ensure that
Recjommendation: To enhance NRC               action would be taken.                        it has a mechanism to enforce orders
regulatory oversight of nuclear facilities’                                                 requiring such activities, the Chairman,
decommissioning efforts, the Chairman,        Recommendation: To enhance NRC                NRC, should act expeditiously to issue
NRU, should determine if NRC residual         regulatory oversight of nuclear facilities’   regulations governing such actions. In
radiation criteria should be revised on       decommissioning efforts, the Chairman,
                                                                                            the interim, the Chairman should also
theibasis of the standards proposed by        NRC, should ensure that NRC obtains
                                                                                            ensure that all contamination at a site
the!Health Physics Society Standards          and keeps for more than 10 years
Committee.                                    decommissioning information such as           has been cleaned up so that it is below
Stakus: Action not yet initiated. At          licensee radiological surveys and             the levels that NRC guidelines allow
August 3, 1989, hearings, the Chairman,       certification of materials disposed, NRC      before releasing all or part of a site for
NRC, indicated that the recommended           or other organizations’ confirmatory          unrestricted use.
action would be taken.                        surveys, and specifics on land, buildings,    Status: Action not yet initiated. At
                                              and equipment that were contaminated          August 3, 1989, hearings, the Chairman,
Retjommendation: To enhance NRC               over the life of the license.                 NRC, indicated that the recommended
regulatory oversight of nuclear facilities’   Status: Action not yet initiated. At          action would be taken.
decommissioning efforts, the Chairman,        August 3, 1989, hearings, the Chairman,


Energy Information,            Policy, and Regulation
Nuclear Nonproliferation: Better Controls Needed Over
Weapons-Related Information and Technology
RCED-89-116,06/19/89
Background                                    1987, the laboratories recorded over          nuclear information under a 1981
Pursuant to a congressional request,          2,000 data requests, honoring about           legislative mandate; (7) DOE was exempt
GAO examined the Department of                1,700; (4) DOE did not require                from most controls that effectively
Energy’s (DOE) controls over                  laboratories to track the number of           regulated the private sector’s export of
unclassified nuclear weapons                  requests or the information provided and      nuclear-related technology and
information and technology developed by       had no systematic method to determine         information; (8) DOE questioned its
its three weapons laboratories.               the information that proliferation-risk       authority to restrict dissemination of
                                              countries obtained from the laboratories;     unclassified information without specific
                                              (5) one of the laboratories developed a       legislation exempting export-controlled
Findings                                      system to track direct requests, but only     information from Freedom of
GAO found that: (1) of the 39,000 reports     one of the other two laboratories             Information Act requests; (9)
DOE produced in 1986 and 1987,60              provided such information; (6) the            proliferation-risk countries routinely
percent were available to the public; (2)     laboratories lacked DOE guidance for          obtained U.S. hardware that had both
68 percent of recipi&ts of 30 randomly        identifying whether specific                  nuclear weapons and commercial
selected reports were from overseas; (3)      technological or programmatic material        applications; and (10) foreign countries
between October 1985 and December             met criteria as unclassified controlled       circumvented U.S export controls over




                                              Page 64                                                                     GAO/OPdO-1
                                              Energy




materials, including sensitive computer       Status: Action not yet initiated.            sensitive nuclear-related information
codes, by obtaining them through other                                                     and better protect national security, the
foreign countries which did not               Recommendation: To help minimize the         Secretary of Energy should require the
adequately control export of U.S.             risks associated with the free               laboratories to send, and refer requests
material.                                     dissemination of unclassified but            for, all computer codes to the National
                                              sensitive nuclear-related information        Energy Software Center.
Open lRecommendations              to         and better protect national security, the    Status: Action not yet initiated.
                                              Secretary of Energy should complete and
Agen ies                                      issue guidance to the weapons                Recommendation: To help minimize the
Recom endation: To help minimize the          laboratories for use in identifying and      risks associated with the free
risks as1 ociated with the free               limiting the dissemination of                dissemination of unclassified but
dissemi ation of unclassified but             unclassified controlled nuclear              sensitive nuclear-related information
sensitiv nuclear-related information          information in accordance with the 1981      and better protect national security, the
and bet r protect national security, the      congressional mandate.                       Secretary of Energy should seek a
Secreta y of Energy should require the        Status: Action not yet initiated.            legislative exemption from the Freedom
labora 1 ries to track foreign requests for                                                of Information Act for unclassified data
information and institute an effective        Recommendation: To help minimize the         categorized by DOE as export-controlled
oversigbt measure to ensure that they do      risks associated with the free               information.
so.      ’                                    dissemination of unclassified but            Status: Action not yet initiated.


Energy Information,           Policy, and Regulation

Energy Management: DOE Has Not Shown Systems
Corkracting to Be in Government’s Best Interest
RCEIj-89418, 06/20/89
Background                                    and benefits of systems contracting,         government by having the operating
                                              verified Sandia’s claimed savings and        contractors compare and evaluate the
Pursuant to a congressional request,
                                              other benefits, or compared contractor       costs and benefits of systems contracting
GAO reviewed the Department of
Energy’s (DOE) operating contractors’         procurement costs with the cost of           with purchases from GSA before
                                              procuring supplies from the General          awarding such contracts.
use of systems contracting to determine
whether DOE ensures that systems              Services Administration (GSA); and (31       Status: Action not yet initiated.
contracting is in the government’s best       DOE has not required Sandia to
interest.                                     establish adequate internal controls over    Recommendation: To help ensure that
                                              purchases under a systems contract.          the operating contractors’ use of systems
                                                                                           contracting is in the best interest of the
Findings                                                                                   federal government, the Secretary of
                                              Open Recommendations                to
GAO found that: (1) although DOE has                                                       Energy should require DOE operating
                                              Agencies                                     contractors to provide detailed
cited the Sandia National Laboratory’s
positive experience with systems              Recommendation: To help ensure that          documentation supporting their
contracting as a basis for encouraging its    the operating contractors’ use of systems    evaluations and independently review
other operating contractors to consider       contracting is in the best interest of the   the contractors’ evaluations.
systems contracting, it has not shown         federal government, the Secretary of         Status: Action not yet initir.ted.
that systems contracting is in the            Energy should enforce its requirement
government’s best interest; (2) DOE has       that GSA be used when it is                  Recommendation: The Secretary of
not independently evaluated the costs         economically advantageous to the             Energy should require Sandia to



                                              Page 65                                                                    GAO/OP-90-1
                                              Energy




establish adequate internal controls to      prices consistent with requirements for      operating contractors have established
help/ ensure that: (1) the lowest-cost       quality and timeliness.                      adequate controls over their purchases
items available under a systems contract     Status: Action not yet initiated.            under systems contracts and, if not,
are selected unless otherwise justified;                                                  require them to establish such controls.
and k2) items added to the systems           Recommendation: The Secretary of             Status: Action not yet initiated.
contract are obtained at the lowest          Energy should determine whether other


Enqw       SUPPLY
Uianium Enrichment: Congressional Action Needed To
Rdvitalize the Program
RC#D-88-18,       10/19/87
 .._.L. ..--...-.-...
Ba<?kground
   ,                                         million over the next few years; and (5)     program with sufficient budget and
In response to a congressional request,      DOE proposed to restructure the              management flexibility to ensure that
GAG assessed the problems of the             program as a federal corporation to          optimum production schedules are
Dep$rtment of Energy’s (DOE) uranium         increase competition, free it from budget    followed and long-term customer
enrichment program and identified            restrictions, and permit flexible pricing.   commitments are not compromised.
optians to revitalize it.                                                                 Status: Action in process.
                                             Open Recommendations               to
                                             Congress                                     Recommendation: In order to place the
Findings                                                                                  enrichment program on firm financial
GAO found that: (1) the program’s            Recommendation: In order to place the        footing, Congress should enact
financial problems include $8.8 billion in   enrichment program on firm financial         legislation to allow DOE sufficient
unrecovered costs, multibillion-dollar       footing, Congress should enact               flexibility in setting its pricing strategy
payments for unused power, market            legislation to define a reasonable           to allow it to meet market competition.
uncertainties due to ongoing litigation,     amount of costs the program needs to         Status: Action in process.
and potentially large decommissioning        recover. In defining the amount of costs
costs; (21 DOE proposed to write off its     to be recovered, Congress should allow
                                                                                          Recommendation: In order to place the
unproductive assets, which would leave       the write-off of unproductive assets and
                                                                                          enrichment program on firm financial
about $3.4 billion in unrecovered costs;     consider freezing total interest charges.
                                                                                          footing, Congress should enact
(3) price flexibility would allow DOE to     Status: Action in process.
                                                                                          legislation to require that DOE include
balance cost recovery objectives with
                                                                                          future decontamination and
other program objectives; (4) DOE            Recommendation: In order to place the
                                                                                          decommissioning costs in its base of costs
lowered its production levels to meet the    enrichment program on firm financial
                                                                                          to be rec0vered.g
objectives even though the continued low     footing, Congress should enact
production would cost more than $80          legislation to provide the enrichment        Status: Action in process.




                                             Page 66                                                                    GAO/OP-90-l
      ,
Ene?w Supply
Napal Petroleum Reserves-l: Data Corrections Made but
Make Accurate Reserve Data Needed
RCEfI-88-174,06/28/88
Bat ground                                  of corrected data to validate the            Open Recommendations              to
Pursu nt to a congressional request,
                                            production accounting system’s accuracy;     Agencies
                                            (3) developing new allocation factors for
GAO eviewed the Department of                                                            Recommendation: The Secretary of
Ener ‘a (DOE) actions to correct Naval      the production accounting system; (4)
                                                                                         Energy should authorize the Director,
Petro1 urn Reserve No. 1 (NPR-1)            establishing standards for developing        Office of Naval Petroleum and Oil Shale
production data inaccuracies which GAO      new allocation factors; and (5) validating   Reserves, to exercise the government’s
believ’ d: (1) resulted from a lack of      all historical monthly production data.      option for phase IVb under the current
effect r ve internal controls; (2) caused   GAO also found that DOE: (1) will take       contract to obtain more detailed geologic
incorrect computation of the reserve’s      almost a year to complete all corrective     and engineering data needed to
maximum efficient production rates; and     actions and will require additional time     accurately determine the ownership of
(3) could result in the government’s not    to measure the effectiveness of its newly    oil produced to date.
receiving its entire share of remaining     implemented internal controls; (2) did       Status: Action not yet initiated. DOE
recoverable reserves if NPR-1 were sold.    not detect certain errors in allocation      exercised option IVa of the contract so
                                            factors that had cleared its review          that additional geological and
                                            process; and (3) has not exercised a study   engineering data about the reserves can
Fingings                                    contract option that would provide it        be obtained. DOE believes it would be
GAO found that DOE promptly initiated       with the specific geological data it needs   inappropriate at this time to exercise the
actions to correct data inaccuracy          to protect the government’s interests if     phase IVb option without considering
problems, including: (1) rewriting          it should choose to sell or manage the       the results of the technical evaluation of
computer programs; (2) conducting tests     reserve.                                     phase IVa planned in fiscal year 1990.


Energy Supply
Nuclear Waste: DOE Should Base Disposal Fee Assessment
on Realistic Inflation Rate
RC$D-88-129,
I_
 ._._....
     ..-- _....._..
              -     07122188
Background                                  Findings                                     Congress, based on the inflation rate, to
                                                                                         ensure that revenues would cover
GAO reviewed the Department of              GAO found that: (1) in June 1987, DOE
                                                                                         program costs; and (3) future program
Energy’s (DOE) annual assessment of the     recommended that the disposal fee
                                                                                         changes and reduced costs should enable
nuclear waste disposal program fee,         remain unchanged, even though its
                                                                                         DOE to begin using a realistic inflation
focusing on DOE treatment of inflation      analysis showed that, at a 4-percent
                                                                                         rate in determining fee adequacy in
in assessing fee adeqyacy.                  inflation rate, the current fee would
                                                                                         1938.
                                            result in end-of-program deficits of $21
                                            billion to $76 billion; (2) DOE should
                                            have proposed a fee increase to



                                            Page 67                                                                   GAO/OP-90-l
                                           Energy




Op/en Recommendations              to      sufficient revenues to recover total          changes in how inflation is considered in
                                                                                         the assessment that he believes are
AgF ncies
                                           program costs.
                                           Status: Action in process. According to       responsive to the objective GAO sought.
Recbmmendation: The Secretary of                                                         This action will be included in the next
                                           a cognizant DOE official, although DOE
Enebgy should use a realistic base-case                                                  assessment report due around December
                                           will not implement this recommendation
inflrbtion rate estimate in determining
                                           exactly as written, it is making some         1989.
the waste disposal fee needed to produce


Enbrgy Supply
Electric Power: Issues Concerning Expansion of the Pacific
Northwest-Southwest Intertie
R&D-88-199, 09/14/88
BaCkground                                 economic benefit of the addition through      Open Recommendations               to
                                           2030 would be $661 million, and its share     Agencies
Pursuant to a congressional request,
                                           of net benefits would be $199 million; (2)
GACj discussed the Bonneville Power                                                      Recommendation: The Administrator,
                                           BPA projected losses for the first 4 years
Administration’s (BPA) plans to expand     and estimated that it would take 18           BPA, should contract for an independent
the Pacific Northwest-Southwest            years to recover its investment; and (3) it   review of FISHPASS and include the
In&tie, focusing on the: (1) BPA           was unclear whether the second 800-MW         activities generally undertaken in
justification for the expansion; (2)       increment of capacity increase would          Environmental Protection Agency (EPA)
relationship of Canadian power imports     result in net benefits to BPA. GAO also       reviews of models. The Administrator
to the intertie expansion; and (31         found that BPA estimated that: (1)            may wish to consult with EPA officials
potential impacts on salmon and            Canada could receive $161 million of the      concerning the content and methods
steelhead trout.                           net benefits and could further benefit if     used in these reviews.
                                           it decided to increase exports; and (2)       Status: Action in process. An
Findings                                   losses of salmon and steelhead trout          independent review of FISHPASS is
                                           related to the expansion would be under       being carried out under contract with
GAG found that: (11 BPA estimated that     3 percent, but made its estimates with a      BPA.
its costs for the 1600-megawatt (MW)       controversial computer model called
addition would be $327 million, the net    FISHPASS.


Energy Supply
Nuclear Waste: Fourth Annual Report on DOE’s Nuclear
Waste Program
RCED-88-131,09/28/88
                  ___I_--
Background           y                     Energy’s (DOE) efforts to implement the       declining nuclear waste quantities; (2)
                                           Nuclear Waste Policy Act of 1982,             increased program costs; and (3) effects
Pursuant to a legislative requirement,
                                           focusing on the: (1) implications of          of the 1987 revisions to the act on the
GAG assessed the Department of




                                           Page 68                                                                    GAO/OP-90-l
DOE plan for a facility to receive and           revised program, with Yucca Mountain           Open Recommendations              to
store nuclear wastes.                            in Nevada as the sole repository, and          Congress
                                                 about $31 billion if it constructed a          Recommendation: Congress may wish
                                                 second repository; (4) DOE expected the
Findings                                         Yucca Mountain site to hold 70,000
                                                                                                to explore with DOE the advantages of
                                                                                                earlier and more complete site
                      (1) waste disposal         metric tons of wastes but was uncertain        characterization information on the
                have declined because            about the site’s potential for expansion;      secondary rock formations at Yucca
                  not ordered new nuclear        and (5) the act’s revisions limited DOE        Mountain, in view of the continuing
                  since 1978; (2) despite this   authority to construct and operate a           decline in the estimates of waste to be
          , estimates of waste program costs     monitored retrievable storage (MRS)            disposed of and uncertainty about the
          ed from $23 billion in 1983 to $33     facility in advance of a repository.           capacity of the currently defined
          in 1987; (3) DOE estimated that it                                                    primary disposal area at that site.
          cost $23 billion to implement the                                                     Status: Action not yet initiated.

      I
Energy SUPPLY
Nuclear Waste: Repository Work Should Not Proceed Until
Quality Assurance Is Adequate
RCED-88459,        09/429/88- -_-
 .._-_... --.._-.-_.-...-.._---
                         .___
Background                                       of direct control over the contractor’s        Open Recommendations              to
Pursuant to a congressional request,
                                                 quality assurance programs; (3) NRC            Agencies
                                                 formally concluded that it lacked
GAO examined the Department of                                                                  Recommendation: The Secretary of
                                                 confidence in the program’s adequacy;
Energy’s (DOE): (1) progress in                                                                 Energy should proceed with site
                                                 and (4) DOE acknowledged that,
developing a quality assurance program                                                          characterization work segments only
                                                 although its present quality assurance         after the Secretary determines that all
for characterizing the Yucca Mountain,
                                                 was inadequate, it would be ready for          quality assurance programs related to
Nevada, site for possible use as a nuclear
                                                 NRC verification before site                   regulatory-related work are in place and
waste repository; and (2) interaction with
the Nuclear Regulatory Commission                characterization began. GAO also found         meet NRC standards.
(NRC) in identifying and resolving               that neither DOE nor NRC have                  Status: Action in process. In October
potential quality-related licensing              sufficiently attempted to timely address       1988, DOE delayed site characterization
problems.                                         these concerns, since: (1) DOE assigned a     until November 1989 because its quality
                                                  higher priority to other project activities   assurance program was not adequate to
                                                  and did not resolve any of the problems       begin work. DOE currently anticipates a
 Findings                                         NRC identified; and (2) NRC has not           further schedule slippage, in part
 GAO found that: (1) NRC oversight of             aggressively pursued opportunities to         because the program will not be ready to
 qualjty sssurance program development            more adequately assess the quality            begin work in November. However, GAO
 was ‘limited due to problems and delays          assurance program and has not raised           cannot close this recommendation until
 in DOE program development; (2) NRC               unresolved issues to higher-level NRC or      DOE decides to begin work and NRC
 identified several concerns about the            DOE management for possible                    agrees that the program is adequate.
 program regarding document                        resolution.
 inadequacy, noncompliance with quality                                                          Recommendation: The Secretary of
 assurance standards, ineffective                                                                Energy should proceed with site
 contractor auditing, general program                                                            characterization work segments only
 management and development, and lack                                                            after NRC has notified DOE that it



                                                  Page 69                                                                     GAO/OP-90-l
                               Energy




concurs with the Secretary’s   Status: Action in process. DOE is            is not known when DOE will begin the
deteItmination.                considering a further delay in the start     work or when NRC will agree that the
                               of site characterization. Consequently, it   program is adequate for doing so.




                               Page 70                                                                GAO/OPdO-1
   I
Fibancial Management and Information
Sybtems


CPA Audit Quality: Many Governmental                                                                    Audits Do Not
Cor$ply With Professional Standards
AFMD-86-33,03/19/86
Background                                                      internal controls; and (4) smaller CPA        of Certified Public Accountants should
In res      nse to a congressional request,                     firms had greater problems than larger        act promptly and decisively to address
GAO r       viewed the quality of certified                     firma in satisfactorily complying with        professional standards violations
public      ccountants’ (CPA) audits of                         standards. GAO believes that, to              referred to them.
federal     assistance programs.                                improve the quality of governmental
                                                                audits: (1) CPA must have the expertise
       1
                                                                to perform governmental audits; (21 the
                                                                                                              Open Recommendations              to
Findings                                                        profession should develop and maintain        Agencies
GAO fdund that: (1) CPA did not                                 positive enforcement programs to              Recommendation: The Director of the
satisfactorily comply with auditing                             randomly or periodically review CPA           Office of Management and Budget
standards on 34 percent of the                                  who perform poor quality audits; (3) the      (OMB) should establish, consistent with
governmental audits they performed; (21                         profession should work actively with          the Single Audit Act, more definitive
more than half of the unsatisfactory                            agency inspectors general (IG) to             criteria for prohibiting the cost of
audits had severe standards violations;                         improve the systems that IG have for          substandard audits to be charged to
(3) two’predominant CPA problems were                           reviewing, compiling, analyzing, and          federally assisted programs.
insufficient audit work or working paper                        using data on individual audits to            Status: Action not yet initiated. OMB
evidence showing testing of compliance                          identify and correct trends or patterns of
                                                                                                              has not followed through on its stated
with laws and regulations, and evidence                         quality problems; and (4) state boards of
                                                                                                              intentions to address this issue.
showing studies and evaluations of                              accountancy and the American Institute




Internal Controls: Weaknesses in HUD’s Single Family
Housing Appraisal Program

-.-.--...-; ._ -. ._.-. ..-.__-~..   ..- - ..-..-..-.
                                                   --.- ----.
Background                                                      Findings                                      GAO also found that HUD field offices:
                                                                                                              (1) overrode random computer selections
GAO analyzed the Department of                                  GAO found that HUD: (11 selected
                                                                                                              of appraisers and assigned them
Housing and Urban Development’s                                 appraisals for review without a
                                                                                                              manually without adequate supervision
(HUD1 efforts to correct weaknesses in                          systematic, statistical sample; (2) did not
                                                                                                              or documentation; (2) did not provide
its single-family housing appraisal                             meet the requirements of its present
                                                                                                              regularly scheduled training for fee
program.                                                        review program; and (3) used fee
                                                                                                              appraisers; and (3) failed to terminate
                                                                appraisers to perform field reviews of
                                                                                                              appraisers who were performing
                                     w                          other appraisers’ work, despite
                                                                                                              unsatisfactorily.
                                                                indications that this practice increased
                                                                the potential for fraud, waste, and abuse.




                                                                Page 71                                                                    GAO/OP-90-l
                                             Financial Management and Information Systems




Opbn Recommendations                to       accurate estimates of the appraisal           Status: Action in process. A sampling
Agencies                                     quality at each of its field offices. In      plan is being installed in all HUD
                                             conjunction with the development and          offices, but has not yet started. HUD is
Recbmmendation: The Secretary of             implementation of this plan, the              waiting for a computer program to be
Ho+ing and Urban Development should          Assistant Secretary should ensure that        implemented before they set up the
direct the Assistant Secretary for           each field office will continue to identify   sample. HUD could not give GAO an
Housing to develop, at field offices where   the poor performers and, if necessary in      estimation date for completion of the
it is cost-beneficial, a systematic plan     the large offices, use some of the reviews    program.
with a sound methodological basis, such      no longer needed for general oversight to
as statistical sampling, to produce          monitor their performance.




Inbernal Controls: EPA Needs To Improve Controls Over
Change Orders and Claims
  I
R&D-88-16,
 .__ i
                   11/17/8’7
       ..-..I.._..- .--~.-~ .~...
Background                                   the change orders and claims that GAO         internal controls are in place, being
                                             reviewed had missing or incomplete            implemented, and are effective in
GAO provided information on the
                                             documentation; (2) reviewing agencies         providing reasonable assurance that
Envlronmental Protection Agency’s            misinterpreted and inconsistently             change orders and claims are adequately
(EPA) internal controls over its             applied EPA guidance; and (3) EPA was         supported and properly evaluated.
Construction Grants Program and the          not monitoring the reviewing agencies.        Status: Action in process. Estimated
actions taken to correct three grants
                                                                                           completion date: 12/89. EPA has
management weaknesses that GAO
identified.
                                             Open Recommendations               to         completed an Internal Control Review in
                                             Agencies                                      which EPA regions were asked to
                                                                                           oversee the states’ change order controls.
Findings                                     Recommendation: The Administrator,            EPA headquarters has completed a draft
                                             EPA, should direct the Director, Office
GAO found that, while EPA has                                                              report on the results of the review and
                                             of Municipal Pollution Control, to
alleviated three identified grants                                                         expects to have it finalized in December
                                             perform follow-up reviews of the
management weaknesses: (1) many of                                                         1989.
                                             corrective actions to ascertain that the




ADP Internal Controls: Actions To Correct System
Weaknesses for Federal Employees’ Compensation
IMTEC-88-9,
-A-.. __.____12/22/U
         -- -...--..- ___-
Background          ”
                                             Standards Administration’s (ESA)              progress in correcting material
                                             Federal Employees’ Compensation Act           automatic data processing (ADP)
Pursuant to a congressional request,
GAO evaluated the Employment                 (FECA) Program, focusing on its: (11          weaknesses identified by the




                                             Page 72                                                                     GAO/OP-90-I
                                             Financial Management and Information Systems




Department of Labor; (2) identification of   Open Recommendations              to        system enhancements planned for 1990
all material ADP weaknesses; and (3)         Agencies                                    through 1994.
processfor identifying and correcting
ADP in b rnal control weaknesses.             Recommendation: The Secretary of           Recommendation: The Secretary of
        ,                                    Labor should reopen the closed
                                                                                         Labor should ensure that the Assistant
                                             corrective action with respect to
Findi    gs                                  expanding the automated medical fee
                                                                                         Secretary, ESA, provides for adequate
                                                                                         internal controls to protect FECA ADP
GAO f nd that, although ESA has              schedule to include noncovered provider
                                                                                         systems and requires that ADP security
made p ogress in correcting its              types, such as hospitals and pharmacies,
                                             and direct the Assistant Secretary, ESA,    procedures are followed. As part of this
admini trative control weaknesses, it
                                             to determine the feasibility of expanding   requirement, the Assistant Secretary
has no . (1) expanded the automated
                                             its automated medical fee schedule to       should ensure that actions are
medica fee schedule; (2) completed
replaceI ent of its computerized system;     include the currently uncovered provider    implemented to improve ADP internal
and (3) corrected security weaknesses        types, as part of completing this           controls which protect system access by
that al ow inappropriate access to           corrective action, The Secretary should     providing each authorized FECA user
payme t systems. GAO found no                continue to report this issue as an open    with a unique user identifier and
additio al material ADP weaknesses. In       corrective action until appropriate         password so that user accountability can
additio i , GAO found that, although ESA     internal controls are implemented.          be effectively tracked, in accordance
generally complied with applicable           Status: Action in process. To assess the    with Federal Information Processing
guidelines for identifying and correcting    feasibility of medical fees, the Medical    Standard (FIPS) Publication 83 and
ADP weaknesses, it: (1) frequently closed    Director of the Office of Workers’          FECA procedures.
or planned to close material ADP             Compensation Program has completed          Status: Action in process. Security
weakness cases before it verified            visits to two state compensation systems,   measures are being developed as part of
correction of the weaknesses; and (2)        and is also examining the Health and        the FECA data system enhancements for
made only limited use of the results of      Human Services Health Care Financing        the new FECA system (1990-19941,in
FECA district offices’ accountability        System. Any enhancements would be           accordance with FIPS Publication 83 and
reviews.                                     developed and tested as part of overall     FECA procedures.




ADP Management Controls: Farmers Home
Administration Can Improve Reporting of Weaknesses
IMTEC-88-38, 07/25/88
Background                                   Findings                                    collection activities were inadequate; (4)
GAO determined whether the Farmers           GAO found that FmHA failed to: (1)          correct two ADP weaknesses concerning
Home Administration (FmHA)                   submit for inclusion in the Department      access controls and its priority-setting
identified, corrected, and reported its      of Agriculture’s (USDA) annual FMFIA        process for system design requests,
automatic data processing (ADP)              reports the specific ADP management         which it had previously reported as
weaknesses in compliance with the            weaknesses which USDA and Treasury          corrected; or (5) verify the
Federal Managers’ Financial Integrity        identified in their management reviews;     implementation or effectiveness of
Act of I982 (FMFIA).                         (2) identify widespread patterns of         corrective actions for uncorrected
                                             weaknesses occurring among states in its    weaknesses.
                      Iy
                                             management control reviews of field
                                             offices; (3) report that field office
                                             internal controls over loan servicing and



                                             Page 73                                                                   GAO/OP-90-l
                                            Financial Management and Information Systems




-.-
Open Recommendations                to      Status: Action in process. FmHA and          the Secretary of Agriculture should
Agencies                                    USDA both reported in their 1988             include in future USDA FMFIA reports
                                            FMFIA reports that inadequate loan           the weakness and planned corrective
Rec&nmendation: To ensure that the          supervison contributed to delinquent         actions concerning the ineffective
Fm$A FMFIA process identifies,              loans and other problem cases. This area     priority-setting process for reducing the
cor&cta, and reporta all FmHA ADP           will be considered for possible additional   backlog of system change requests until
management weaknesses, as called for        issues to be reported in the December 31,    the weakness is corrected.
by USDA implementation of that act,         1989 FMFIA report.                           Status: Action in process. The weakness
the $ecretary of Agriculture should                                                      cited is to be included in the USDA
include in future USDA FMFIA reports        Recommendation: To ensure that the           December 31, 1989 FMFIA report.
the specific weakness that FmHA field       FmHA FMFIA process identifies,
                                                                                         FmHA recently issued a directive that
officle internal controls over loan         corrects, and reports all FmHA ADP
                                            management weaknesses, as called for         sets a strategy to determine priority and
servicing and processing are inadequate,
                                            by USDA implementation of that act,          specifies standards in this area.
unti! the weakness is corrected.




B$dget Issues: USDA’s Commodity Certificates Should Be
Rdcognized in Budget Totals
AFMD-88-27, 08/16/88
Background                                  systematic congressional review; (2)         (OMB) should include the use of
In response to a congressional request,     treating the certificates as cash            commodity certificates in budget totals
GAO examined the current budget             transactions and including them in the       reviewed by Congress by developing a
treatment of the Commodity Credit           total budget authority and outlay totals     new set of noncash-based terms and
Corporation’s (CCC) commodity               would ensure congressional review of         totals, or by treating the issuance of
certificates to: (1) determine if CCC       their use, but would add noncash             commodity certificates as if they were
should treat the certificates as cash for   amounts to a cash-based total; and (3)       cash. The Director should also consider
budget purposes; and (2) develop            establishing new terms and totals for the    these approaches for applicability to the
alternative budget reporting methods.       use of noncash assets to finance             other programs with authority to use
                                            government programs would provide            noncash asset financing and should
                                            Congress with more information               consult on the matter with congressional
Findings                                    regarding the use of commodity               budget and appropriations committees.
GAO evaluated three budget reporting        certificates, but could initially reduce     Status: Action in process. An OMB
methods for commodity certificates, and     understanding of budget information.         bulletin requiring agencies to request
found that: (1) continuing to treat                                                      apportionment before using a non-cash
certificate issuances as noncash            Open Recommendations              to         asset to liquidate .an obligation is in
transactions, excluding them from the                                                    draft form. A second bulletin on the
budget authority and outlay totals, and
                                            Agencies                                     budget treatment of commodity
including a supplementary table would       Recommendation: The Director of the          certificates and monetary credits is
involve no change, but would not ensure     Office of Management and Budget              being drafted.




                                            Page 74                                                                   GAO/OP-90-1
                                            Financial Management and Information Sy&ems




Int&nal Controls: Program to Address Problem Meat and
Poultry Plants Needs Improvement
RCEq-89-55, 03/31/89
                                            experienced higher cattle condemnation         to track plant performance. This work
          to a legislative requirement,     rates than the national average; (2)           will take several years. Until that time,
          ssed the Food Safety and          lacked adequate systems to monitor             USDA will use its directive which
         n Service’s (FSIS) Intensified     plants that graduated from IRE, and            contains instructions for manually
            Enforcement (IRE) Program       failed to take action against plants with      entering and removing plants from the
            and poultry plants              recurring problems; (3) failed to ensure       program.
                                            that all meat and poultry plants were
                                            identified and considered for IRE              Recommendation: To ensure the long-
Findihgs                                    because of an inadequate survey                term effectiveness of the IRE program,
GAO foknd that: (1) although FSIS has       methodology; and (4) relied on the             the Secretary of Agriculture should
instituted IRE at 42 plants nationwide      plants’ internal inspectors and field          direct the Administrator, FSIS, to
since 1984, the program has only been       supervisors to identify problem plants         improve the IRE program by taking such
partially successful; (2) 24 plants         for IRE.                                       actions as entering into stipulation and
improved their operations and graduated                                                    consent orders and reinstating plants in
from the program, 1 plant went              Open Recommendations                to         the IRE program, or withdrawing
bankrupt, 7 plants were removed from        Agencies                                       inspections at plants that become
the program permanently, and 4 plants                                                      problem plants after being taken off
changed ownership; (3) 24 plants that       Recommendation: To ensure the long-
                                                                                           IRE.
graduated from IRE improved their           term effectiveness of the IRE program,
                                            the Secretary of Agriculture should            Status: Action in process. Estimated
conditions within 1 year, while 7 plants
were under IRE for less than 1 year; and    direct the Administrator, FSIS, to             completion date: 06/91. USDA is
(4) 7 of the 10 plants that graduated       improve the IRE program by developing          planning a progressive enforcement
from IRE violated health, safety, and       and implementing: (1) criteria for             program as part of its future improved
product standards at an unacceptable        placing plants in the program; and (2) a       processing inspection program. This
levels, and 1 plant reentered the           data information system based on these         enforcement program will address
program for the second time. GAO also       criteria that profiles all plants inspected.   varying levels and terms of plant
found that FSIS (11 records showed that     Status: Action in process. Estimated           noncompliance and, when necessary,
some graduating plants had sanitary         completion date: 06/91. The Department         apply enforcement actions and possibly
problems, excessive levels of antibiotics   of Agriculture (USDA) is working on a          new enforcement mechanisms, as they
and animal residue in livestock, and        stronger automated information system          emerge.




                                            Page 15                                                                      GAO/OP-90.1
                                             Financial Management and Information Systems




Financial Integrity Act: Actions Needed to Correct ADP
Irhernal Control Weaknesses
Ih$TEC-89-11,05/09/89
Background                                   weaknesses to fully evaluate funding        Recommendation: The Director, OMB,
GAO assessed federal agencies’               requests for development of the effective   should include in its annual summary a
imdlementation of the Financial              ADP systems needed to accomplish their      discussion of corrective actions that have
In&grity Act (FMFIA) in annual               missions.                                   been delayed for 1 year or more past
mahagement reports that accompany the                                                    their estimated completion dates, the
Pre$dent’s budget, focusing on: (1)          Open Recommendations               to       reasons for delays, and the timetables
wh ther agencies reported automatic                                                      for corrective actions.
                                             Agencies                                    Status: Action in process. The October
dat processing (ADP) internal control
we 1 knesses and how significant those       Recommendation: The Office of               1989 OMB letters stated that: (1)
wedknesses were to totals reported           Management and Budget (OMB) should          weaknesses need to be tracked until
under FMFIA; (2) the types of ADP            take a leadership role to focus attention   corrected; and (2) agencies should have a
internal control weaknesses reported; (3)    on progress to identify and correct the     reporting system to highlight and
whbther agencies continued to report         underlying ADP management control           explain delays and provide focus on
weaknesses in evaluating ADP controls        problems that affect successful             longstanding uncorrected problems.
and security; and (4) the extent of and      implementation of FMFIA and to
rationale for any delays in correcting the   provide Congress with useful, reliable      Recommendation: To ensure that the
weaknesses.                                  information on overall progress.            summary information is most useful to
                                             Status: Action in process. In October       Congress in carrying out its oversight
Findings                                     1989, OMB sent letters to the 16 major      role, OMB should link the information
                                             federal agencies. In these letters, OMB     to the agencies’ budget submissions, and
GAO found that: (1) the 23 agencies          addressed: (1) specific agency high-risk    describe the resulting budgetary
reported 522 ADP internal control            areas; (2) areas in need of improvement     implications.
weaknesses under FMFIA between 1983          in agencies’ FMFIA programs; and (3)        Status: Action in process. The October
and 1987; (2) agencies reported 173          key elements that each agency FMFIA         1989 OMB letters identify this issue as a
weaknesses as active in their 1987           program should embody. These letters        key element in an agency’s internal
reports; (3) 156 weaknesses were in areas
                                             contained items covering ADP.               control and audit follow-up program.
of ADP organization and management
                                                                                         Specifically, the letters state that
controls and the methodology for
                                             Recommendation: The Director, OMB,          correction of weaknesses should be
evaluating ADP controls and security; (4)
although agencies took steps to improve      should annually summarize for Congress      linked to program planning and
their methodologies for evaluating ADP       agencies’ ADP internal control              budgeting. The letters stated that this
controls and security, five agencies         weaknesses and the status of actions to     will help in setting priorities and
reported active methodology weaknesses       correct: (1) ADP organization and           obtaining resources for correction.
at the end of 1987; (5) agencies had not     management controls; and (2) agency
corrected 55 active ADP internal control     evaluation methodologies needed to          Recommendation: To provide a sound
weaknesses, had not corrected 68 aa          identify and correct ADP weaknesses.        basis for OMB use in summarizing the
planned, had inexplicably delayed 55,        Status: Action in process. The October      results, OMB should ensure itself that
and had corrected timetables for 17; and     1989 OMB letters included ADP               the heads of federal agencies fully report
(6) these conditions result in Congress      management issues, as well as the need      the schedules for correcting internal
not having complete and useful               to conduct ADP security reviews at some     control weaknesses and the reasons for
information on the status of agencies’       agencies.                                   any delays when they occur.



                                             Page 76                                                                   GAO/OP-90-1
                                              Financial Management and Information Systems




Status: j Action in process. The October      corrected; and (21 agencies should have a    explain delays and provide focus on
1989 O$¶B letters stated that: (11            reporting system to highlight and            longstanding uncorrected problems.
weaknesses need to be tracked until


       i




Badk Failures: Independent Audits Needed to Strengthen
Int&rnal Control and Bank Management
AFM
       P
    -89-25,05/31/89
_- I_-.~
Backiground                                   insider abuse in 64 percent and              complying with laws and regulations
GAO r viewed recent bank failures,            suspected fraud in 38 percent of bank        related to the safety and soundness of
focusin ! on: (1) the internal weaknesses     failures; (4) federal regulators did not     bank operations and for establishing
and enVironmenta factors which                generally require all insured banks to       methods to monitor compliance; and (2)
examiners cited for insured banks that        have an annual independent audit; and        contains management’s assessment of
failed ip 1987; (2) the extent to which       (5) small banks, which account for the       the bank’s compliance with laws and
insider: abuse and fraud affected the         majority of the failures, were less likely   regulations related to operations.
same failed banks; and (3) potential          to have adequate internal controls or        Status: Action not yet initiated.
areas of concern which could be used for      internal auditing functions.
congressional oversight and policy                                                         Recommendation: As a condition for
delibenation, federal bank examination        Open Recommendations                to       federal deposit insurance, Congress
and su@-vision, bank management, and                                                       should enact legislation requiring each
                                              Congress                                     insured bank to obtain an annual
financial auditors.
                                              Recommendation: As a condition for           independent audit of the bank’s
                                              federal deposit insurance, Congress          financial statements, have its
Findings                                      should enact legislation requiring each      independent auditor report on the
GAO found that: (11 the internal control      insured bank to prepare an annual            management assertions described above,
weaknesses that federal regulators            management report which: (1) describes       and submit such reports with the
identified that most contributed to the       management’s responsibility for              independent auditor’s report to the
184 bank failures in 1987 included            preparing financial statements and for       Federal Deposit Insurance Corporation
inadequate or imprudent loan policies         establishing and maintaining an              (FDIC) and the bank’s respective
and procedures, inadequate bank board         effective internal control structure; and    regulators.
supervision, weak loan administration,        (2) contains management’s assessment of      Status: Action not yet initiated.
poor loan documentation, and                  the effectiveness of the internal control
inadequate credit analysis; (2) each of       structure.                                   Recommendation: Congress should
the failed banks had a unique                 Status: Action not yet initiated.            require FDIC, in conjunction with other
combination of weaknesses that                                                             federal banking regulators, to identify
contributed to its failure, most of which     Recommendation: As a condition for           applicable laws and regulations related
related to some aspect of management;         federal deposit insurance, Congress          to the safety and soundness of bank
(3) although regulators did not cite          should enact legislation requiring each      operations which FDIC determines
insider abuse or fraud as a sole factor in    insured bank to prepare an annual            should be reviewed and reported on in
any failure, and only rarely as a             management report which: (1) describes       management reports.
significant contributing factor, they cited   management’s responsibility for              Status: Action not yet initiated.
                         Y




                                              Page 77                                                                  GAO/OP-90-l
                                             Financial Management and Information Systems




Financial Management: Improvements Needed in
OBMRE’s Method of Allocating Obligations
AtiMD-89-89, 07/28/89
B@ckground                                   decided at the beginning of the year the    AML and regulation and technology
Pu&iuant to a congressional request,         portion of each of certain invoices it      programs.
GAD reviewed the propriety of the            would charge to each account through        Status: Action in process. Unofficially,
Offtce of Surface Mining Reclamation         the year; and (3) lacked documentation      Interior agreed with this
an Enforcement’s (OSMRE) fiscal years        to support its allocation of some           recommendation and plans to implement
(F J ,) 1987 and 1988 charges to the         obligations to the AML fund. GAO            it in FY 1990, although GAO does not
AbAndoned Mine Reclamation (AML)             believes that, while the OSMRE              know specific dates. GAO has been told
Fu$d.                                        accounting system has the capability to     that Interior plans to issue an order
     /                                       properly account for and allocate its two   which will address this recommendation.
FiQdings                                     programs’ obligations, OSMRE instead
                                             uses a methodology which allows its         Recommendation: To provide the
GA;0 found that OSMRE charged its two        budget to become a self-fulfilling          needed assurances to Congress and other
primary appropriation accounts, the          prophecy and impedes congressional and      interested parties that funds are being
AML fund and a regulation and                agency oversight of its activities.         obligated as authorized, the Secretary of
technology program, by dividing its                                                      the Interior should require the Director,
obligations into direct regulation and                                                   OSMRE, to issue written procedures
technology activities, direct AML            Open Recommendations              to        requiring that when contracts support
activities, and administrative activities.   Agencies                                    multiple offices and appropriations, such
GAO also found that, although a review                                                   as those for computer services, the
                                             Recommendation: To provide the              allocation basis is adequately supported
of &ample transactions indicated that
                                             needed assurances to Congress and other     and documented.
OXMRE charged the appropriate
                                             interested parties that funds are being     Status: Action in process. Unofficially,
appropriation accounts, it did not use
supportable methodologies to make those      obligated as authorized, the Secretary of   Interior agreed with this
allocations, since it: (1) accumulated       the Interior should require the Director,   recommendation and plans to implement
administrative-related obligations           OSMRE, to develop and use a                 it in FY 1990, although GAO does not
throughout the year in various accounts      supportable methodology for the             know specific dates. GAO has been told
and then allocated them at year-end          allocation of obligations for               that Interior plans to issue an order that
based on the approved budget; (2)            administrative activities between its       will address this recommendation.




                                             Page 78                                                                  GAO/OP40-I
                                                Financial Management and Information Systems




Accobnting       Systems in Operation
Debt Collection: More Aggressive Action Needed To Collect
Del&s Owed by Health Professionals

                                            -
                                                June 30, 1986, of which $2’7 million was     must request HRSA write-off approval
                                                more than 3 years delinquent; and (4)        for those which are determined to be
                                                HRSA has not established a time frame        uncollectible.
                                                in which schools must request write-off      Status: Action in process. HHS
                                                approval for uncollectible loans. GAO        determined that it has statutory
                                                also found that: (11 lack of a               authority and plans to amend its
effortal under its financial assistance         comprehensive debt management                regulations to implement this
prograbs for health professions and             system, staffing shortages, and failure to   recommendation. Proposed regulations
medical facilities, focusing on the: (1)        follow established procedures have           have been approved by affected HHS
Health Professions Student Loan                 seriously hindered HRSA attempts to          components and are currently awaiting
Program; (2) Nursing Student Loan               collect on delinquent debts; (2) HRSA        signature by the Secretary after which
Program; (3) National Health Service            untimely issued collection notices, made     they will be published for a 60.day
Corps Scholarship Program; (4) Health           few personal contacts with delinquent        comment period.
Education Assistance Loan Program;              debtors, and improperly granted
and (54 Health Facilities Direct and            additional time for delinquent debt          Recommendation: The Administrator,
Guaranteed Loan Program.                        repayment; and (3) HHS opposes               HRSA, should set time limits within
                                                offsetting delinquent educational debts      which the schools must reimburse the
                                                from Medicare reimbursements to              funds, or HRSA (in the case of those
Findings                                        physicians.                                  schools which are no longer
GAO tound that: (1) HRSA imposed                                                             participating in the programs) for those
several measures which resulted in              Open Recommendations               to        loans for which the schools did not
significant declines in loan delinquency                                                     follow required collection procedures.
rates for health professions schools, but       Agencies                                     Status: Action in process. HHS plans to
not for nursing schools; (2) the                Recommendation: The Secretary of             modify its program regulations so that
delinquency rates for nursing schools           Health and Human Services should             this recommendation can be
will decline when HRSA terminates a             direct the Administrator, HRSA, to           implemented. Proposed regulations have
large number of these schools from the          establish time limits within which           been approved by affected HHS
program for noncompliance with                  schools participating in the Health          components and are currently awaiting
performance standards; (3) health               Professional and Nursing Student Loan        signature by the Secretary, after which
professions and nursing schools reported        programs must determine the                  they will be published for a 60-day
$47.5 million in delinquent loans as of         collectibility of delinquent loans and       comment period.




                                                Page 79                                                                  GAO/OP-90-l
                                               Financial Management and Information Systems




Acjcounting Systems in Operation
F&reign Military Sales: Redirection of Accounting
Ihprovement Efforts Is Appropriate
AFMD-88-75,
___._.
  ‘.“.--_-._        09/15/88
          -_--_..-.-1_1
Bdckground                                     to reconcile balances in both the existing   routine FMS accounting activities and to
                                               and new FMS trust funds; and (5) not         ensure that both routine and nonroutine
Pu+uant to a congressional request,
                                               clarified the role of the Reconciliation     reconciliation responsibilities are clearly
GAD reviewed Department of Defense
                                               and Case Closure Board in this               defined, the Secretary of Defense should:
(DqD) efforts to correct long-standing         reorganized effort. GAO believes that, to    (1) assign full FMS accounting
accbunting problems in ita Foreign             improve FMS accounting controls and          responsibility, including reconciliation,
Mi$tary Sales (FMS) Program.                   effectively implement its latest             to the Air Force; and (2) clarify the role
                                               initiatives, DOD needs to implement          of the Reconciliation and Case Closure
F&dings                                        accounting controls to ensure that: (1)      Board in the reconciliation process.
                                               the old and new trust funds do not           Status: Action in process. The Air Force
GAO found that, since March 1988, DOD          become commingled; (2) military
ha$: (1) terminated the current central                                                     has been assigned responsibility for
                                               departments transmit and record
FMS accounting system development                                                           developing and implementing a new
                                               accurate and complete data in the
effort, citing its excessive costs, schedule                                                accounting system. The reconciliation of
                                               central FMS system; and (3) central
delays, and unsatisfactory testing             records contain sufficient information to    the accounting records is an ongoing
results; (2) transferred responsibility for    facilitate precise identification and        process involving the Army, Navy, and
central FMS accounting from the                timely resolution of imbalances.             Air Force, the Security Assistance
Defense Security Assistance Agency                                                          Advisory Council, and DSAA. Also, DOD
(DSAA) to the Air Force for                                                                 clarified the role of the Reconciliation
                                               Open Recommendations               to        and Case Closures Board.
development, implementation, and
operation of a new system; (3) directed
                                               Agencies
the establishment of a new FMS trust           Recommendation: To ensure that
fusd by October 1989; (4) directed DSAA        reconciliations are an integral part of


Accounting        Systems in Operation

Surface Mining: Operation of the Applicant                                                  Violator
System Can Be Improved
AFMD-89-31,01/24/89
Background                                     Findings                                     addresses, inconsistent recordkeeping
                                                                                            and reports, and a lack of a proper
In response to a congressional request,        GAO found that: (1) the OSMRE
                                                                                            definition of mining ownership or
GAO assessed the Office of Surface             automated permit review system was
                                                                                            control hampered AVS effectiveness; (3)
Mining Reclamation and Enforcement’s           inadequate to effectively determine
                                                                                            OSMRE relied on manual processing to
(OSMRE) efforts to’implement its               whether permits should be issued or
                                                                                            verify AVS information, resulting in
Applicant Violator System (AVS).               denied; (2) incomplete names and
                                                                                            delays in meeting states’ projected




                                               Page 80                                                                    GAO/OP-90-1
                                           Financial Management and Information Systems




approval dates; (41 OSMRE had not          Control and Reclamation Act, the              The information update rule is final.
incorporated data from other mining        Department of the Interior should: (1)        State compliance with the update and
ownership and control information          incorporate the data sources accessed         ownership rule is being negotiated.
source! to adequately compare and          during the manual verification process        Clearinghouse procedures are expected
match pplicants and violators; and (5)     into AVS, including but not limited to        to be effective in the near future.
AVS 1 ked linkage features and other       Labor’s Mine Safety and Health
capabil ties, while an interest group’s    Administration system, to improve the         Recommendation: The Department of
compa able system had access to state      quality of the data in the system; (2)        the Interior should work with the
mining permit and Department of Labor      expedite efforts to finalize both the         National Wildlife Federation (NWF) to
mine s fety and health data.               information update rule and the               establish specific dates and milestones to
                                           clearinghouse procedures in order to          complete its comparisons of AVS and the
Open,1 Recommendations            to       obtain more current information; and (3)      Wildlife system and incorporate those
                                           monitor state adherence to the recently       features of the Wildlife system which
Agen/cies                                  promulgated ownership and control rule        will enhance AVS coverage and
Recom endation: To improve the             and, when finalized, the information          operation.
accura r y of the data in the system and   update rule.                                  Status: Action in process. OSMRE and
thereby reduce reliance on manual          Status: Action in process. Labor mine         NWF are continuing negotiations on
verifications and ensure compliance with   safety data has been added to the system      how to conduct the comparison.
section; 510 of the Surface Mining         with AML audit violation data to follow.


Accopnting      Systems in Operation

Financial Management: Operating Cash Requirement                                                              for
Air Force Stock Fund Can Be Reduced
AFMD-89-60, 04/0’7/89
Background                                 accounting system deficiencies in its         Open Recommendations              to
Pursuant to a congressional request,       1988 Federal Managers’ Financial              Agencies
GAO reviewed Air Force stock fund          Integrity Act (FMFIA) report to the
                                           Secretary of Defense; (31 since 1986, the     Recommendation: The Secretary of the
pricing and refund practices to
                                           stock fund fiscal year-end operating          Air Force should improve the stock fund
determine: (11 whether the stock fund
                                           balances have been equivalent to less         accounting system so that it produces
could operate at less than the currently
required 1 l-day operating cash balance;   than a 3-day supply of cash; (4) a 3-day      accurate and reliable reports on both the
(21 how refunds made to stock fund         cash target could reduce the stock fund       appropriated and operating cash
customers affected the 11-day cash         customers’ budget authority by over $215      balances. Until this system deficiency is
balance; and (3) how customers used the    million; (5) refunds to customers             corrected, this deficiency, together with
refunds.                                   totalling over $1 billion since fiscal year   planned corrective actions, should be
                                           1984 have been the major factor in            included in the Air Force FMFIA reports
                                                                                         to the Secretary of Defense.
Find’ings                                  reducing the operating cash balance; and
                                                                                         Status: Action not yet initiated. Since
                                           (6) it could not determine the disposition
GAO found that: (1) the Air Force stock                                                  the Office of the Secretary of Defense
                                           of the refunds because the Air Force
fund accounting system was incomplete                                                    did not concur with this
                                           merged them with other accounts.
and inaccurate, since it did not                                                         recommendation, the Air Force has not
distinguish between appropriated and                                                     yet initiated any action.
operating stock fun.d cash balances; (2)
the Air Force did not report its



                                           Page 81                                                                    GAO/OP-90-l
                                              Financial Management and Information Systems




____~
Recjommendation: The Secretary of the         available to cover temporary operating       reducing Defense’s fiscal year 1990
Air! Force should prepare future budget       cash shortages.                              budget. DOD is taking action to correct
submissions to Congress using an              Status: Action in process. The House         the problem.
operating cash target of approximately 3      and Senate Appropriation Committees
days as long as appropriated funds are        used the GAO report as a basis for


Adcounting       Systems in Operation
National Archives: A Review of Selected Management
Isjsues
ATMD-89-39, 05/23/89
B+ckground                                    requirement that its profits not exceed      completed by December 31, 1989. The
  I                                           the lo-percent profit margin allowed for     study will help ensure costs are properly
In esponse to a congressional request,
G 0 investigated allegations that: (1)        its publications; (2) Trust Fund financial   allocated between reproductions and
  4                                           operations lacked written policies,          Trust Fund publications subject to the
the National Archives and Records
Administration (NARA) and National            procedures, and documentation for its        lo-percent profit margin. The Trust
Archives Trust Fund Board improperly          accounting practices; (31 NARA and           Fund Secretary is currently monitoring
commingled appropriated funds and             Trust Fund annual reports did not            profits on Trust Fund publications. The
unrestricted Trust Fund money; (21            provide a Statement of Changes in            study will also validate that
NARA violated federal procurement and         Financial Position; and (4) the financial    reproductions are provided at cost.
personnel regulations; and (3) because        statements did not fully disclose unusual
Trust Fund personnel did not hold civil       transactions and were unaudited,             Recommendation: In order to ensure
service appointments, they were not           resulting in inaccurate and unreliable       the reliability of the Trust Fund’s
eligible to compete for remaining             financial information for presentation to    financial information and proper
positions if a reduction-in-force occurred.   Congress.                                    accounting, the Trust Fund Board
                                                                                           should prepare and implement written
                                              Open Recommendations               to        financial policies and procedures for
Findings                                                                                   managing trust fund accounting and
                                              Agencies                                     operations which describe how the
GAO found that: (1) NARA recorded its
reproduction fees deposited into the          Recommendation: In order to ensure           accounting system and other financial
Trust Fund in separate accounts; (2)          the reliability of the Trust Fund’s          processes operate, including the proper
NARA did not improperly expend the            financial information and proper             posting of transactions and preparation
funds, because the fees were available        accounting, the Trust Fund Board should      of adequate documentation.
for any appropriate Trust Fund                direct the Trust Fund Secretary to           Status: Action in process. Estimated
expenditure; (3) the Trust Fund was not       develop a methodology to account for         completion date: 10/90. Eight of 12
required to follow the Federal                costs and revenues associated with sales     chapters of the Trust Fund Manual have
Acquisition Regulation when purchasing        of publications and reproductions to the     been approved. The remaining chapters
goods and services; and (4) because           public and to monitor the financial          are expected to be completed in fiscal
NARA personnel appointments were              results to ensure compliance with the lo-    year (FYI 1990.
consistent with the law and regulations,      percent profit margin and with the
all employees would compete equally for       break-even requirements legislated by        Recommendation: In order to ensure
remaining positions in the event of           Congress.                                    the reliability of the Trust Fund’s
reductions-in-force: GAO also found that:     Status: Action in process. Estimated         financial information and proper
(1) the Trust Fund could not ensure that      completion date: 12/89. A study of the       accounting, the Trust Fund Board should
it complied with the legislative              fee schedule for reproductions should be     publish all appropriate financial



                                              Page 82                                                                    GAO/OP-90-1
                                                                                                                                   -
                                             Financial Management and Information Systems




statements, including the Statement of       accounting, the Trust Fund Board should     accounting, the Trust Fund Board
Changes in Financial Position and            comply with Title 2 and Treasury            should obtain an independent annual
statement disclosures, as required by        requirements by reporting inventory         audit of the Trust Fund’s financial
Title 2 and Treasury regulations.            status in the Statement of Financial        statements.
Status: ~Action in process. Estimated        Position.                                   Status: Action in process. Estimated
completion date: 12/89. The agency           Status: Action in process. Estimated        completion date: 12/91. A draft
intendsi to publish required statements.     completion date: 12/89. Inventory has       statement of work is currently being
Howevt r, statements will not be             been counted and adjusted and will be       prepared. The Trust Fund Secretary
availab i e until the end of calendar year   properly shown in financial statements      expects auditors to begin with FY 1990
1989. 1                                      for FY 1989.
                                                                                         records and accounts and render their
                                                                                         first opinion on FY 1991 financial
Recom/nendation: In order to ensure          Recommendation: In order to ensure
the rel’ability of the Trust Fund’s          the reliability of the Trust Fund’s         statements.
financi i 1 information and proper           financial information and proper

       I
Acco nting Systems in Operation

Finkncial Management: Air Force Records Contain $512
Million in Negative Unliquidated Obligations
AFMD-89-P&06/30/89
Background                                   Air Force officials did not know about      Status: Action in process. The House
Pursuant to a congressional request,         negative ULO problems, since the Air        Appropriations Committee used the
GAO reviewed negative unliquidated           Force did not require ALC to report         GAO report as a basis for reducing
obligations (ULO) relating to the Air        negative ULO information; and (5)           Defense’s fiscal year (FY) 1990 budget.
Force’8 purchase of supply and               although ALC did not maintain statistics    DOD is taking action to correct the
equipment inventories, focusing on the:      on the causes of negative ULO, many         problem.
(1) age and causes of ULO; and (2)           ALC accounting supervisors cited such
procedures that the Air Force’s air          internal control weaknesses as              Recommendation: The Secretary of the
logistics centers (ALC) used to report       contractor overpayments, appropriations     Air Force should direct ALC to report,
them to senior Air Force officials and to    accounting errors, and inaccurate or        on a quarterly basis to the Air Force
Congress.                                    incomplete obligations information as       Logistics Command, summary-level data
                                             the primary causes.                         on the total amount and age of negative
                                                                                         ULO.
Findings                                                                                 Status: Action not yet initiated.
                                             Open Recommendations               to
GAO found that: (1) as of April 1988, 5      Agencies
ALC had 6,257 individual negative ULO                                                    Recommendation: The Secretary of the
account balances totalling about $512        Recommendation: The Secretary of            Air Force should ensure that ALC follow
million; (2) although regulations            Defense should direct the Secretary of      existing regulations on taking immediate
required immediate corrective action on      the Air Force and the Director of the       action to correct negative ULO.
negative ULO, ALC had more than $132         Defense Logistics Agency to jointly         Status: Action not yet initiated.
million in negative ULO that were at         resolve negative ULO already recorded
least 6 months old; (3)accounting            in ALC accounting records with the          Recommendation: The Secretary of the
supervisors attributed the lack of           initial objective of promptly identifying   Air Force should identify negative ULO
attention to negative ULO to staff           and collecting any overpayments made        as a material weakness in the annual
shortages and clerical errors; (4) many      to contractors.                             Federal Managers’ Financial Integrity



                                             Page 83                                                                   GAO/OP-90-1
                                           Financial Management and Information Systems




-7
Act report to the Secretary of Defense     Status: Action not yet initiated.
until this weakness is corrected.


Arfcounting Systems in Operation
Federal Financing Bank: The Government Incurred a Cost
of $2 Billion on Loan Prepayments
AFMD-89-59,08/22/89
                  -__
 I
Bgckground                                 Treasury market value, since                and account for the government’s
                                           prepayments based on interest rates         economic costs, FFB could use the funds
Pursuant to a legislative requirement,
                                           specified in loan agreements, rather        generated from the administrative fees it
       reviewed the Federal Financing
G4°                                        than on Treasury’s current borrowing        charged borrowers or Congress could
BTk’s (FFB) loan prepayments, focusing     rate, could result in an economic gain or
on: the: (1) benefits that FFB lending                                                 provide the programming agency or FFB
                                           cost to the government; (4) between 1985    with an appropriation to cover the
provided and the procedures and            and 1988, prepaid loans had book values
conditions for prepaying FFB loans; (2)                                                prepayment costs.
                                           totalling $13.3 billion, of which $8.5
FPB borrowers’ costs and benefits when     billion was prepaid at book value, as
they prepay their loans; and (31           Congress directed; (5) FFB lost about $2    Open Recommendations              to
prepayment conditions and alternative      billion, since these loans had Treasury     Congress
financing measures FFB should use to       market values totalling about $10.5
balance costs and benefits.                                                            Recommendation: In considering
                                           billion; (6) some FFB borrowers had
                                                                                       legislative proposals to allow selected
                                           loans with interest rates substantially
                                           higher than commercial rates due to the     FFB borrowers to prepay their loans at
Findings                                                                               book value rather than at current
                                           general decline in interest rates; (7)
GAO found that: (1) FFB interest rates     because borrowers appealed to               Treasury market value, as called for in
were consistently lower than those         policymakers for relief after FFB           FFB policy, Congress should consider
available in the private sector; (21 the   maintained that prepayments had to be       providing the programming agencies or
FFB prepayment policy provided             made at the loans’ Treasury market          the FFB with appropriations to cover the
borrowers with flexibility and protected   value, Congress passed legislation          costs of authorizing loan prepayments at
the government from incurring costs; (3)   allowing certain borrowers to prepay        book value.
FFB accepted loan prepayments at their     loans at book value; and (8) to finance     Status: Action not yet initiated.




                                           Page 84                                                                  GAO/OP-90-l
                                           Financial Management and Information Syetem6




      I
Inte!nal   Audit
CP& Audit Quality: Improved Controls Are Needed To
Endure Quality Audits of Federal Loan Programs
AFMjD-88-3,05/02/88
@acidground                                Development and the Administrator,            the quality of CPA audits of loan
GAO jeviewed the Department of             SBA, should issue written procedures          programs.
Agric lture’s (USDA), the Department of    requiring loan program officials to follow    Addressee: Department of Agriculture
Housi 9 g and Urban Development’s          up on late audit reports, specify action to   Status: Action in process. FmHA is
(HUD , and the Small Business              be taken when the reports are late, and       developing procedures for reviewing the
Admi istration’s (SBA) controls for        improve controls to ensure that those         quality of CPA audits.
ensuri g that certified public             procedures and actions are taken.             Addressee: Small Business
accou ! tants (CPA) conduct high-quality   Addressee: Department of Agriculture          Administration
audite! of their loan programs.            Status: Action in process. The Farmers        Status: Recommendation valid/action
                                           Home Administration @ ‘mHA) has               not intended. SBA believes that it has
                                           proposed a regulation to address this         the authority to review the quality of
Findings                                   recommendation, The Rural                     CPA audits, when it deems that
GAO found that: (1) 26 percent of loan     Electrification Administration (REA) has      necessary.
program audits did not comply with         not responded to this recommendation.
auditijlg standards; (2) noncompliance     Addressee: Small Business                     Recommendation: The Secretary of
with auditing standards included a lack    Administration                                Agriculture and the Administrator, SBA,
of documentation regarding CPA             Status: Recommendation valid/action           should require that audits of
financial transactions, tests, internal    not intended. SBA believes that existing      participants in loan programs be
control evaluations, and compliance; and   regulations are adequate.                     performed in accordance with generally
(3) a national professional CPA                                                          accepted government auditing standards
association made 25 recommendations in     Recommendation: The Secretaries of            (GAGAS).
the areas of education, engagement,        Agriculture and Housing and Urban             Addressee: Department of Agriculture
evaluation, enforcement, and               Development and the Administrator,            Status: Action taken not fully
information exchange to improve the        SBA, should provide CPA with complete
quality of government audits. GAO also                                                   responsive. FmHA is developing
                                           and current written audit guidance to         regulations to require audits to be
found that USDA, HUD, and SBA: (1)
                                           use in the conduct of loan audits.            performed in accordance with GAGAS.
lacked effective controls for receiving
                                           Addressee: Department of Agriculture          REA has no current plans to require
and reviewing CPA audits of their loan
pro&am participants; and (2) did not       Status: Action in process. FmHA is            audits to be performed in accordance
fully iaddress problems involving          developing a new audit guide.                 with GAGAS, claiming that
untimely receipt of audit reports,         Addressee: Small Business                     requirements to perform audits in
insufficient audit reviews, and            Administration                                accordance with GAGAS would be
inadequate written guidance for CPA in     Status: Recommendation valid/action           inappropriate as well as too costly.
their internal control improvements.       not intended. SBA disagreed that              Addressee: Small Business
                                           participants in its programs should be        Administration
                                           subject to government audit standards,        Status: Recommendation valid/action
Open Recommendations             to                                                      not intended. SBA believes that it would
Agencies                                   Recommendation: The Secretary of              be inappropriate, as well as too costly, to
Recommendation: The Secretaries of         Agriculture and the Administrator, SBA,       require such audits to be performed in
Agriculture and Housing and Urban          should implement procedures to review         accordance with GAGAS.




                                           Page 85                                                                     GAO/OP-90-l
                                            Financial Management and Information Systems




   ,
Internal    Audit
FBI Internal               Audit: Opportunities                       for Improvement
GGD-89-9,11/23/88
         .-__.--
R&kground                                   experience requirements for its program      oftices to prioritize issues that it should
                                            evaluation staff, GAO also found that, by    evaluate. OPEA staff also informally
In besponse to a congressional request,
                                            filling audit management positions           review FBI programs and use this with
GAO reviewed the Federal Bureau of
                                            temporarily with special agents, FBI         prioritization to determine what work
Investigation’s (FBI) internal audit        could impair the independence of the
ac$vities to determine the: (1) extent of                                                will be undertaken each year. OPEA will
                                            internal audits.                             vary, when appropriate, from its 5-year
the audits’ focus on major FBI
injestigative programs; (2) steps FBI                                                    schedule for reviewing major programs.
to k to increase the qualifications,        Open Recommendations               to
in d ependence, and permanence of its       Agencies                                     Recommendation: The Attorney
inspection and audit staffs; and (3)                                                     General should require the Director,
                                            Recommendation: The Director, FBI,           FBI, to improve the independence of FBI
potential weaknesses in audit quality       should modify the internal audit
and effectiveness.                                                                       inspection activities by increasing the
                                            procedures of the Office of Program
                                                                                         permanency of the persons responsible
                                            Evaluations and Audits (OPEA) to
                                                                                         for directing or managing the Inspection
Findings                                    improve its long-range planning of
                                                                                         Division and internal audit activities.
                                            program evaluations through
GAO found that, since 19’79, FBI has: (1)   periodically assessing the vulnerabilities   Status: Action taken not fully
improved its inspection and program         of FBI operations and considering these      responsive. The Department of Justice
evaluation activities by focusing on its    vulnerabilities in its long-range            stated in its 31 U.S.C. ‘720 response that
11 major investigative programs during      evaluation plans, and consider assessing     the Director, FBI, would be more
division and field office inspection; (2)   the vulnerabilities of the individual        sensitive to permanence in the selection
evaluated all major investigative           categories of crimes that make up the        of leaders for the Inspection Division
programs at least once, except for the      major criminal investigative programs.       and internal audit activities. It is not
recently established FBI Drug Program;      Status: Action in process. OPEA is now       clear how this will translate into greater
and (3) raised the educational and          asking headquarters divisions and field      permanence for these positions.


Internal    Audit
CPA Audit Quality: Failures of CPA Audits to Identify and
Report Significant Savings and Loan Problems
AFMD-89-45, 02/02/89
Background                                  Findings                                     financial or internal control problems;
                                                                                         (2) improperly evaluated the institutions’
Pursuant to a congressional request,        GAO reviewed audits performed by 9
                                                                                         loan collectibility and nonconformance
GAO assessed the quality of audits of       independent certified public accountant
                                                                                         with accounting standards and practices;
savings and loan llssociations in the       (CPA) firms and found that the CPA           (3) did not hire or request the
Federal Home Loan Bank Board’s              firms: (1) did not adequately audit 6 of     institutions to hire independent
(FHLBB) Dallas district.                    the 11 savings and loan associations’        appraisers to verify collateral or oral



                                            Page 86                                                                     GAO/OP40-I
                                              Financial Management and Information Systems




assert&s made by management of loan           regulatory and professional bodies for       nature and inherent risks of land and
collectibility and collateral value; (4)      review.                                      acquisition, development, and
underrbported the institutions’ violations                                                 construction projects loans; (2)
of govelnment regulations regarding           Open Recommendations               to        evaluating the potential effects of
excessike loans to single borrowers and                                                    increases in restructured and past-due
related) parties and concentration of
                                              Agencies
                                                                                           loans; (3) following up on the work of
high-rigk loans in limited geographic         Recommendation: The American                 federal examiners; (4) ensuring that
areas; Cnd (5) lacked sufficient working      Institute of Certified Public Accountants    regulatory violations and formal
papers) to adequately evaluate the            (AICPA) should revise the AICPA Audit        regulatory actions are disclosed; and (5)
institu ions’ asset portfolios for land       and Accounting Guideline for Savings         properly reporting all material
invest enta and for acquisition,              and Loan Associations to include specific    weaknesses in internal controls.
develo ment, and construction project         steps for ensuring that those audits are
                                                                                           Status: Action in process. AICPA is
loans. % A0 believes that the nature of       performed in a quality manner. The
                                              guide should include the detailed            currently revising the guide. The
the CPb firms’ audit and reporting
                                              discussion and specific requirements for,    completion date is not yet known.
problebs was significant enough to
warra$ referring the firms to                 among other things: (1) identifying the


Regujlatory Accounting            Rules and Financial          Reporting
Budget Issues: The President’s Current Services Budget
AFl\llDW-10,
--._...._  _ --. 12/02/86
      I..__.....    ..-.-~~-.-~--___I-
Bachground                                    not inconsistent with the act’s              Open Recommendations               to
In resixmse to a congressional request,       requirements, since the act does not         Congress
GAO reviewed the current services             discuss or define policy; (2) the use of
                                              different policy definitions lessens the     Recommendation: If the requirement
budget to determine: (1) whether                                                           for a current services budget is retained,
procedures for developing current             current services budget’s usefulness to
                                              Congress as a budget tool; (3)               Congress should amend the budget act to
services estimates complied with the                                                       specifically define the set of policies to
Congressional Budget and Impoundment          congressional staff involved in the
                                              budget process do not regularly use the      be assumed in developing the current
Control Act of 1974; and (2) how to                                                        services estimates. While judgment is
improve the usefulness of current             current services budget because the
                                              Congressional Budget Office’s                always required in making budget
services estimates to Congress.                                                            estimates, the use of a defined set of
                                              information is more useful; (4) budget
                                                                                           policies would ensure a common
                                              examiners’ use of inconsistent
Findings                                      estimating methods and OMB use of
                                                                                           understanding between Congress and
GAO hoted that the act requires the                                                        OMB as to what the current services
                                              exceptions to its own guidelines could
President to submit a current services                                                     budget represents, making it a more
                                              result in a current services budget
budgeit to Congress showing the                                                            useful budgetary tool.
                                              developed to support the President’s
estimated outlays and proposed budget                                                      Status: Action not yet initiated.
                                              proposed policies rather than to
authority for the following fiscal year if    highlight the fiscal effects of proposed
the government maintained all                                                              Recommendation: For the current
                                              policy changes; and (5) elimination of the
programs and activities at their current                                                   services budget to best serve the purpose
                                              legal requirement for the current
levels. GAO found that: (1) the Office of                                                  of providing a baseline for highlighting
                                              services budget would help prevent the
Management and Budget’s (OMB)                                                              the fiscal effects of policy changes
                                              use of its estimates to support particular
definition of policy for certain agencies                                                  proposed in the President’s budget,
                                              policies.
and programs, although different from                                                      Congress should use the most current
its general current services guidelines, is                                                policy reflected in law to develop it.



                                              Page 87                                                                   GAO/OP-90-l
-

                                                Financial Management and Information Systems




Ggress should specifically define               to Congress as a baseline. The definition      Act of 1985 is an example of the detail
current policy at a sufficient level of         of the budget base in the Balanced             required in such a definition.
detajl to ensure that OMB provides the          Budget and Emergency Deficit Control           Status: Action not yet initiated.
type! of information that would be useful


Re&ulatory Accounting               Rules and Financial           Reporting

Financial Audit: Veterans Adm inistration’s                                                    Financial
St!atements for Fiscal Year 1986

Bqckground                                      decreased by between $4 billion and $5.7       Open Recom m endations             to
Gi     examined the Veterans
                                                billion; (3) VA did not always properly        Agencies
                                                bill patients who were not entitled to
AdF inn&ration’s (VA) consolidated                                                             Recommendation: The Administrator of
finsncial statements for fiscal year 1986,      free care, and its records showed about        Veterans Affairs should conduct a
and reviewed VA internal controls and           $20.2 million in receivables for ineligible-   review of delinquent VA debts and,
corupliance with federal laws and               patient care; (4) VA failed to comply          accordingly, either assess the proper
regulations.                                    with the Prompt Payment Act and the            amount of interest and administrative
                                                Veterans’ Rehabilitation and Education         costs, as required by law, or execute
                                                Amendments of 1980, and may not have           waivers if there are appropriate reasons
Findings                                        complied with the Debt Collection Act of       for doing so.
GAO found that: (1) it could not                1982; and (5) except as noted, the VA          Status: Action in process. Estimated
establish the book value of VA assets,          financial statements presented fairly the      completion date: 01/91. The interest rate
including land, buildings, and equipment        VA financial position as of September          charged on loan guaranty debts will be
that VA acquired over periods dating            30, 1986, in accordance with generally         changed. However, the computerized
bqck to 1930; (2) had VA calculated its         accepted accounting principles applied         system will have to be modified for this
insurance reserve balance under                 on a consistent basis.                         change, and due to the extensive
generally accepted accounting principles,                                                      programming required, implementation
its balance of $11.2 billion would have                                                        cannot be achieved until 1991.


Regulatory          Accounting       Rules and Financial          Reporting
    Financial Reporting: Defense Agencies’ Reports on
    Financial Position Need To Be Improved
    A F M.ID_..__._.
            -88-19,_______
                     04/ 14/88
                           ..~..I.._
                               ____
    Background                                  whether DOD encountered any problems           Findings
                                                in implementing the requirements; and          GAO found that DOD: (1) did not develop
    GAO reviewed th,e Department of
                                                (2) identify actions DOD should take to        the required guidelines for compiling
    Defense’s (DOD) compliance with GAO
                                                improve compliance.                            financial reports; (2) did not verify the
    and Department of the Treasury annual
    reporting requirements, to: (I) determine                                                  accuracy of the data in its reports to




                                                Page 88                                                                      GAO/OP-90-l
                                              Financial Management and Information Systems




--+
Treasury, which contained                     Open Recommendations                to         Status: Action in process. Estimated
compumtional errors; (3) submitted only       Agencies                                       completion date: 09/90. DOD has issued
four of the five required agency-level                                                       guidance requiring DOD activities to
report-s; (4) overstated its assets by $395   Recommendation: The Secretary of               implement the U.S. Government
million’ liabilities by $11.6 million, and    Defense should direct the defense              Standard General Ledger. The project to
equity y $250.1 million in its general        agencies to obtain access to, and use,         implement the central Washington
         b                                    systems containing general ledgers, or a
and de osit fund consolidated report; (5)                                                    Headquarters Service (WHS) general
omitte 46 accounts from its                   centrally controlled data base containing
                                                                                             ledger in support of centralized
                                              proprietary and budgetary accounts, as a
consoli i ated report; (6) did not comply                                                    reporting is completed. Beginning with
                                              primary source of information in
with a counting standards and                                                                the FY 1990 reporting period, WHS
                                              preparing the Reports on Financial
requir 1 ments; and (7) did not require the                                                  plans to prepare the Reports on
                                              Position, as an interim measure until
use of eneral ledger data.                                                                   Financial Position, based on the central
        9                                     full implementation of the U.S.
         I                                    Government Standard General Ledger.            general ledger.



Reguilatory Accounting            Rules and Financial           Reporting
Financial Audit: Commodity Credit Corporation’s Financial
Statements for 1987 and 1986
AFMD-8%47,07/0'7/88
Background                                    reconciling loan disbursements and             Open Recommendations                to
GAO reported on the Commodity Credit          repayment receipts from its Kansas City        Agencies
Corporation’s (CCC): (1) financial            Management Office to local county
                                              offrices; and (5) did not adequately control   Recommendation: CCC should give
statements for the years ended                                                               prompt attention to controls over
September 30,1987 and 1986; and (2)           conversion to that system, resulting in
                                              unreconciled differences in receipts and       conversions to new automated systems.
system of internal accounting controls                                                       Status: Action in process. CCC has
and compliance with laws and                  disbursements. GAO also found that: (1)
                                              except for their failure to establish an       developed a computerized error listing
regulations.
                                              allowance for estimated loan losses and        and is in the process of clearing the
                                              a reserve for guaranteed loan losses, the      remaining outstanding potential errors.
Findings                                      financial statements presented fairly the      The GAO Kansas City Regional Office is
GAO found that CCC: (1) did not include       financial position of CCC as of                monitoring the program.
in its financial statements an allowance      September 30, 1987 and 1986, and the
for the uncollectible portion of $15          results of its operations and the changes      Recommendation: The Chairman of the
billion in outstanding loans to countries     in its financial position for the years        Board of Directors, CCC, should direct
experiencing financial difficulties; (2)      then ended, in conformity with generally       the Controller, CCC, and the Director of
had estimated cumulative losses ranging       accepted accounting principles applied         the Kansas City Management Office to
from $5 billion to $8 billion on those        on a consistent basis; and (2) internal        ensure that local offices are provided
loans as of September 30, 1987; (3) did       accounting controls and procedures had         with a monthly listing of unreconciled
not have a reserve for losses associated      several weaknesses that were not               differences between internal and
with $5 billion in outstanding                material to the CCC financial                  external sources.
guaranteed loans to foreign countries; (4)    statements.                                    Status: Action in process. Estimated
during 1987, instituted a new automated                                                      completion date: 12/89. ASCS has
system which transferred the                                                                 directed that reconciliation listings of all
responsibility for recording and                                                             unmatched paid checks and unmatched



                                              Page 89                                                                       GAO/OP-90-l
                                              Financial Management and Information Systems




cash, be sent to county offices on a          monitor county offices to ensure             automated systems until problems
mon&hly basis for corrective action.          differences are resolved in a timely         associated with current implementation
Insufficient time has elapsed to judge        manner. Additionally, procedures for         efforts are resolved and CCC accounts
compliance with, and effectiveness of,        national area offices are being enhanced     are accurate and current.
the new policy.                               to ensure that state and county offices      Status: Action in process. The agency
                                              comply with new reconciliation               stated that it has established a new
Recbmmendation: The Chairman of the           procedures. This recommendation should       policy giving priority to correcting
Board of Directors, CCC, should direct        remain open until policy is implemented      problems associated with current
the !Controller, CCC, and the Director of     and its effectiveness tested.                systems and completing projects already
the !Kansas City Management Office to                                                      underway before starting any new
ensure that local offices’ efforts are        Recommendation: The Chairman of the          projects. However, recently enacted
mokitored to resolve the differences in a     Board of Directors, CCC, should direct       legislation will necessitate that ASCS
tim/ely manner.                               the Controller, CCC, and the Director of     suspend this policy to make significant
Stabus: Action in process. Estimated          the Kansas City Management Office to         modifications in existing software to
completion date: 12189. ASCS is drafting      ensure that consideration is given to        implement the new disaster-related
pol/cy instructing state offices to closely   suspending further conversions to            programs.

   !



Rfgulatory       Accounting       Rules and Financial          Reporting

Financial Audit: Veterans Administration’s Financial
Statements for Fiscal Years 1987 and 1986
AFMD-89-23, 11/30/88
Background                                    inaccurate account balances; and (2) a       Open Recommendations              to
GAO reviewed the Veterans                     $3-billion overstatement in life insurance   Agencies
Administration’s (VA): (1) consolidated       reserves due to VA use of statutory
                                              assumptions, rather than more realistic      Recommendation: The Administrator of
financial statements for the fiscal years                                                  Veterans Affairs should direct the Office
(F’Y) ended September 30, 1987 and 1986;      assumptions. GAO also found: (1) that
                                              the VA manual property accounting            of Information Systems and
(2) internal accounting controls; and (3)
                                              system was inefficient; and (2) automatic    Telecommunications and the
compliance with laws and regulations.
                                              data processing (ADP) internal control       Department of Veterans Benefits to
                                              weaknesses at all three VA data              improve the ADP centers. These
Findings                                      processing centers. In addition, GAO         corrective actions should include: (1)
GAO found that, except for two                found that VA violated laws and              implementing effective manual or
qualifications, the consolidated financial    regulations by failing to charge: (1)        automated documented reviews of
statements presented fairly: (1) the          interest and administrative costs on         software program code changes for
financial position of VA on September         certain debts that compensation and          sensitive applications; and (2)
30, 1987 and 1986; and (2) the results of     pension programs generated; or (21 the       incorporating software maintenance and
VA operations, the changes in its             correct interest rate on its loan guaranty   data integrity controls, such as
financial position, and the budget            accounts receivable. GAO found that: (1)     establishing independent audit test files
reconciliation for FY 1987. GAO               VA stated that it could not charge the       at the Austin Data Processing Center.
qualified its opinion due to: (1) its         correct rate until 1991 when it would        Status: Action in process. Estimated
inability to perfol;m necessary auditing      complete necessary computer software         completion date: 09/90. VA is conducting
procedures to substantiate the asset and      reprogramming; and (2) the VA cash           a systems audit study which will include
related expense accounts, due to              vendor invoice payment procedures did        considering automated reviews of
unavailable documentation and                 not fully comply with regulations.           software program code changes, and



                                              Page 90                                                                   GAO/OP30-1
                                             Financial Management and Information Systems




--
trying to develop a consistent approach      Veterans’ Rehabilitation and Education       implementation date for the resolution
across all three systems development         Act. At least two potential alternatives     method ultimately chosen.
centera. Controls will be improved at the    include: (1) issuing waivers as authorized
Insurance Center when the insurance          by 38 U.S.C. 3102 for cases where            Recommendation: The Administrator of
system are converted to COBOL                charging interest and administrative         Veterans Affairs should direct the
compu cer language, which is anticipated     costs is deemed to be against equity and     Controller to complete the conversion to
for con pletion by the end of FY 1990.       good conscience; or (2) obtaining the        the automated invoice payment system
                                             legislative approval to exempt               of invoices handled manually.
Recommendation: The Administrator of         compensation and pension receivables         Status: Action in process. Estimated
Vetera 1 s Affairs should require the        from interest and administrative costs       completion date: 03190. Automated
Dire&r of the Department of Veterans         charges.                                     improvements in the CAPPS system
Benefi s to determine an effective and       Status: Action in process. VA concurred      were made during fiscal year (FY) 1988;
appro riate method of resolving the          and is examining all possible methods        however, an enhancement to the system
issue o charging interest on accounts        for resolving the issue of charging          is being developed to provide for batch
receive ble relating to the compensation     interest on the compensation and             input from field stations. This
and pe sion benefit overpayments as          pension benefit overpayments. VA does        enhancement is expected to be installed
requir d by the 1980 amendments to the       not consider it possible to provide an       early in FY 1990.
     i,
Reg$atory       Accounting       Rules and Financial          Reporting

Financial Audit: Farmers Home Administration’s                                                        Losses
Have Increased Significantly
AFMD-89-20,12/20/88
__.._
 I_-.-‘---
Background                                   $24 billion due in 1989. GAO also found      Open Recommendations              to
GAO examined the Farmers Home                that FmHA: (1) made loans at interest        Agencies
Administration’s (FmHA): (1) financial       rates far below what it had to repay; (2)
                                             as a lender of last resort, made loans to    Recommendation: The Secretary of
statements for the year ended                                                             Agriculture should direct the
SeptemTlber30, 1987; (2) internal            individuals who were not otherwise
                                             creditworthy, resulting in a large           Administrator, FmHA, to ensure that
accounting control system; and (3)
                                             number of delinquent loans; (3) did not      the procedures are fully implemented for
compliance with laws and regulations.
                                             record property it received by voluntary     conducting an annual risk assessment of
                                             conveyance at fair market value; (4)         the FmHA loan portfolio and for
Findings                                     lacked a policy for writing off              producing loss estimates based on these
GAO ‘found that, although the financial      uncollectible loans and did not analyze      assessments, as required by Office of
statements presented fairly the FmHA         the ultimate collectibility of its loan      Management and Budget Circular A-129.
financial condition, FmHA: (1) had a         portfolio in accordance with Office of       Status: Action taken not fully
significantly deteriorating financial        Management and Budget COMB)                  responsive. FmHA implemented a loan
condition, with an accumulated deficit of    requirements; (5) had numerous control       classification system used as a basis for
$36 billion; (2) relies on Treasury loans    weaknesses in its Automated Multiple         estimating the allowance for loan losses.
to colitinue its operations and may          Family Housing Accounting System             However, weaknesses exist in the system
require significantly increased              (AMAS); (6) lacked adequate controls         which may cause the data produced by
congressional assistance to sustain          over the entry of guaranteed loans into      the system to be unreliable. For
operations; (31 had an operating 108s of     its accounting system; and (7) did not       example, realistic market values of
$22 billion for fiscal year (FYI 1987; and   reconcile its detailed property files with   collateral were not used, procedural
(4) owed the Treasury $85 billion, with      general ledger control accounts.



                                             Page 91                                                                   GAO/OP-90-l
                                              Financial Management and Information Systems




errctrs were made, and some loans were        AMAS borrower account activity cannot        losses on the acquisition of property are
omi&ted from the classification system.       be reconciled to the general ledger. The     properly recorded.
                                              Federal Manager’s Financial Integrity        Status: Action in process. Estimated
Reqommendation: The Secretary of              Act report for fiscal year 1988 recognizes   completion date: 10/90. FmHA is
Aglticulture should direct the                AMAS as a material internal control          undergoing system changes to properly
Ad&inistrator, FmHA, to ensure that:          weakness.                                    compute gains and losses on property
(1) AMAS is thoroughly tested; (2)                                                         acquisition and disposition. FmHA
internal control procedures are in place      Recommendation: The Secretary of             initiated the Acquired Property
to reconcile detailed AMAS files to the       Agriculture should direct the                Tracking System; however, all detailed
general ledger on a daily basis; and (3)      Administrator, FmHA, to complete all          files are not reconciled to the general
operating instructions and internal           acquired property system modifications        ledger and some data entered in the
cor(tro1 procedures are fully documented.     within reasonable time frames to ensure       system are inaccurate. The system
Sta/tue: Action in process. Estimated         that: (1) all detailed files are balanced     software does not include parameter
cor/lpletion date: 12/89. Operating           with the general ledger; (2) acquired         checks to detect the recording of
 inskructions and internal control            property is recorded at fair value at the     unreasonable property value.
 prtkedures are not documented. All           time of acquisition; and (3) gains and


Rfgulatory      Accounting       Rules and Financial           Reporting
Fjinancial Audit: Examination of EPA’s Financial
Statements for Fiscal Year 1987
 GFMD-89-24,02/09/89
   .._.
     ___.-.
        -
 Background                                    (FMFIA) report; and (4) recorded              Open Recommendations              to
 GAO examined the Environmental                inaccurate cost and property data in          Agencies
                                               Superfund property records and did not
 Protection Agency’s (EPA) consolidated                                                      Recommendation: To ensure that all
 financial statements for the year ended       properly maintain records. GAO also
                                               found that: (1) it could not determine        agency assets and liabilities are properly
 September 30, 1987, and the related                                                         accounted for and reported, the
 consolidated statements of revenues and       whether EPA properly recorded assets,
                                                liabilities, equity, revenues, and           Administrator, EPA, should direct
 expenses and of changes in financial                                                        agency staff to ensure that the
 position and reconciliation to budget for      expenses at the beginning of tiscal year
                                                (FY) 1987, since that was the first year     accounting system provides accurate and
 the year then ended.                                                                        reliable financial and management
                                                EPA began preparing consolidated
                                                statements in accordance with generally      records needed to account for and
 Findings                                       accepted accounting principles; (2) it       control property assets.
 GAO found that EPA: (1) did not                 could not perform auditing procedures       Status: Action in process. Estimated
 routinely reconcile its general ledger          necessary to determine the aggregate        completion date: 08/91. EPA is
 balances t.0 external sources or                net book value of land, buildings, and      developing procedures to identify and
 subsidiary records; (2) used property           equipment, due to numerous property          support fixed assets being capitalized.
 management systems and records which            accounting problems; and (3) except as      The new EPA I Financial Management
 lacked the necessary information for            noted, the financial statements              System (FMS) will provide the ability to
 proper accounting, reconciliation, and          presented fairly the EPA financial           integrate property information with the
 internal controls;d(3) did not include the      position as of September 30, 1987.           EPA Property Control System. However,
 material weakness in ita internal control                                                    this will not be operational until August
 system over property in its 1987 Federal                                                     or September 1991.
  Managers’ Financial Integrity Act



                                                Page 92                                                                    GAO/OP-SO-1
                                                     Financial Management and Information System8




-_I_




 Recom&ndation:       To ensure that all             FY 1987 audit report dated September         However, EPA agreed that a conflict
 agency aseta and liabilities are properly           21, 1988.                                    exists between EPA directives and
 accoun b d for and reported, the                    Status: Action in process. Estimated         Region 2 General Counsel opinion on the
 Admini 5 trator, EPA, should direct                 completion date: 09/90. EPA declined to      requirement for custodial officers to
 agency Btaff to address all property-               reconcile the difference between FMS         sign. Custodial officers are still
 related ‘findings and recommendations               and the Property Control System that         responsible for property if they refuse to
 reported by the Superfund auditor in its            existed a~ of September 30, 1988.            sign for it.


  Regu atory Accounting                 Rules and Financial          Reporting
  CP Audit Quality: Status of Actions Taken to Improve
  Au f iting and Financial Reporting of Public Companies
   AFMb-89-38.03/06/89
   Back/ground                                       by terminated auditors to SEC would          Status: Action in process. SEC staff is
   Pursuant to a congressional request,              serve to alert SEC to possible problems      analyzing comments received on its
   GAO reviewed the implementation of                which caused the company to change           proposal.
   changes to improve auditing and                   auditors; (5) SEC has delayed action on
   financial reporting of public companies.          mandatory peer review for all public         Recommendation: SEC should require
                                                     company auditors while it addresses          the auditor to review and publicly report
                                                     several issues, including the structure of   on the management report.
       Findings                                      an SEC-sponsored peer review program,        Status: Recommendation valid/action
       GAO found that the public accounting          the costs and benefits of mandatory peer     not intended. No action is planned based
       profesoion and others have taken              review, and questions about SEC              on the section 236 response.
       positive actions to address concerns          authority to require peer reviews; (6) the
       about audit quality and the accuracy          American Institute of Certified Public       Recommendation: SEC should reverse
       and reliability of financial discloBures,     Accountants’ (AICPA) Special                 its decision on audit committees and
       but have not acted on several proposals.      Investigations Committee, which              adopt a requirement for public
       GAO found that: (1) the Securities and        examines allegations of audit failures,      companies to establish such committees.
       Exchange Commission (SEC) does not            has performed its activities in strict       Status: Recommendation valid/action
       require companies to provide                  confidence, limiting SEC ability to          not intended. No action is planned based
       information concerning significant risks      monitor the investigative process; and (71   on the section 236 response.
       and uncertainties in the corporate            although AICPA has made significant
       management diSCUSSiOnand analysis             progress in improving both professional      Recommendation: AICPA, or SEC, if it
       section of annual reports; (2) in July        and auditing standards, it has not           concludes it has the authority, should
       1988, SEC proposed a rule requiring           updated guidelines for some specialized      require accountants to report directly to
       public companies’ management to report        areas.                                       SEC when they resign or are terminated.
       on their responsibilities for the financial                                                However, if AICPA or SEC does not
       statements and on their assessment of         Open Recommendations              to         adopt such a requirement, legislation
       the company’s internal controls, but SEC                                                   would be necessary to require direct
       never finalized the rule; (3) while
                                                     Agencies                                     notification to SEC.
       endorsing audit committees 88 an              Recommendation: SEC should adopt its         Addressee: Securities and Exchange
       effective force for ensuring auditor          proposal to require management of            Commission
       independence, SEC decided not to              public companies to publicly report on       Status: Action not yet initiated. AICPA
        require all public companies to establish    its responsibility for the financial         has taken the required action as to SEC
       audit committees; (4) direct notification     statements and internal controls.            Practice Section members. However,



                                                     Page 93                                                                    GAO/OP-SO-1
                                             Financial Management and Information Systems




noh-AICPA members are not covered            Status: Action not yet initiated. The      Status: Action in process. SEC is
an SEC has taken no action.                  Commission staff is continuing to study    working with the SIC in this area.
   P                                         these issues.
Ra’commendation: SEC should resolve                                                     Recommendation: AICPA should issue
th)? remaining issues and adopt a            Recommendation: In order for SEC to        the industry audit guides currently
rebuirement that all firms practicing        monitor the effectiveness of the Special   under revision as quickly as possible and
before SEC be subject to periodic peer       Investigations Committee’s (SIC)           undertake an effective program to keep
reiiews. However, if SEC determines          activities, the Committee should provide   all guides current.
thbt it does not have sufficient authority   SEC with access to all required            Status: Action in process. AICPA is
to’do this, legislation would be             information about the cases it             considering a proposal to change its
necessary.                                   investigates.                              process for issuing and updating guides.


Wegulatory Accounting             Rules and Financial        Reporting
qinancial Audit: Food and Nutrition                                        Service’s Financial
gtatements for 1987
i$FMD-89-22,03/15/89
--r-.-.-
Background                                   Open Recommendations              to       returned to inventory, as reported by the
GAO examined the Food and Nutrition          Agencies                                   issuance points.
Service’s (FNS) financial statements for                                                Status: Action not yet initiated.
                                             Recommendation: To correct these
the fiscal year (FYI ended September 30,                                                Adjustment was reflected in the FY 1990
                                             weaknesses, the Secretary of Agriculture
1987.                                        should direct the Administrator, FNS, to   budget. As a result, FNS has not
                                             determine whether all issuance points      recorded this adjustment in its
                                             are properly reporting food coupons        accounting records but plans to reflect
Findings                                     returned to inventory on the FNS-250       this adjustment on its Treasury
GAO found that: (1) the statement of         reports and direct those that are not      statement TSF-224 around December
financial position presented fairly the      properly reporting them to do so.          1989.
FNS financial position as of September       Status: Action not yet initiated. In
30, 198’7, in conformity with generally      addition to the FNS-250 report, starting   Recommendation: To correct these
accepted accounting principles; (2) FNS      in January 1990, FNS will require states   weaknesses, the Secretary of Agriculture
failed to adjust the food stamp benefits     to complete Form 46, Issuance and          should direct the Administrator, FNS, to
issued and the related liability of          Reconciliation Report. Data from this      reconcile account balances to the
undelivered coupons, resulting in a IO-      report will be used as the basis for the   relevant supporting documentation, such
percent increase in liability between        obligation and expense entries for food    as Treasury account balances, and to
1984 and 198’7,with no significant           stamp issuance. FNS currently plans to     supporting subsystem balances, such as
growth in program benefits over the          test information coming from this report   the accounts receivable subsystem
same period; and (3) FNS did not             to parellel with information coming from   balance. Adjusting entries resulting from
                                             the FNS-250 report.                        this reconciliation process should be
effectively use its financial accounting
#and reporting system in preparing its                                                  recorded promptly.
                                             Recommendation: To correct these           Status: Action in process. FNS has sent
financial reports.                           weaknesses, the Secretary of Agriculture   out instructions to its regional offices
                                             should direct the Administrator, FNS, to
                                                                                        emphasizing the importance of
                                             reduce the food stamp expense and
                                                                                        reconciliation. However, significant
                                             unredeemed food coupon liability
                                                                                        accounts remain out of balance and
                                             accounts for the value of the coupons



                                             Page 94                                                                 GAO/OP-90-l
                                              Financial Management and Information Systems




subsystdms do not agree with the              transactions, such as year-end liability    system. While FNS staff have recorded
general pdger balances.                       accruals, in the accounting system.         year-end entries to adjust liability
                                              Status: Action not yet initiated. FNS       accounts, the methodologies they have
Recumr/lendation: To correct these            does not have an accrual-based              used do not appropriately evaluate
weaknesses, the Secretary of Agriculture      accounting system, and has no               whether the accounts are appropriately
should tlirect the Administrator, FNS, to     methodologies in place to make accrual      valued.
record all relevant accounting                accounting entries in the accounting


Regu atory Accounting             Rules and Financial          Reporting
Fin ncial Reporting: Navy’s 1986 Consolidated Report on
Fin ncial Position Is Unreliable
AFMb89-l&04/06/89
  ...__-I
       _l__..l__.__
              *_-.-._.--.- --                  -
Backbround                                    receivable data that differed from the      ledger account data rather than budget
GAO reviewed the Department of the            accompanying support schedules by           execution documents; and (2) monitor
Navy’s fiscal year 1986 Consolidated          $164.5 million; (5) used different data     and take action necessary to ensure
Report ‘on Financial Position to              sources, with different requirements, to    adherence to existing procedures to
determine its compliance with GAO and         prepare reports for Treasury and            reconcile balances of property
Department of the Treasury annual             Congress; (6) did not reconcile property    accounting activities with detailed
financi$ reporting requirements.              records with its accounting system; (7)     property record balances contained in
        /                                     did not develop service-specific            the real property management system.
                                              guidelines for complying with Treasury      Status: Action in process. Estimated
Findings                                      reporting requirements; and (8) lacked      completion date: 02190. The Navy
GAO found that the Navy provided              controls to identify and correct problems   implemented the Department of Defense
inaccurate and incomplete financial           occurring from dual recording of assets,    Uniform Chart of Accounts in the Navy
position reports to Treasury, since it: (1)   property recording delays, and minimum      Headquarters Financial System and is
did not effectively supervise, review, or     acquisition-reporting thresholds.
                                                                                           using that system to prepare its reports
control report preparation to ensure                                                       on financial position. The Navy,
accuracy; (2) did not disclose                Open Recommendations               to        however, has not completed its
approximately $58 billion in real
property, understating property assets
                                              Agencies                                     monitoring for compliance with existing
                                              Recommendation: The Secretary of the         procedures.
by 34 percent and total assets by 18
percent; (3) did not disclose $1.7 billion    Navy should direct the Navy
in guaranteed loans or data on operating      Comptroller to: (1) prepare the report on
leases for ships; (4) presented accounts      financial position based on general




                                               Page 95                                                                 GAO/OP-90-l
                                            Financial Management and Information gystems




Re/gulatory Accounting           Rules and Financial         Reporting
Iriternal Controls: Areas for GSA Management to
Strengthen
AFMD-89-36,04/20/89
Bkckground                                  adequate written guidance and the            should direct the GSA Comptroller to
GAO identified areas in which the           amount of manual processing of               develop a plan which includes a
General Services Administration (GSA)       financial data led to inaccuracies and       timetable for resolving the weaknesses
nebded to improve its internal              inconsistencies in its financial reporting   identified.
accounting controls and procedures.         and consolidation process; (9) did not       Status: Action in process. Estimated
                                            adhere to established accounting             completion date: 12190. The Acting
                                            procedures during 1987, resulting in         Administrator of General Services
Findings                                    adjustments of over $2 million to correct    responded on June 51989, with a
GAO found that GSA: (1) did not             uncollectible accounts receivable and        detailed action plan to the 18 findings
perform the number of test counts           related bad-debt expense accounts and        noted, 11 of which have been completed.
rekuired to ensure the accuracy of          $900,000 to increase year-end accounts       The remaining are to be completed by
general supply inventory records; (21 did   payable and amounts withheld from            December 31, 1990.
not maintain adequate supporting            vendor invoice payments from the
documentation for certain fund              Federal Buildings Fund; (10) did not         Recommendation: To assist the Acting
transactions; (3) did not always properly   adequately review accounts receivable        Administrator in ensuring that actions
record financial transactions in the        subsidiary records to detect and             to accomplish these improvements are
proper fiscal year, resulting in $2.6       eliminate erroneous and outdated             progressing on schedule and to assist
million in chargebacks on Federal           information, resulting in an $8.9-million    him in carrying out his responsibilities
Buildings Fund rent billings and            reduction in the Federal Buildings           under the Financial Integrity Act,
adjustments of $29 million to increase      Fund’s net income; (11) did not              managers should continue to include in
unrecorded General Supply Fund assets       adequately review construction projects      reports to the Acting Administrator
and liabilities; (4) did not always         to determine their status, resulting in      under the act information on the status
pkoperly account for cash, equity, and      adjustments of $50 million to reclassify     of efforts to correct the weaknesses
income in the receipt funds; (51 did not    completed projects and $1.7 million for      identified. To the extent weaknesses are
detect errors in the computation of         depreciation expenses; (121 lacked           not corrected by the end of the current
future lease obligations and was unable     adequate separation of duties for            fiscal year, they should be considered for
to calculate future minimum lease           personnel responsible for reviewing          inclusion in the Administrator’s annual
payments beyond 1999; (61 manual            inventory operations; and (13) lacked        report required by the act.
calculations to supplement the lease        written guidelines for some of its routine   Status: Action in process. Estimated
payment system understated future           operations.                                  completion date: 12190. The Acting
minimum lease payments from the                                                          Administrator of General Services
Federal Buildings Fund by over $18          Open Recommendations               to        responded on June 5, 1989, with a
million; (7) did not use general ledger                                                  detailed action plan to the 18 findings
expense accounts for financial statement
                                            Agencies                                     noted, 11 of which have been completed.
expense line items in its statement of      Recommendation: The Acting                   The remaining are to be completed by
revenues and expenses; (8) lack of          Administrator of General Services            December 1990.




                                            Page 96                                                                    GAO/OP-90-I
-
         I                                     Financial Management and Information Systems




Regulatory Accounting             Rules and Financial           Reporting
Thrift Failures: Costly Failures Resulted From Regulatory
Viogations and Unsafe Practices

Back round                                     misconduct in solvent thrifts, while bank    Recommendation: As a condition for
                                               system personnel generally reported          deposit insurance, Congress should enact
GAO re iewed the Federal Savings and                                                        legislation requiring each insured thrift
                                               misconduct in failed thrifts; (5) although
Loan C rporation’s (FSLIC) activities to:                                                   to prepare an annual management
                                               changes in law and the economy affected
(1) iden ify the common characteristics        all thrifts, poor regional economic          report which: (1) describes management’s
of the i oat costly failed thrifts, focusing   conditions compounded the problems in        responsibility for complying with laws
on violations of federal laws or               failed thrifts, while solvent thrifts        and regulations relating to the safety
regulations, related unsafe practices, and     followed prudent business practices that     and soundness of thrift operations and
fraud and insider abuse; (2) compare and       enabled them to survive; and (61             for establishing methods to monitor
contra+ the characteristics with solvent       although FSLIC developed new training        compliance; and (2) contains
thrifts; :and (3) identify the impact of       programs and an office to oversee            management’s assessment of the thrift’s
deregulation, regional or local economic       regulatory efforts and ensure nationwide     compliance with laws and regulations
factors, and federal regulators’               consistency, it did not address FSLIC        related to operations.
supervision and enforcement efforts for        and district banks’ multiple and             Status: Action not yet initiated.
both types of thrifts                          conflicting roles as promoters,
                                               regulators, and bankers of thrifts.          Recommendation: As a condition for
Findings                                                                                    deposit insurance, Congress should enact
                                               Open Recommendations               to        legislation requiring each insured thrift
GAO found that: (1) almost all of the                                                       to have the thrift’s independent auditor
failed thrifts changed from traditional        Congress                                     report on the management assertions
home mortgage lending to higher-risk           Recommendation: As a condition for           described and submit such reports with
activities permitted under deregulation;       deposit insurance, Congress should enact     the independent auditor’s audit report to
(2) violations of laws included inaccurate     legislation requiring each insured thrift    the thrift’s regulator.
appraisals for real estate investments,        to prepare an annual management              Status: Action not yet initiated.
excessive loans for single borrowers,          report which: (1) describes management’s
business with prohibited persons or            responsibility for preparing financial       Recommendation: Congress should
insiders, and inadequate assessments of        statements and for establishing and          enact legislation requiring that insurers
borrowers‘ ability to repay loans; (31 all     maintaining an effective internal control    identify applicable laws and regulations
of the failed thrifts had indications of       structure; and (21 contains                  which have material consequences on
fraud and insider abuse, of which the          management’s assessment of the               the safety and soundness of thrift
majority involved thrift officers or           effectiveness of the internal control        operations to be reviewed and reported
directors; (4) thrift personnel generally      structure.                                   on in management reports.
reported allegations of criminal               Status: Action not yet initiated.            Status: Action not yet initiated.




                                               Page 97                                                                    GAO/OP-90-l
                                            Financial Management and Information Systems




Regulatory Accounting             Rules and Financial        Reporting

Sbngle Audit Act: Single Audit Quality Has Improved but
Some Implementation Problems Remain
AFMD-89-72, 07/27/89
Bbckground                                  problems with some audits relating to       responsibilities for agencies that provide
                                            either internal controls, compliance        general oversight.
Pursuant to a congressional request,
                                            testing, or reporting; (3) federal          Status: Action not yet initiated. The
GAO reviewed the Office of
                                            inspectors general did not provide          report was released in August 1989, and
Management and Budget’s (OMB)                                                           OMB has not yet considered how to
implementation of the Single Audit Act,     consistent oversight, and the degree of
                                            monitoring over audit quality varied;       amend Circular A-128.
focusing on the: (1) quality of single
audits by determining their compliance      and (4) although most report recipients
                                            had concerns about the usefulness of        Recommendation: The Director, OMB,
w)th generally accepted government                                                      should amend OMB Circular A-128 to
                                            single audits, most of the reports
auditing standards; and (2) usefulness of                                               require auditors to identify in single
single audits to report recipients.         contained findings and covered the
                                                                                        audits those programs tested for
                                            majority of federal funds provided, but
                                                                                        compliance with laws and regulations
                                            did not always identify the programs
Pindings                                                                                and to differentiate among those tested
                                            tested for compliance or the extent of      as major or nonmajor programs and
GAO found that: (1) certified public        testing.                                    those tested in connection with the audit
accountants (CPA) complied with                                                         of the general purpose financial
auditing standards in 35 of the 40 audits   Open Recommendations              to        statements.
reviewed because their audits showed        Agencies                                    Status: Action not yet initiated. The
sufficient evidence of studies and                                                      report was released in August 1989, and
evaluations of internal controls and        Recommendation: The Director, OMB,          OMB has not yet considered how to
compliance testing; (2) five CPA noted      should establish and define                 amend Circular A-128.


Regulatory Accounting             Rules and Financial        Reporting
Financial Management: Opportunities for Improving                                                           VA’s
Internal Accounting Controls and Procedures
AFMD-89-35,OW
-.. _, ...~._..-~ .--_I_.
                          1l/89
Background                                  Findings                                    had undocumented or poorly supported
GAO reviewed the Department of                                                          consolidation and closing procedures; (2)
                                            GAO found that VA: (1) made significant
Veterans Affairs’ (VA) financial                                                        did not adequately implement internal
                                            progress in preparing its consolidated
management systems, focusing on how                                                     controls for medical care cost recovery;
                                            financial statements in accordance with
VA could improve internal accounting                                                    (3) lacked automated system internal
                                            generally accepted accounting principles,
controls and fInEycia1 management.                                                      controls to ensure complete and accurate
                                            although statements did not always
                                                                                        processing of compensation, pension, and
                                            agree with underlying accounting
                                                                                        education benefit payments data; (4) did
                                            systems and general ledger balances and
                                                                                        not obtain proper authorization for



                                            Page 98                                                                    GAO/OP-90-l
                                             Financial Management and Information Systems




releasing payments over threshold            perform pay verifications and                financial accounting system.
amounts; (5) did not meet requirements       reconciliations to ensure correct            Accordingly, the plan for corrective
in such areas as timely collection on        processing of payroll data.                  action should include procedures for
accounp receivable, recognition and                                                       ensuring compliance with agency
record ng of liabilities, and prompt and     Open Recommendations                to       policies and procedures. In addition, the
accura b accumulation and reporting of                                                    Controller should clarify the policy
obliga ional data on all appropriated
                                             Agencies
                                                                                          regarding approval of journal vouchers
funds; ”(6) improved principal controls in   Recommendation: The Secretary of             to require an individual not directly
its ho sing credit assistance area,          Veterans Affairs should direct the Chief     involved in voucher preparation to
althou h remaining weaknesses included       Benefits Director and the Controller to      approve vouchers initiated by the Chief,
the la b k of an established system for      develop a plan for implementing              Accounting Section.
recog izing losses on guaranteed loans,      corrective action on the internal control    Status: Action not yet initiated. As of
lack o reconciliation between the            problems that the GAO audit disclosed        October 31, 1989, the Benefits Director
gener 1 ledger control account and           in the housing credit area. VA               has commented on planned corrective
subsid’
      1 ary ledger balances, and improper    requirements for reconciliation of
                                                                                          action, but due to higher priority work,
documentation and approval of journal        account balances and documentation and
                                                                                          an official response under 31 U.S.C. 720
vouchers; (7) lacked effective payroll       proper authorization of accounting
                                                                                          has not been drafted for the Secretary’s
system controls for implementing proper      transactions are excellent internal
                                             control techniques for ensuring the          signature. A response is anticipated
pay changes for all employees, resulting
in incorrect payments; and (8) did not       integrity of data contained in the VA        around November or December 1989.



Regulatory Accounting             Rules and Financial         Reporting

Transportation                   Audits: GSA’s Accounting for
Transportation                   Overcharges
AFMD-89-47,08/30/89
Background                                   miscellaneous receipts account, but did      needed reserves; and (8) lacked formal
Pursuant to a congressional request,         not comply with legislative requirements     written procedures for documenting its
GAO examined the General Services            to transfer the funds by the end of FY       process for estimating needed reserves.
Administration’s (GSA) accounting            1987; (3) at the end of FY 1988,
procedures for and disposition of funds it   transferred the FY 1987 funds and $20        Open Recommendations               to
collected as transportation overcharges.     million in FY 1988 collections to the
                                             Treasury account; (4) retained $23.2
                                                                                          Agencies
                                             million in reserves for settlement of        Recommendation: The Acting
Findings                                     carrier protests and $15.6 million for       Administrator, GSA, should take steps to
GAG found that GSA: (1) from October         contract audit and administrative            ensure that Treasury’s fund restoration
1986 through August 1988, collected          activities; (5) could have transferred the   process, subsequent transportation
$100.8 million in transportation             remaining, undesignated $23.4 million it     overcharge collections, and historical
overcharges and disbursed $34 million        retained to the Treasury; (6) believed its   claims experience are considered when
for carrier refunds and contract audit       estimates of the reserves it needed were     estimating contingency reserves. These
services and administration; (2)             very conservative; (7) did not consider      factors should be included in formalized
determined that it could transfer $19        such factors as the funds restoration        written procedures covering the
million of the $47.2 million it collected    process, subsequent transportation           transportation overcharges collection
during fiscal year (FY) 1987 to the          overcharge collections, and historical       and transfer process.
Department of the Treasury’s                 claims resolution data in estimating its     Status: Action not yet initiated.



                                             Page 99                                                                    GAO/OP-90-l
                                                 Financial Management and Information Systems




R$gulatory Accounting             Rules and Financial             Reporting
Fknancial Audit: Veterans Administration’s Financial
Statements for Fiscal Years 1988 and 1987
Aj?MD-89-69,
        _..._.. _09/15/89
    _...__       ._.._._____
                       - ..--_-_             -
B&c kground                                      fiscal years then ended, in conformity       that may require assistance beyond that
                                                 with generally accepted accounting           identified in its current appropriation
GAO examined the Veterans
                                                 principles. GAO qualified its opinion,       request.
Administration’s (VA) consolidated               since: (1) VA did not have the documents
financial statements for the fiscal years        supporting the original cost of land,
emled September 30, 1988 and 1987, and           buildings, and equipment which it
                                                                                              Open Recommendations              to
the related consolidated statements of           acquired over periods dating back to its     Agencies
op rations and changes in financial              establishment in 1930; (2) although VA       Recommendation: The Secretary of
po 1ition and reconciliation to budget for       made significant improvements in             Veterans Affairs should direct the
the fiscal years then ended.                     transferring project costs from work-in-     Controller to determine an appropriate
                                                 process to completed facilities, it still    method for achieving consistent
Findings                                         kept accounting records for land and         implementation of the federal
                                                 buildings manually that contained errors
GhO found that the consolidated                                                               capitalization and depreciation
                                                 in recorded values; (3) the financial
financial statements presented fairly the                                                     accounting principles and policies. One
                                                 statements reflected statutorily
financial position of the Veterans               calculated life insurance reserves, rather   possible approach would be to provide
Administration as of September 30, 1988          than reserves calculated in accordance       assistance and training on this matter to
and 1987, the results of its operations,         with generally accepted accounting           field station accountants during normal
and the changes in its financial position        principles; and (4) the VA housing credit    field station reviews.
and reconciliation to budget for the             program experienced financial problems       Status: Action not yet initiated.



Regulatory Accounting             Rules and Financial             Reporting

1988 Financial Audit: Federal Housing Administration
T-AFMD-89-17, 09/27/89
                    ______.._
                          ---             ..-______
&c kgrouhd          ~-.                    major losses in its two largest funds; (3)         general ledger reconciliations, or
                                           the Department of Housing and Urban                properly justify certain payments; and
GAO discussed its audit of the Federal
                                           Development (HUD) failed to monitor                (7) HUD and FHA management did not
Housing Administration’s (FHA)                                                                take appropriate actions to correct
                                           functions involving large amounts of
financial etatements. GAO noted that: (1)                                                     weaknesses and problems that previous
                                           money that FHA delegated to third
it was unable to express an opinion on                                                        audits and investigations identified.
                                           parties; (4) FHA does not have sufficient
the FHA financial statements because of
                                           program-level information to properly
uncertainties over potential losses from   manage its programs; (5) HUD internal
tbe diversion of pioperty sales proceeds,                                                     Open Recommendations              to
                                           controls over cash management and
overstatements of the values of            claims processing were weak, (6) HUD
                                                                                              Congress
foreclosed property, and the effects of    accounting staff did not maintain                  Recommendation: To aid in its
other investigations; (2) FHA suffered     adequate documentation, perform                    oversight role, Congress should monitor



                                                 Page 100                                                                  GAO/OP-90-1
                                              Financial Management and Information Syeteme




       I
the Department of Housing and      Urban      include financial statements, the           Federal Managers’ Financial Integrity
Development’s progress through     an         independent auditor’s opinion, reports      Act.
annual lovereight hearing on the   annual     on internal controls and compliance, and    Status: Action not yet initiated.
report from the Secretary which    should     management’s report required by the


ReguFatory Accounting              Rules and Financial        Reporting
Finbncial Audit: Federal Financing Bank’s Fiscal Year
1988 Financial Statements
AFMjD-89418,
  -. ..-..   09/29/89
                ..--.___-.--
Bacl(ground                                   $4.3 billion in accrued interest            record interest accruals as required by
GAO ‘xamined the Federal Financing            receivable, although 3 agencies which       the FFB accounting policy and
Bank’1 (FFB) financial statements for         were experiencing significant numbers       procedures manual.
the year ended September 30, 1988, its        of problem loans held 64 percent of the     Status: Action not yet initiated.
system of internal accounting controls,       agency-guaranteed loans. In addition,
the related statements of income and          GAO found that, although FFB                Recommendation: The Secretary of the
changes in retained earnings, and the         improved some of the internal control       Treasury should direct the President,
changes in its financial position for the     weaknesses identified during FY 1985, it:   FFB, to develop and maintain detailed
year then ended.                              (1) recorded cash transactions in the       subsidiary records of the purchased SBA
                                              general ledger 30 to 60 days after          loans, including information on the
                                              transaction; (2) could not correctly        contractual interest rates, to facilitate
Findings                                      compute accrued interest on loans it        the correct computation of accrued
GAO found that the financial statements       purchased from the Small Business           interest on those loans.
presented fairly the FFB financial            Administration (SBA) or on its Treasury
                                                                                          Status: Action not yet initiated.
position. GAO also found that FFB: (1)        debt; (3) remitted a 1986 loan it took
incurred a net loss of $1.15 billion during   from the Civil Service Retirement and
                                              Disability Fund (CSRDF) to Treasury         Recommendation: The Secretary of the
fiscal year (FY) 1988, due to a $1.29-
                                              without identifying which Treasury          Treasury should direct the President,
billion prepayment premium it owed to
the Department of Treasury; (2) was           loans it was repaying; and (4) did not      FFB, to develop and maintain subsidiary
legislatively prohibited from collecting      complete the required interest accrual      records for FFB debt which correlate the
any related prepayment premiums from          verifications for FY 1988 accruals.         outstanding amounts owed to Treasury
borrowers who prepaid their debt,                                                         and CSRDF to the related loans
enforcing loan provisions that required                                                   receivable to ensure that FFB pays the
                                              Open Recommendations              to        proper amount of interest on its
borrowers to prepay loans at their
current market value, or repaying ita
                                              Agencies                                    Treasury debt.
Treasury borrowing in any other way           Recommendation: The Secretary of the        Status: Action not yet initiated.
than under the terms of the agreement         Treasury should direct the President,
between it and Treasury; and (3) had          FFB, to record general ledger cash
$146.3 billion in loans receivable and        transactions as incurred and review and




                                              Page 101                                                                 GAO/OP-90-I
General Government


Cdntral Fiscal Operations
  I
Financial Management: The U.S. Mint’s Accounting                                                             and
Cbntrol Problems Need Management Attention
AITMD-89-88,07/26/89
Bdckground                                    to support decisionmaking; and (5) Mint     Status: Action in process. Mint
Pursuant to a congressional request,          accounted for its numismatic programs       directives are being revised to require an
GAO reviewed aspects of the U.S. Mint’s       through its annual salaries and expenses    annual inventory of dies by serial
numismatic programs and overall               appropriation, instead of through a         number. If the quarterly inventories
financial management, focusing on: (1)        revolving fund.                             show discrepancies, a follow-up
whether the Mint complied with legal                                                      inventory by serial number will be
requirements involving the shipment of        Open Recommendations               to       performed.
Statue of Liberty coins; (2) internal         Congress                                    Recommendation: To ensure that field
conprols for die inventories and coins; (31
cost accounting systems, funds control        Recommendation: Congress should             mints have adequate internal control
systems, and management information           establish a public enterprise revolving     procedures for die inventories, the
repbrts; and (41 the budgetary fund           fund, subject to the appropriations         Director of the Mint should ensure that
structure for numismatic programs.            process, to finance the Mint’s              the San Francisco Mint implements
                                              numismatic program operations.              adequate internal controls over dies
                                              Status: Action in process.                  released by its die room to its chroming
Findings                                                                                  unit.
GAO found that the: (1) Mint did not          Open Recommendations               to       Status: Action taken not fully
comply with a legal requirement that it                                                   responsive. The Mint reported that San
                                              Agencies                                    Francisco implemented a Daily Die
ship Statue of Liberty coins to customers
only after payment or guarantees of           Recommendation: To ensure that field        Inventory System on January 3, 1989.
payment, but the number of coins              mints have adequate internal control        GAO could not confirm with the
incorrectly sent represented less than 1      procedures for die inventories, the         cognizant official that the daily
percent of the 15.5 million coins shipped;    Director of the Mint should conduct         inventory system was implemented on
(2) @lint had weak internal controls over     physical inventories of dies quarterly so   that date. No information was provided
dies and coins; (31 physical inventories of   that lost dies can be identified sooner     to demonstrate adequacy of this system.
dies were not frequent enough; (4)            than under the present annual
resolution of die inventory discrepancies     inventory procedures.                       Recommendation: To ensure that field
was not independently reviewed; and (5)       Status: Action in process. Mint             mints have adequate internal control
Mint did not always report coin               directives are being revised to require     procedures for die inventories, the
shortages to field mint security offices.     quarterly die inventories by total          Director of the Mint should ensure that
GAO also found that the: (11 Mint’s June      number and face. The revised directive,     independent representatives from the
30, 1987, reports on revenues and             MD 16B-1, is projected to be issued         Department of the Treasury’s Office of
expenses related to numismatic                around December 1989.                       Inspector General (IG) and the field
programs were unreliable; (2) Mint’s cost                                                 mints’ security offices are notified of all
accounting system was manual and              Recommendation: To ensure that field        unreconciled differences between die
decentralized and did not produce             mints have adequate internal control        records and the number of dies found
reliable cost information; (31 Mint’s         procedures for die inventories, the         during physical inventories.
funds control system had deficiencies in      Director of the Mint should match serial    Status: Action in process. Field mints
its design, reporting, and use of financial   numbers of dies in inventory to serial      were instructed orally to report all
plans; (4) Mint has not developed             numbers recorded in die inventory           unreconciled die discrepancies to
management information reports needed         records.                                    Treasury IG staff and Mint police. The



                                              Page 102                                                                   GAO/OP-90-l
                                              General Government




revised hint Directive, MD 16B-1, will        FMFIA did not cover a comprehensive            operate on the mainframe computer and
contain this requirement.                     review of the Die Information System. In       will provide funds control for all
                                              addition, for the areas reviewed, such as      facilities. The targeted completion date
Recomqendation:        To ensure that field   quarterly die inventories, the moderate        has slipped from October 1, 1989 to
mints have adequate internal control          risk factor did not sufficiently reflect the   October 31,199O.
procedures for die inventories, the           significance of the internal control
Director of the Mint should ensure that       weakness.                                      Recommendation: To modernize critical
the resolution of discrepancies identified                                                   elements of the Mint’s fmancial
during field mint die inventories are         Recommendation: To modernize critical          management system through improved
review+ by mint representatives who           elements of the Mint’s financial               cost, funds control, and management
are independent of the inventory process      management system through improved             information, the Director of the Mint
so that complete resolution is ensured.       cost, funds control, and management            should develop management information
Status: Action taken not fully                information, the Director of the Mint          reports that will give Mint managers a
respon ive. The revised directive, MD         should develop an automated cost               range of program and financial
16B1, ill contain a provision requiring       accounting system to provide accurate          information, including summarized or
the he 4 d of each field mint to appoint a    and timely information on the cost of          comparative reports on programs
repres 4 ntative independent of the           operations.                                    showing, by time period, information
Coinin Division to conduct all die            Status: Action in process. In early 1989,      such as the numbers of coins produced
inven 4 ries. This does not address the       the U.S. Mint contracted with BOOZ-            and sold, revenues and expenses, and
need fur independent verification of          Allen Hamilton Inc. for a review of its        unit costs.
inventory results.                            overall automated financial
                                                                                             Status: Action not yet initiated.
                                              management system to identify system
                                                                                             Improved management information
Reco~mendatkon: To ensure that the            requirements, including those for cost
San Francisco Mint follows established        accounting. The targeted completion            reports will be made possible as the
bullion coin control procedures, the          date for the system is September 30,           development of the funds control and
Director of the Mint should direct the        1993.                                          cost accounting systems progress.
San Francisco Mint to notify its security
office ef bullion coin shortages shown on     Recommendation: To modernize critical          Recommendation: To comply with the
weight and piece count reports.               elements of the Mint’s financial               Comptroller General’s internal control
Status: Action in process. On August 15,      management system through improved             standard that control systems be
1989, the Director of the Mint issued a       cost, funds control, and management            documented, the Director of the Mint
reminder to San Francisco that all            information, the Director of the Mint          should initiate projects that will update
shortages of coins, blanks, and dies are      should enhance the Mint’s funds control        the Mint’s written policies and
to be reported to Mint police.                system in order to: (1) provide data to        procedures for cost accounting and for
                                              help managers ensure that funds are not        funds control.
Recommendation: The Director of the           overobligated or overexpended; (2)             Status: Action taken not fully
Mint, through the Mint’s Federal              generate standard, consistent, and             responsive. Grant Thornton, Inc. assisted
Managers’ Financial Integrity Act             reliable funds control reports from            the Mint in documenting and updating
(FMFIA) program, should direct that: (1)      information in the accounting system;          accounting procedures. In addition, it
a current and comprehensive assessment        and (3) use the Mint‘s financial plans as      was engaged to draft certain policies and
of its vulnerability to theft and loss of     the basis for controlling funds at both        procedures. As the overall modernization
dies be undertaken; and (2) annual            the headquarters and field mint levels.        effort progresses, policies and procedures
reports made under the act discuss            Status: Action in process. In October          will be further developed and
progress on initiatives to improve its die     1988, the U.S. Mint began developing a        documented. Written policies and
inventory control system and practices.       funds control system. As of April 1989,        procedures should not be delayed for
Status: Action taken not fully                the system was developed through the           implementation of automated cost
responsive. Prior Mint reports under          commitments phase. The system will             accounting systems.
                      Y




                                              Page 103                                                                    GAO/OP30-1
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(!!entral Personnel Management
$enior Executive Service: Reasons the Candidate
Development Program Has Not Produced More SES
Appointees
GGD-88-4'7,04/20/88
Background                                    selected GDP candidates emphasized         appointments. GAO believes that agency
Pursuant to a congressional request,         general management background, while        management views significantly
GPO examined why federal agencies did         officials who made SES appointments        influenced use of and reliance on CDP
not more frequently use the Office of        typically selected non-CDP candidates       for SES appointments.
Psrsonnel Management’s (OPM)                 who had technical proficiency and
Candidate Development Program (CDP)          agency experience; and (3) the conflict
                                             between CDP candidate selection and
                                                                                         Open Recommendations             to
when making Senior Executive Service
#ES) appointments, focusing on the: (1)      SES appointment practices lowered the       Agencies
Ehvironmental Protection Agency (EPA);       program’s credibility to both potential     Recommendation: To better achieve
(22 Department of Health and Human           candidates and management. GAO also         OPM expectations for CDP, the Director,
Services; (3) Department of Agriculture      found that a lack of OPM guidance and       OPM, should determine what actions
(USDA); (4) Department of the Interior;      agency commitment prevented agencies        OPM could take to enhance the use of
(5) Office of the Secretary of Defense;      from: (1) envisioning CDP as a major        CDP. This could be done by OPM in
and (6) Veterans Administration.             source for SES appointments; or (2)         conjunction with other federal agencies
                                             taking advantage of the expedited SES       or by the SES advisory board as part of
                                             appointment process for certified CDP
Findings                                     candidates. In addition, GAO found that
                                                                                         its examination of SE&elated policies.
GAO found that: (11 during fiscal years                                                  Status: Action in process. Estimated
                                             USDA, Interior, and EPA plan to make
1982 through 1986, certified CDP             greater use of CDP as a source for SES      completion date: 05/90. OPM is nearing
candidates received 141, or 15 percent, of   appointments through changing the           completion of an examination of its CDP
the agencies’ 956 career SES                 candidate selection process and             program. It will respond further as soon
appointments; (2) agency officials who       justifying non-CDP-candidate SES            as its CDP review is complete.



Central Personnel Management
Federal Workforce: A Framework                                        for Studying Its Quality
Over Time
PEMD-88"2'7,08/04/88
__.-I
   "-
Background                                   work force over time; and (2) developed a   Findings
Pursuant to a congressional request,         framework for obtaining such
                                                                                         GAO: (1) examined the executive branch
GAO: (1) examined the feasibility of         information.
                                                                                         civilian work force in professional and
producing general&able and reliable                                                      administrative positions; and (2)
information on the quality of the federal                                                developed a two-part definition of




                                             Page 104                                                                GAO/OP-90-1
                                              General Government




. ..-
quality which included employee               base for an assessment effort would be        Open Recommendations              to
capabilIties and the degree to which          impractical. GAO suggested an                 Congress
those capabilities matched the                alternative assessment design which           Recommendation: To help provide
requirements of a particular job. GAO         would: (1) gather data by surveying           generalizable answers to questions about
found hat: (1) the information available      samples of employees in selected              the quality of the federal work force and
in age 1 cy personnel records was not         occupations; (2) answer many of the           changes in it over time, Congress may
comprehensive, accessible, or current         major questions concerning work-force         wish to authorize a continuing program
enough for the purposes of a quality          quality; and (3) cost less than $1 million.   to assess work-force quality based on the
          ent effort; and (2) changing                                                      framework outlined in this report.
                   to provide a better data                                                 Status: Action not yet initiated.



Cent/ral Personnel Management

Se ‘ior Executive Service: The Extent to Which SES
MeIn bers Have Used the Sabbatical Program
GGQ-88-90,
----“A-..------ 08/04/88
Background                                    and 6 went to different SES positions; (4)    effectiveness of SES members through
                                              as of May 1988, seven participants had        study or work experience and as an
Pursuant to a congressional request,          left either SES or the federal service        incentive for recruitment and retention.
GAO reviewed the Office of Personnel          after completing their sabbaticals, and       The study should define what would
Management’s (OPM) sabbatical                 two of those left within 2 years; (5)         constitute an appropriate level of use for
program for Senior Executive Service                                                        the program and determine what can be
                                              officials in 13 of the 15 agencies that
(SES) members to determine: (1) the                                                         done to reduce the level of attrition by
                                              granted sabbaticals said the sabbaticals
costs of sabbaticals; (21 the positions to
                                              benefited their agencies; (6) officials in    SES members who have completed their
which SES members returned after their
                                              44 agencies said the participation level      sabbaticals. If OPM determines that
sabbaticals; (31 whether participants
                                              was appropriate, 16 said participation        participation should be increased, it
remained in federal service for at least 2
                                               should be higher, and 11 had no               should also assess how factors such as
consecutive years after completing their
                                               response; and (7) the most frequently         those identified in the GAO review are
sabbaticals, as required; and (41 whether
                                               cited reasons for the low level of            precluding SES members from
agencies considered the program
worthwhile.                                    participation were that agencies could        participating.
                                               not spare additional SES members and          Status: Action in process. Estimated
                                               few SES members expressed interest in         completion date: 05/90. OPM is in the
 Findings                                      the program.                                  process of conducting an assessment of
 GAO found that: (1) from July 1981                                                          the sabbatical program. It expects to
 through May 1987,15 of the 71 agencies        Open Recommendations                 to       inform GAO of the results of its review
 interviewed had granted 21 sabbaticals;       Agencies                                      within the next few months.
 (2) sabbatical costs totalled over $1
 million; (3) of the 20 participants who       Recommendation: The Director, OPM,
 had completed sabbaticals as of May 19,       should assess the sabbatical program’s
 1987,14 returned to the same positions        contribution to the development and




                                                Page 105                                                                   GAO/OP-90-l
                                              General Government




work force planning guidelines to             staffing repercussions of the Federal        specifically begun or authorized any
properly /identify governmentwide             Employees Retirement System.                 additional research or demonstration
staffing needs. GAO believes that OPM         Status: Action in process. OPM has           projects.
needs to:; (1) develop a program to           begun to marginally address this
continually assess its hiring efforts; (21    recommendation. Specifically, OPM            Recommendation: The Director, OPM,
assist ot er agencies in their efforts to     contracted for Civil Service 2000 to study   should require ongoing assessments of
improve performance management and            long-term demographic effects on the         the OPM staffing program. At a
producti ity; (3) reinforce its oversight     federal work force, but has not              minimum, this assessment effort should
and eval ation efforts; and (4) resolve       undertaken a sustained effort in this        include instituting systematic reviews of
internal management morale and                area. Similarly, OPM contracted for a        the effectiveness of delegated examining,
         1                                    locality pay study, addressing one aspect
communications problems.                                                                   including establishing, in consultation
                                              of pay, but broader ramifications of         with the agencies, measurable standards
                                              inadequate pay are not being addressed.      for cost, effectiveness, and timeliness.
Open ecommendations                 to
                                                                                           Status: Action taken not fully
Cong es8                                      Recommendation: The Director, OPM,           responsive. OPM stated that it is
Recom endation: Congress should               should actively encourage work-force         evaluating staffing programs as a part of
make g/ eater use of the oversight and        planning in the agencies and provide or      its overall efforts to evaluate agency
appropr/iation process to establish a clear   help to arrange assistance to the            personnel management. However, OPM
                                              agencies if requested.                       has not specifically assessed the cost or
record (if OPM plans, programs, and
                                              Status: Action taken not fully               effectiveness of delegated examining as
results and better hold OPM accountable
                                              responsive. OPM stated that it has
for me$ing the goals of the Civil Service                                                  called for in the recommendation.
                                              always encouraged agencies to carry out
Reform! Act (CSRA). For example,
                                              work-force planning and is not planning
Congreis could require that OPM                                                            Recommendation: The Director, OPM,
                                              any new actions in this area.
provide, on an annual basis, an                                                            should assert more leadership in
assessment of the status of the federal       Recommendation: The Director, OPM,           ensuring that agencies receive the
work force and a detailed discussion of       should serve as a central clearinghouse      assistance they need to improve
OPM activities in such critical areas as      for work-force planning practices and        productivity, quality, and performance,
planning, staffing, performance               trends in the public and private sectors,    including enhancing OPM capability to
improvement, and oversight.                   and publicize successful planning efforts.   provide, or help agencies to acquire,
Status: Action not yet initiated.             Status: Action in process. OPM has           special and technical assistance in such
                                              introduced the Federal Staffing Digest,      areas as setting performance standards,
                                                                                           or measuring performance and
Open Recommendations                 to       which is distributed to agency personnel
                                                                                           motivation.
Agencies                                      offices and discusses, among other
                                              things, effective work-force planning        Status: Action not yet initiated. OPM
Recommendation: The Director, OPM,            practices from the public and private        has not specifically begun efforts to
should establish an ongoing, viable           sectors.                                     address agency productivity. Although a
planning program to identify and                                                           member of the Board of the Federal
prepare the government for its future         Recommendation: The Director, OPM,           Quality Institute, no specific program
work-force needs as an integral part of       should culminate the recently initiated      has been initiated by OPM in this area.
OPM activities. Such a program should         efforts to increase the quantity and
include, at a minimum: (1) establishing a     quality of personnel management              Recommendation: The Director, OPM,
continuing effort to identify key             research with a well-defined research        should establish a more aggressive
emerging demographic, social, and             strategy, and provide usable products to     outreach program into the public and
economic trends and changes to the            the agencies.                                private sectors to learn current practices
structure of the federal work force; (2)      Status: Action in process. OPM has           and trends in performance improvement
developing information on the quality of      developed a research agenda for              and quality and productivity
the federal work forcei (3) enhancing         personnel management research and has        management.
analysis of the staffing implications of      developed a data-base inventory of           Status: Action taken not fully
the federal pay structure; and (4)            relevant personnel management                responsive. OPM has established a
 identifying and addressing the potential     research. OPM, however, has not              variety of programs to learn about



                                               Page 107                                                                  GAO/OP30-1
                                               General Government




cur    ent trends in productivity, including   this task force’s efforts in the follow-up   and implementing the OPM long-term
con    erences, a gainsharing project, and     review to begin in January 1990.             action plan by including components of
so     e of the activities of the Federal                                                   the plan in their Senior Executive
Qu     lity Institute. However, OPM needs      Recommendation: In order to improve          Service @ES) contracts.
mo:i   e specific efforts in this area.        agency internal evaluation programs,         Status: Action in process. OPM has
                                               the Director, OPM, should establish a        begun actions to make OPM executives
Ree/ommendation: The Director, OPM,            clearinghouse on good and innovative         more accountable for the performance of
shohld enhance clearinghouse activities        evaluation methods, techniques, and          ita units. According to the new Director,
thai disseminate information on                plans.                                       OPM, specific goals are being established
innpvative human resource practices to         Status: Action not yet initiated.            in SES contracts.
hel’ agencies wishing to further their         Although OPM has gathered some
per ormance improvement efforts.               information on innovative evaluation         Recommendation: OPM should assert a
Sta us: Action in process. OPM has             techniques, it has not developed a way to    more effective and consistent leadership
    i                                          make this information available to
takpn a number of actions to improve ita                                                    role in the planning, hiring, performance
clegringhouse activities in this area,         agencies.                                    improvement, and oversight areas. This
inc uding periodic publications and                                                         would entail working with the agencies
                                               Recommendation: In order to improve          to address critical human resource
pr CLiding software to agencies. The
                                               agency internal evaluation programs,         management issues, and better posturing
bejefits of these efforts is not known at
                                               the Director, OPM, should develop            the government to meet inevitable
thi time, but will be evaluated during
                                               qualifications for evaluators and assess
th 4 follow-up review.                                                                      future challenges.
                                               the training available to them.
                                               Status: Action not yet initiated. OPM        Status: Action in process. OPM has
Rebommendation: The Director, OPM,             has not taken any action in this area. A     begun to recognize ita CSRA role of
shduld initiate additional research and        specific assessment of the reasons for       exercising more leadership in
sudport new demonstration projects to          inaction will be addressed in the follow-    governmentwide human resource
coljtinue the search for ways to remove        up review to be initiated in January         management. Although specific actions
thri barriers which prevent performance        1990.                                        have been scarce, the intention of OPM
management systems from achieving                                                           to carry out this role was emphasized by
their potential.                               Recommendation: In order to improve          the new Director in her confirmation
Status: Action in process. OPM has             agency internal evaluation programs,         hearings.
begun to study barriers to the                 the Director, OPM, should increase
effectiveness of performance                   oversight of agency internal Personnel       Recommendation: OPM should make a
management systems. OPM did conduct            Management Evaluation programs to            concerted effort to revitalize its internal
some research on the effectiveness of          include more agencies.                       work force and build a capacity
performance management review                  Status: Action in process. OPM has           commensurate with its much-needed
systems for reauthorization using focus        begun to study how best to carry out this    leadership role.
groups of line agency officials, but the       recommendation. GAO will look into           Status: Action in process. To begin to
effort did not include any study of pay-       OPM actions in the January 1990 follow-      develop its internal capacity, OPM hired
for-performance systems used by other          up review.                                   a consultant to develop a program to
public or private-sector organizations.                                                     address the many internal management
                                               Recommendation: The Director, OPM,           problems identified in the report. The
Recommendation: In order to improve            should initiate an internal management       effectiveness of these actions will be
agency internal evaluation programs,           improvement and organization                 assessed in the follow-up review.
the Director, OPM, should assess the           development agenda which includes
standards for evaluation systems and           steps to involve employees in identifying    Recommendation: The President should
make changes where needed.                     critical areas needing attention and         give sustained attention to establishing
Status: Action in process. OPM has             determining causes of problems, and          and maintaining an environment that is
convened a task force to study personnel       evaluate the results. The Director should    more conducive to human resource
management evaldation system                   ensure that senior executives are            management. This would entail
standards. This task force has not yet         committed to, and held accountable for,      emphasizing that the ultimate success of
ccmpleted its work. GAO will evaluate          improving management in their units          federal programs depends in large part



                                               Page 108                                                                    GAO/OP-90-l
                                           General Government




on a qualified, motivated, and efficient   Recommendation: OPM should, at a             Recommendation: OPM should, at a
civil service. It would also involve       minimum, develop: (1) mechanisms to          minimum, assess ways to improve
selecting/ individuals for leadership      improve communication, including             retention and motivation, including
positions at OPM who have a                clarifying and communicating to all          OPM awards systems and promotion
demonstlated commitment to such            employees the mission, priorities, and       processes.
principles. The President should work      goals and objectives for OPM overall and     Status: Action taken not fully
with Go gress to ensure a competitive      for each unit; and (2) duties,               responsive. OPM has only marginally
federal ay and benefit structure.          responsibilities, and performance            addressed this recommendation. It
Status:     ction taken not fully          expectations for each employee.              established a spot award program for
responsii e. Although President Bush has   Status: Action taken not fully               effective employees, but the maximum
set a more positive tone for public        responsive. OPM actions in this area         award is $25. More needs to be done in
service, khe Administration has not        consist of publishing a new employee         this area.
specific lly addressed these problems in   handbook and sponsoring annual
         i
the federal pay and benefit structure.     conferences. The effect these actions        Recommendation: OPM should, at a
GAO ~$1 continue to address the pay        have on improving communications will        minimum, develop a work-force planning
issue th’ ough work in the Human           be assessed in the GAO January 1990          system to determine needed staffing
Resour 92; Management and Federal          follow-up review.                            levels and skills, and basing staffing and
Workfokce Future Issues.                                                                budget requests on work-force planning.
                                           Recommendation: OPM should, at a             The system should provide information
Recomhendation:      The Director, OPM,    minimum, provide supervisors and             on what staff are leaving and how or
should boncentrate OPM in-depth            managers with better training or             whether they should be replaced, take
oversight activities on those agencies     developmental experiences to help them       into account an analysis and forecast of
with weak or nonexistent programs.         improve their skills in communication,       customers’ demands for services, and
Once agencies have improved their          information sharing, and setting and         provide an assessment of skills and
programs, OPM should reassess its          providing feedback on performance            training needs. Particular attention
strategy to determine whether an           expectations.                                should be paid to those functional areas
enhanced OPM on-site presence is still     Status: Action in process. OPM has           where there is a need for increased OPM
necessary.                                 established an office to focus on            activity, such as productivity assistance
Statue: Action taken not fully             employee development and has begun to        and personnel management evaluation.
responsive. OPM plans to study where it    develop overall training plans for the       Status: Action not yet initiated. OPM
should conduct its indepth on-site         agency. GAO will assess this effort in its   plans to initiate a work-force planning
reviews, however, specific actions have    follow-up review.                            study. Actions are not yet underway.
not yet taken place.


Central Personnel Management

Disabled Veterans’ Employment: Performance Standards
Needed to Assess Program Results
GGD-89-45,02/28/89
.^.. ._ .._.__
             __-__..__
                 ~__.--.--..---.
Background                                 Department of Labor (DOL), Department        Office
                                                                                            _ ,^.of---Personnel
                                                                                                        -       . Mana,
                                                                                                                  . . .
                                                                                                                        gement (OPM);
                                           of Health and Humr .n Services (HHSl,        and (2) UJ?‘M oversrgnt or DVAAP.
Pursuant to a congressional request,
                                           National Aeronautic s and Space
GAO reviewed the: (IYeffectiveness of
                                           Administration (NA SA), Office of
the Disabled Veterans’ Affirmative
                                           Management and BI tdget (OMB), and
Action Program (DVAAP) at the



                                           Page 109                                                                     GAO/OP-90-l
_-._...._....--.. _--.- .-.--.
                                              General Government




Firqdings                                     to determine the best course of action.     Status: Action in process. Agencies are
                                              Further followup is needed.                 discussing with OPM the best methods of
GAG found that: (1) neither the law                                                       establishing performance.
establishing DVAAP nor the                    Recommendation: The Director, OPM,          Addressee: Department of Labor
imp ementing regulations provided             should require OARE to improve its          Status: Action in process. Coordination
perf \ rmance standards or other criteria                                                 is in process.
                                              management of DVAAP by overseeing
for measuring employment and                                                              Addressee: Department of Health and
                                              agencies’ self-evaluation efforts by
advancement of disabled veterans; (2)
                                              helping them do the in-depth data           Human Services
without specific performance criteria, it
coul/d not conclusively determine             analysis necessary to find the causes of    Status: Action in process. Coordination
whether agencies’ programs have been          problems and ways to improve                is in process.
succ$essfulor not; (3) employment, new-       performance.                                Addressee: National Aeronautics and
hires, and promotion data indicated that      Status: Action not yet initiated. OPM is    Space Administration
DOlc and OPM programs were more               coordinating with other agencies and        Status: Action in process. Coordination
succ/essful at employing and advancing        veterans’ groups to determine the best      is in process.
dis led veterans than HHS, NASA, and          course of action.                            Addressee: Office of Management and
OM programs; (4) all five agencies’                                                        Budget
 dis bled veteran employment rates            Recommendation: The Director, OPM,           Status: Action not yet initiated. A
 dec ined from 1982 to 1987; (5) neither      should require OARE to improve its           follow-up hearing is planned to discuss
 OP , as governmentwide program               management of DVAAP by using its             actions planned.
 ma ager, nor any of the five agencies        reviews of agencies’ plans and
 did the detailed analyses needed to          accomplishment reports and its on-site      Recommendation: The Secretary of
    I
 define and correct problems in               reviews to evaluate agencies’ progress in   Labor, the Secretary of Health and
 employing and advancing disabled             meeting DVAAP objectives.                   Human Services, the Administrator,
 veterans; and (6) OPM did not evaluate       Status: Action not yet initiated. OPM is    NASA, the Director, OMB, and the
 individual agency progress in meeting        studying alternative methods of             Director, OPM, should examine the
 DVAAP objectives in its annual report        implementing this recommendation.           manner in which DVAAP coordinators
 to Congress. GAO also found that most                                                    are used and trained, and take any
 DVAAP coordinators reported that they:       Recommendation: The Director, OPM,          actions necessary to ensure that the
 (11 spent less than 10 percent of their      should require OARE to improve its          coordinators are more effectively used to
 time on DVAAP; (2) received less than 5      management of DVAAP by citing               accomplish program objectives, In
 hours of DVAAP training; (3) were not        individual agencies’ progress or lack of    particular, the coordinators should be
 evaluated on their program activities in     progress and program effectiveness in
 their annual performance appraisals,                                                     informed about the special hiring
                                              the annual report to Congress.              authorities that can be used to increase
  contrary to OPM instructions; and (41
  perceived the program as falling short of   Status: Action in process. Estimated        the employment of disabled veterans and
  achieving its objectives.                   completion date: 04/90. This is to be put   the exclusion of veterans readjustment
                                              into action in the next annual DVAAP        appointments from agency employment
                                              report to Congress.                         ceilings.
  Open Recommendations              to                                                     Addressee: Office of Personnel
  Agencies                                     Recommendation: The Secretary of            Management
  Recommendation: The Director, OPM,           Labor, the Secretary of Health and          Status: Action not yet initiated. A
  should require the Office of Affirmative     Human Services, the Administrator,          follow-up hearing is planned to discuss
  Recruiting and Employment (OARE) to          NASA, the Director, OMB, and the            actions planned.
  improve its management of DVAAP by           Director, OPM, should work with OARE        Addressee: Department of Labor
  developing, with agency assistance,          to develop the criteria needed for          Status: Action not yet initiated. A
  criteria for measuring agencies’ disabled    measuring their disabled veteran            follow-up hearing is planned to discuss
  veteran employment and advancement           employment and advancement                  actions planned.
  performance.       *                         performance.                                Addressee: Department of Health and
  Status: Action in process. OPM is            Addressee: Office of Personnel              Human Services
  coordinating with other agency officials     Management



                                               Page 110                                                                GAO/OP-90-I
                                           General Government




Status: /Action not yet initiated. A       Status: Action not yet initiated. A          maintain contact with veterans
follow-ub hearing is planned to discuss    follow-up hearing is planned to discuss      representatives in state employment
actions planned.                           actions planned.                             offices as a principal recruiting source of
Addresqee: National Aeronautics and        Addressee: Department of Labor               qualified disabled veterans.
Space Ajdministration                      Status: Action not yet initiated. A          Addressee: Office of Personnel
Status: ~Action not yet initiated. A       follow-up hearing is planned to discuss      Management
follow-u/p hearing is planned to discuss   actions planned.                             Status: Action not yet initiated. A
                                           Addressee: Department of Health and          follow-up hearing is planned to discuss
actions lanned.
         P                                 Human Services                               actions planned.
Addresqee: Office of Management and        Status: Action not yet initiated. A
Budget 1                                                                                Addressee: Department of Labor
                                           follow-up hearing is planned to discuss      Status: Action not yet initiated. A
Status: ~Action not yet initiated. A       actions planned.
follow-vp hearing is planned to discuss                                                 follow-up hearing is planned to discuss
                                           Addressee: National Aeronautics and          actions planned.
actions lanned.                            Space Administration
         i”                                                                             Addressee: Department of Health and
                                           Status: Action not yet initiated. A
Recom+endation: The Secretary of                                                        Human Services
                                           follow-up hearing is planned to discuss
Labor, dhe Secretary of Health and         actions planned.                             Status: Action not yet initiated. A
Human/ Services, the Administrator,        Addressee: Office of Management and          follow-up hearing is planned to discuss
NASA, bhe Director, OMB, and the           Budget                                       actions planned.
Dire&t, OPM, should ensure                 Status: Action not yet initiated. A          Addressee: National Aeronautics and
compliaince with the OPM instruction       follow-up hearing is planned to discuss      Space Administration
that all/ agency officials who have        actions planned.                             Status: Action not yet initiated. A
DVAAP responsibilities be evaluated, as                                                 follow-up hearing is planned to discuss
part of their performance appraisal, on    Recommendation: The Secretary of             actions planned.
their effectiveness in carrying out the    Labor, the Secretary of Health and           Addressee: Office of Management and
prograrh.                                  Human Services, the Administrator,           Budget
Addressee: Office of Personnel             NASA, the Director, OMB, and the             Status: Action not yet initiated. A
                                           Director, OPM, should ensure that their      follow-up hearing is planned to discuss
Management
                                           DVAAP coordinators establish and             actions planned.


Central Personnel Management
Federal Workforce: Implementation of the Executive
Exchange Program Voluntary Services Act of 1986
GGD-89-62,
   __.__   03/31/89
      _...__..__...
           ______--.___I-
Background                                 Findings                                     in PCEE; (3) the experimental
Pursuant to a legislative requirement,                                                  component will save the government
                                           GAO found that: (1) prior to
GAO reviewed an experimental                                                            about $1.5 million during fiscal years
                                           implementation of the experimental
compodent of the President’s                                                            1988 and 1989; (4) some government
                                           component, the government paid the
Commission on Executive Exchange                                                        agencies would not have participated in
                                           salaries of private-sector participants up
(PCEE) Program to identify advantages                                                   PCEE if they had to pay the private-
                                           to a maximum, while the private-sector
and disadvantages of private-sector        employers paid the salaries of federal       sector participants’ salaries; (5) PCEE
                                           participants; (2) the experimental           followed adequate procedures for
employers paying their participants’
                                           component enabled higher-salaried            eliminating potential conflicts of interest
salaries, instead of the government.
                                           private-sector executives to participate     resulting from allowing private-sector




                                           Page 111                                                                    GAO/OP-90-l
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employers to pay federal participants’       Status: Action in process.                    other existing statutes that may be
salaries; and (6) federal participants’                                                    relevant to the PCEE program and for
leaie-without-pay status resulted in the     Recommendation: Congress should               which exemptions for federal
redbction of such benefits as retirement     authorize federal executives assigned to      participants may be necessary.
credit, within-grade increases, and          private-sector companies, as part of the      Status: Action in process.
savings plan contributions, while            PCEE program, to be placed on detail to
priiate-sector participants continued to     the private sector during the exchange        Recommendation: Congress should
receive most of their benefits.              assignment. This would allow executives       include in legislation authorizing this
                                             to remain in federal pay status and           authority an enumeration of those
                                             continue to receive all benefits which, as
0 ~en Recommendations              to        federal employees, they would normally
                                                                                           statutes that should continue to apply to
C f ngress                                                                                 the PCEE program, such as applicable
                                             be entitled to receive.                       statutes relating to compensation,
Re ommendation: Congress should              Status: Action in process.                    benefits, travel and relocation, conflict of
ex nd the authority provided by Public                                                     interest, standards of ethical conduct for
La 99-424 to permit private-sector           Recommendation: Congress should
                                                                                           government officers and employees, post-
ex cutives assigned to government            authorize the corporate host companies
                                             to reimburse the sponsoring federal           employment restrictions for exchange
ag ncies in the PCEE program to be
                                             agencies for the executives’ salaries.        executives, and authority for agencies to
pa,d
  ~ their full salaries by their corporate
                                             Status: Action in process.                    accept reimbursements for executives’
employers.
St+tw: Action in process.                                                                  salaries from private-sector companies.
                                             Recommendation: Congress should               The applicable statutes should be listed
R$commendation: Congress should              include in legislation authorizing this       and incorporated by reference into the
expand the authority to permit more          authority a statement that it is enacted      PCEE program statute.
corporate executives to be paid their full   “notwithstanding any other law” in             Status: Action in process.
salaries by their corporate employers.       order to preclude the need to amend any


Central Personnel Management

Federal Personnel: Status of the Federal Employee Direct
Corporate Ownership Opportunity Plan
GGD-89-49,04/03/89
           .--..__ ~..
Background                                   benefits after former federal employees       FED CO-OP, affected employees are
                                             are terminated.                               provided stock incentives to join
In response to a congressional request,                                                    government contractors; and (4) OMB
GAO provided information on the                                                            has received queries from other federal
proposed Federal Employee Direct             Findings                                      agencies concerning FED CO-OP, and
Corporate Ownership Opportunity Plan         GAO found that: (1) the Office of             has identified potential commercial
(FED CO-OP) that would increase              Personnel Management (OPM) developed          activities for contracting. GAO also
government contracting efforts, focusing     FED CO-OP to increase government              found that: (1) the Department of
on: (1) how FED CO-OP evolved; (2) FED       commercial contracts to the private           Agriculture contracted with an
CO-OP status; (3) the Offrice of             sector; (2) OMB was responsible for           accounting firm to determine its
Management and Budget’s (OMB) future         administering FED CO-OP, and planned          operating costs under FED CO-OP, but
plans for FED CQOP; and (4) the              to include only those commercial              believes that it could not implement
beneficiaries of any remaining               activities that could survive even if their   FED CO-OP until 1990; (2) OMB is
employees stock-ownership plan (ESOP)        government contract expired; (3) under        currently looking for potential




                                              Page 112                                                                     GAO/OP-90-l
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particip/ants in FED CO-OP, but will         Open Recommendations                to         requirements. To accomplish these
have nd implementation plan until the        Agencies                                       objectives, the Office of Privatization
new administration has established its                                                      may need to restructure FED CO-OP or
policy direction; and (31 it was uncertain   Recommendation: The Director, OMB,             seek changes in legislation or
whether former government employees          should require the Office of Privatization     regulations.
working for government contractors           to explore ways to ensure that: (11 the        Status: Action taken not fully
should be excluded from ESOP bonuses         federally funded portion of ESOP stock         responsive. OMB has taken action on
or that FED CO-OP participants would         bonuses are paid only to the former            one recommendation to consult the
qualify or certain tax benefits. GAO         federal employees who were initially           Internal Revenue Service, but does not
believe that ESOP stock bonuses should       with the subsidiary, even if all of the        plan to take action on the
benefit i nly former government              former federal employees have been             recommendation to explore ways to limit
employees working for FED CO-OP              terminated; and (21 ESOP meet the              ESOP to former federal employees until
contractors.                                 Internal Revenue Service’s                     FED CO-OP candidates are identified.


         1 Personnel Management
Intdrgovernmental                       Personnel Act of 1970:
In&governmental                         Purpose No Longer Emphasized
GGDS9-95, 06119039
Backiround                                   government; (3) 96 percent of the federal      Recommendation: Because of the
Pursuant to a congressional request,         and nonfederal employees assigned to           widespread use of mobility assignments
GAO reviewed the Intergovernmental           the program were on detail; (4) federal        among federal agencies and the
Personnel Act mobility program,              agencies were the principal beneficiaries      importance agencies give to the
focusing on: (11 changes to the program;     of mobility assignments and paid most of       program, Congress may want to require
(2) the extent and nature of the             the assignment costs; (5) OPM has              OPM to report periodically on issues like
program’s use; (3) program cost; (41         exercised minimal guidance and                 program costs and benefits, legislative or
agreement purposes and benefits; and (5)     oversight over the program since 1982          regulatory requirement compliance, and
Office of Personnel Management (OPM)         and does not always obtain timely              program results.
guidance and oversight.                      corrections of improper agreements; (6)        Status: Action not yet initiated.
                                             OPM was not required to report to
Findings                                     Congress on the program; and (7)               Open Recommendations               to
                                             agencies did not always require                Agencies
GAO found that: (1) 36 federal agencies      employees detailed to federal agencies to
made a total of 3,996 assignment             file financial disclosure reports for use in   Recommendation: To ensure effective
agreements with nonfederal                   identifying and resolving any apparent         use of the resources OPM has already
organizations from fiscal years 1984         conflicts of interest.                         committed to the mobility program, the
through 1988; (2) although the program’s                                                    Director, OPM, should implement a
original purpose was to improve federal-                                                    system to control the receipt of
state-local government cooperation by        Open Recommendations                to         assignment agreements, agency
strengthening state and local                Congress                                       evaluation reports, and other
governments’ personnel capabilities,                                                        information necessary to effectively
federal agencies have made most of their     Recommendation: Congress may want              review federal agencies’ use of the
mobility assignments tith colleges and       to reassess and clarify the primary            mobility program. OPM should use this
universities in order to bring personnel     purpose of the mobility program.               information to direct agencies to make
with higher education into the federal       Status: Action not yet initiated.              timely corrections of any improper



                                             Page 113                                                                    GAO/OP-90-l
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.--+.--..-
agreements, as provided in current         Recommendation: To ensure effective         OPM report to GAO, dated September 7,
regulations.                               use of the resources OPM has already        1989, action has been already completed
Stat/us: Action in process. Estimated      committed to the mobility program, the      or will be undertaken within the next
corn letion date: 10/90. The OPM report    Director, OPM, should specify the           fiscal year, As of October 13,1989, one of
to d AO, dated September 7, 1989,          circumstances in which nonfederal           the proposed items was implemented in
indijcates actions were undertaken or      employees on detail to federal agencies     mid-FY 1988. All others have not been
pla4ned for implementation within the      should file financial disclosure reports.   implemented yet, per OPM.
next fiscal year (FYI.                     Status: Action in process. Estimated
                                           completion date: 10190. According to the


Ceptral Personnel Management
Federal Compensation: Premium Taxes Paid by the Health
B/enefits Program
GfiD-89-102,08/08/89
 .     ._"
        . - --
B ckground                                 participating plans to charge premium       Open Recommendations               to
Pu,t suant to a congressional request,     taxes as a program expense; (3) in 1987,    Congress
GAO provided information on the            22 of 25 participating fee-for-service
                                           plans charged the health benefits           Recommendation: If Congress wants to
amount of premium taxes that                                                           make the treatment of premium taxes
underwriters participating in the          program about $44.1 million for
                                           premium taxes, and included those taxes     uniform in the health and life insurance
Federal Employees Health Benefits
                                           in the premiums they charged to             programs, it may wish to consider
Program paid to states and other
government entities.                       enrollees and the federal government; (4)   amending the Federal Employees’
                                           in 1980, Congress exempted Federal          Health Benefits Act to expressly prohibit
                                           Employees Group Life Insurance              states, the District of Columbia, the
Findings                                   Program premiums from similar               Commonwealth of Puerto Rico, or other
GAO found that: (1) states, county and     premium-based taxes, since it considered    political subdivisions from imposing or
municipal governments, U.S. territories,   the program to be self-insured; and 6)      collecting taxes, fees, or other monetary
and Panama imposed premium taxes on        although the Federal Employees Health       payments based on the premiums paid
the portion of premium income that         BenefIts Program operated similarly to      under the Federal Employees Health
participating plans paid to insurance      the life insurance program, Congress has    Benefits Program.
underwriters to process and pay claims;    not exempted it from premium-based          Status: Action not yet initiated.
(2) federal regulations allowed            taxes.




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Centra/l Personnel Management
Fed&al Workforce: Federal Suggestion Programs Could Be
Enhanced
GGD-81-71,08/23/89                                         -
Backg ound                                  extent to which they had those success        in 1987, while federal agencies used a
        i                                   factors; (3) slow processing of suggestions   sliding-scale formula to grant awards, at
Pursuant to a congressional request,
GAO prolvided information on private        and unresponsive replies were the most        an average of $235 per 100 employees;
firms’ an b federal agencies’ employee      significant disincentives to employee         and (8) federal agencies and firms
suggestion programs, focusing on the        participation; (4) 11 of the 23 largest       calculated intangible awards similarly.
program ‘characteristics which              federal agencies with suggestion
contribu ed to high employee                programs had automated suggestion             Open Recommendations               to
particip 1 ion and savings.                 systems; (5) in 1987 and 1988, the Office
                                            of Personnel Management (OPM) issued          Agencies
                                            guidance to agencies on using computers       Recommendation: To motivate federal
Findidgs                                    to improve their suggestion programs, as      employees to participate more actively,
GAO found that National Association of      well as guidance on program evaluation,       the Director, OPM, should adopt a fixed-
Suggestion Systems (NASS) data, input       planning, and administration; (6) during      percentage formula for tangible benefit
from federal program managers, and a        1987, the private sector generated about      awards of not less than 10 percent,
Merit Syptems Protection Board study        30 suggestions and realized savings of        which as shown by NASS data is the
revealed that: (1) successful employee      about $50,000 per 100 eligible employees,     typical industry practice. OPM and
suggestion programs included such key       while federal programs generated 3.9          other agencies should be aware that the
factors as management support,              suggestions and realized savings of about     potential benefits of this change may not
continuous publicity, adequate funding      $11,000 per 100 employees; (7) firms          be realized unless the other key factors
and staffing, monetary awards, and          generally granted tangible awards as a        in a successful program are also
responsiveness to suggesters; (2) federal   fixed percentage of realized savings, at      emphasized.
and private programs varied in the          an average of $5,000 per 100 employees        Status: Action not yet initiated.


Central Personnel Management
Federal Pay: Complexities in Calculating Federal Civilian
Firefighters’ Pay
GGD-89-131,09/29/89
Background                                  resulted in pay reductions from lost          attributed to payroll complexities; (2)
Pursuant to a congressional request,        overtime pay; and (3) legislation would       errors will be less likely when DOD
GAO reviewed federal civilian               correct these pay problems.                   completes the full automation of its
firefighters’ compensation to determine                                                   payroll systems; (3) firefighters were
whether: (1) pay calculatjon complexities   Findings                                      undergoing pay reductions due to lost
have resulted in pay errors; (2)                                                          overtime following promotions to
                                            GAO found that: (1) errors from               supervisory levels; and (4) legislation was
promotions to supervisory positions have
                                            misinterpreted regulations could be



                                            Page 115                                                                    GAO/OPdO-1
                                             General Government




-
nee’ ed to entitle supervisors to            Open Recommendations             to        Status: Action not yet initiated.
ove R ime.                                   Agencies
                                                                                        Recommendation: The Secretary of
                                             Recommendation: The Secretary of           Defense should direct Army and Navy
Open Recommendations                to       Defense should alert officials at Army
Cqngress                                                                                payroll offrces to provide specialized
                                             and Navy payroll offices that are          training to their personnel who do the
Redommcndation: Congress should              manually calculating firefighters’ pay     manual calculations.
enact legislation to change current pay      that their pay systems are vulnerable to   Status: Action not yet initiated.
pro$sions so that firefighters’ pay is not   improper payments resulting from
&$uced upon promotion.                       random mistakes and misinterpretations
$t$us: Action not yet initiated.             of regulations,


C@ral      Personnel Management
S nior Executive Service: Training                                     and Development of
S nior Executives
G/SD-89-127,09/29/89
Bbckground                                   nonparticipation included work and         planned to issue guidance on
                                             training experiences already obtained      expectations from federal executives and
Pursuant to a congressional request,
                                             and lack of available time; (3) about 80   the types of experiences that could assist
GAO presented information on the
                                             percent considered the training and        them in meeting those expectations.
Senior Executive Service @ES), focusing
on: (1) career members’ perceptions of       development experiences they received
the extent and usefulness of their           before and after appointment useful in     Open Recommendations                 to
                                             their jobs; (4) the mechanisms for
training and development experiences
                                             ensuring that SES members obtained
                                                                                        Agencies
before and after SES appointment; and
(2) how the Office of Personnel              appropriate training and development,      Recommendation: OPM should, in
Management (OPM) fulfilled its               formal needs assessments, and advisors     reassessing its roles and responsibilities
executive development roles and              did not work as intended; (5) although     in executive training and development,
responsibilities.                            the Commission on the Public Service       examine the need for governmentwide
                                             recommended that OPM require regular       requirements for minimal levels of
                                             training for all professional federal      executive training and development.
Findings                                     employees, only 21 percent of the SES      Status: Action not yet initiated.
GAO found that: (1) about 13 percent of      members surveyed who received
the executives appointed after 1982          appointments after the candidate           Recommendation: OPM should, in
stated that they had not participated in     development program (CDP) began            reassessing its roles and responsibilities
any training or development activity         entered from CDP, (6) a much larger        in executive training and development,
designed to prepare them to become           proportion of executives from small        examine the difficulties small agencies
executives during the 5 years prior to       agencies did not receive pre-appointment   face in providing executive training and
their appointment, about 23 percent of       training and development, considered       development.
all executives stated that they had          the training they received less helpful,   Status: Action not yet initiated.
received no training or development          and cited costs as a reason for
since their appoigtment, and more than       nonparticipation after appointment; and    Recommendation: OPM should, in
half had not participated in a formal        (‘7) OPM recently began a reexamination    reassessing its roles and responsibilities
training or development activity in at       of its executive training and              in executive training and development,
‘least 5 years; (2) the reasons for SES      development responsibilities and           examine the need to improve the



                                             Page 116                                                                  GAO/OP-90-l
                                             General Government




mechaniisms for ensuring that executives     Recommendation: OPM should, in                the training and development
receive appropriate training and             reassessing its roles and responsibilities    curriculum.
development.                                 in executive training and development,        Status: Action not yet initiated.
Status: Action not yet initiated.            examine the need for certain types and
                                             levels of training for new executives.        Recommendation: OPM should consider
Recomniendation: OPM should, in              Status: Action not yet initiated.             the Volcker Commission
reassessing its roles and responsibilities                                                 recommendations and what specific
in execukive training and development,       Recommendation: OPM should, in                responsibilities agencies and OPM
examin the need to encourage greater         reassessing its roles and responsibilities    should have in the oversight process. It
        “i                                                                                 should address as well what actions
support among executives and agencies        in executive training and development,
toward executive training and                examine ways to improve the                   OPM should take to ensure a strong
development.                                 managerial competency benefits from           oversight program.
Status: ~        not yet initiated.                                                        Status: Action not yet initiated.


Execu/tive Direction          and Management
Soc& Security Administration: Stable Leadership and
Bettjer Management Needed To Improve Effectiveness
HRD-8’7-39.03/18/87
Backgiround                                  systematically identify and develop           should enact legislation fixing the term
GAO reviewed management problems             future leaders and managers; and (51          of the Commissioner of Social Security
                                             cannot ensure that employees’ wage            at 8 years. In the case of removal, the
that the Social Security Administration
(SSA) must address to ensure the             records are accurate. GAO also found          President should be required to inform
continued delivery of high-quality           that SSA: (1) makes substantial benefit       Congress of the reasons. In addition,
service to social security recipients.       overpayments annually; (2) has been           Congress should periodically monitor
                                             unable to correct its financial               SSA progress in solving its managerial
                                             management problems because of                and operational problems. If, in the long
Findings                                     fragmented responsibility and lack of         term, Congress believes the
GAO noted that SSA has serious               leadership; (31 has allowed wide              recommended actions are insufficient, it
management problems that: (11 are not        variations in efficiency among similar        should consider other organizational
evident to the public; (2) have              units because of its limited emphasis on      alternatives to administer social security
contributed to crisis situations in the      efficiency; (41 has neither established nor   programs.
past; and (3) could interfere with SSA       used measurable, national benchmarks          Status: Recommendation valid/action
ability to effectively accomplish its        for service quality or timeliness for         not intended.
mission’ in the future. GAO found that       certain post-entitlement work loads; and
SSA: (11 has had seven commissioners or      (5) has many employees who are                Recommendation: Congress should
acting commissioners over the last 10        uncertain about the future of their jobs      consult with SSA on the time needed to
years, resulting in frequent changes in      and are dissatisfied with many                automate legislative requirements
priorities, diminished accountability, and   management actions.                           promptly, efficiently, and effectively, and
little lohg-term operational planning; (2)                                                 consider the information provided by
has made little progress in modernizing      Open Recommendations                 to       SSA in establishing effective dates.
its computer system, pasticularly its        Congress                                      Status: Recommendation valid/action
software; (31 plans to spend over $600                                                     not intended.
million to modernize its computer            Recommendation: To provide more
system; (41 does not have a plan to          stable leadership for SSA, Congress



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                                              General Government




Oben Recommendations              to          being used to guide component planning,       correcting them and, through SES
A$encies                                      it will take budget funds for this activity   contracts and merit pay plans, hold
                                              to be completed and time to complete          managers accountable for implementing
Re’ommendation: In recognition of the         the projects and plans essential for ADP      agreed-upon actions.
cri ical importance of social security to     development.                                  Status: Action in process. Improvements
    F
the nation and the problems SSA has                                                         to POMS, and changes to SES contract
experienced with instability of               Recommendation: The Commissioner of           language, are all still undergoing agency
leadership and frequent changes in            Social Security should take the following     actions.
direction, especially regarding computer      actions to improve budget development
systems modernization, the President          in SSA: (1) expand on the May 1986            Recommendation: The Commissioner of
should, when nominating persons to fill       permanent agencywide annual budget            Social Security should: (1) periodically
the commissioner’s position, focus on         instructions covering all components in       evaluate whether the new process is
in’ ividuals who: (1) view the position as    SSA to adhere to the objectives set forth     reducing the time it takes to finalize
0 1”e requiring long-term commitment; (2)     in the November 1984 proposal                 regulations and implement further
are inclined to focus attention on            submitted by the Acting Deputy                improvements if warranted; and (21
re olving significant long-standing           Commissioner for Management and               periodically survey operating personnel
p oblems; (31 are comfortable adhering to     Assessment; (2) hold managers                 to determine the extent to which
lo g-term operational and computer            accountable for adherence to budget           improvements in POMS have been
s stems modernization plans, unless           policy and requirements; and (3)
 :                                                                                          effective.
major changes are justified and               establish standards for the amount of
concurred in by the Secretary of Health                                                     Status: Action in process. Too few
                                              time SSA should take to complete its
and Human Services and reported to the                                                      regulations have been processed recently
                                              various work loads and use those
appropriate congressional committees;                                                       to evaluate whether improvement has
                                              standards in developing the SSA budget
and (4) are committed to the programs’                                                      taken place. There is evidence that some
                                              for operating staff. These standards
goals and to providing high-quality,          could be based on engineering studies or      progress is being made in improving
efficient service to social security          on actual times required by better-           POMS, but more needs to be done.
recipients.                                   performing offices to do the work. Any
Statw Recommendation valid/action             adjustments to the standards should be        Recommendation: To help gain better
not intended. A formal follow-up is in        based on careful study reflecting the         managerial and technical control over
progress.                                     appropriate time needed to implement          SSA computer operations and
                                              operational changes.                          modernization efforts, the Commissioner
Ikecommendation: The Commissioner of           Status: Action in process. A new set of      of Social Security should complete those
Social Security should: (1) develop and       budget guidelines was developed and           aspects of a long-term operational plan
implement agencywide, long- and short-         published in November 1987 and               that set forth how SSA will deliver
term operational plans; (2) consult with       December 1988. Managers are being held       services in the future, and revise the
the Department of Health and Human             accountable through their performance        modernization strategy to be consistent
Services, the Office of Management and         review process for adhering to the new       with the service delivery needs.
Budget, congressional committees, states,      budget policy and time frames. NO            Managers should be held accountable for
client groups, and others as to how SSA        progress has been made on establishing       adhering to the modernization strategy
should do business in the future, as part      work standards.                              unless changes are fully justified.
of the process of formulating a long-term                                                   Status: Action in process. The planning
plan; and (3) use the plan to guide policy,   Recommendation: The Commissioner of           process has not progressed far enough to
budget, and automatic data processing         Social Security should: (1) through           provide specific guidance needed to
(ADPI systems decisions and hold              Senior Executive Service @ES) contracts,      develop an ADP systems plan.
managers accountable for adhering to it.      hold appropriate managers involved in
 Status: Action in process. SSA is            the regulation development process            Recommendation: To help gain better
developing a coordinated SSA-wide             accountable for complying with the new        managerial and technical control over
 planning system! It has established a        rulemaking procedures; and (2) identify       SSA computer operations and
 high-level planning staff and developed a    underlying causes of Program                  modernization efforts, the Commissioner
 long-range plan, SSA has also developed      Operations Manual System (POMS)               of Social Security should: (11
 component plans. While the plan is           problems, develop specific plans for          expeditiously establish effective project



                                              Page 118                                                                   GAO/OPdO-1
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 control and integration for the              Status: Action in process. SSA has            develop future management information
 moderniiration effort, including more        conducted two agencywide surveys of           requirements based upon the modernized
effective1 use of an integration contractor   employee job satisfaction and morale.         computer system; and (41 intensify
to help integrate Systems Modernization       The results of the first have been            efforts to improve SSA data bases and
 Plan projects and make the transition        published. The second was sent to             establish an SSA-wide focal point for
from the old to the new computer              employees in April 1989. The effects on       overseeing and integrating SSA
system; and (2) reassess whether the          systems employees are undetermined.           management information and data base
location ;of the ADP procurement review                                                     activities, including reviews and
function! within the Office of Systems         Recommendation: Because SSA will be          evaluations.
providesi sufficient internal control over    dependent on its inefficient existing         Status: Action in process. A new
this pro$ess.                                 systems for a longer time due to major        Associate Commissioner has been
Status: Action in process Systems have        delays in redesigning its new system, the     assigned to this area to refocus efforts. A
been m ed organizationally from a             Commissioner of Social Security should        management information plan has been
Deputy       mmissioner-level office to a     also reexamine the current allocation of      developed in consort with the agency
lower-le % el office under the Deputy for     resources and priorities established for      long-range plan. No progress has been
Operations. The integration contractor        maintaining and improving the existing        made in establishing standards beyond a
has re rted on some improvement in            system and redesigning the new one.           contract to study them. Action is still
project“4 ontrol. ADP procurements will       This reexamination should focus on: (1)
                                                                                            ongoing to improve SSA data bases.
now be teviewed by the SSA Chief              developing a clear picture of how the
Financial Officer. It will take several       new system will be implemented,
                                                                                            Recommendation: The Commissioner of
years before SSA can complete                 including how system components will
implementation of an effective project        be integrated, how SSA will make the          Social Security should take the following
control activity.                             transition from the existing system to        actions to enhance productivity, without
                                              the new system, and when major                diminishing the organization’s strong
Recomr$endation: To help gain better          redesigned system components will be          commitment to providing high-quality
managerial and technical control over         operational; and (21 assessing the effect     service to the public: (1) improve SSA
SSA computer operations and                   that problems in the existing system,         focus on productivity by establishing
modernization efforts, the Commissioner       such as the inefficient software and          more specific expectations for efficiency
of Social Security should: (1) identify the   manual operations, are having on              in SES contracts and merit pay plans as
number, type, and qualifications of ADP       service to the public. Such an assessment     a basis for gauging performance
personnel needed to carry out the             should include an estimate of the             (regional and local variations can be
modernization program and maintain            resources and time that would be              recognized where justified); (21 require
and improve the current systems; and (2)      required to correct the problems in           the use of work measurement data and
take steps to obtain the necessary skills.    relation to when the redesigned system        periodic cost reports for all SSA cost
Status: Action in process. A formal           will be operational.                          centers, such as regional, area, and
inventory of ADP staff resources has          Status: Action in process. A systems          district offices, to identify targets of
recently been completed. A study and          baseline document has been prepared,          opportunity for improved efficiency and
comparison will be done this year to          but this is only the first step GAO feels     cost-effectiveness; (3) allocate staff
determine continued staff and training        is needed to accomplish the GAO               resources to similar units,
needs.                                        objectives. Other action is still required.   district/ branch offices and program
                                                                                            service centers, based on performance
Recommendation: To help gain better           Recommendation: To help gain better           expectations; and (4) develop and
managerial and technical control over         management control over management            implement strategies for addressing
SSA computer operations and                   information, the Commissioner of Social       external factors that could impede
modernization efforts, the Commissioner       Security should: (1) develop a                improved efficiency.
of Social Security should periodically        comprehensive management information          Status: Action in process. SES contracts
survey fiystems staff morale, particularly    policy commensurate with the agency           now contain productivity goals in
regarding organizational and                  long-range operational plan; (2) establish    varying degrees depending on the
management problems perceived as              performance standards and measures            position. Work measurement data are
contributing to low morale, to determine      that are based on the goals and               being disseminated to regions and will
whether improvements have resulted.           objectives in the operational plan; (3)       be sent to offices in the near future. Cost



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data are being developed. Staff              reductions through 1990. However, SSA         do not have the appropriate skills and
allkation to similar units is not based      is pursuing a pilot project to enhance        abilities for, or who do not fully
on performance, but on work loads and        salaries of operations supervisors and is     understand, the duties and
mabagement priorities.                       revising its job classification standards     responsibilities of the job. In addition,
                                             to provide opportunities for freer            the Commissioner should reassess the
Ke ummendation: The Commissioner of          movement of field employees to other          structure of the operations supervisor
S 1 ‘al Security should: (1) establish       field or headquarters locations. Award        position to determine how more
national performance standards and           funds have been substantially increased       emphasis can be placed on making it
me sures for important services, such as     in lieu of promotions.                        more rewarding and attractive.
ad 1 ress changes and services to                                                          Status: Action in process. SSA is
M icare beneficiaries; (2) hold              Recommendation: The Commissioner of
                                                                                           developing a pilot program to upgrade
m T! agers accountable for meeting           Social Security should: (1) determine
                                                                                           the pay for operations supervisors,
pe4,formance standards; (3) consider what    what senior- and mid-level manager
                                             positions will likely have to be filled       through broad-banding rather than
adgitional actions are necessary to
im rove notices sent to the public and       over the next several years, the              General Schedule grades. It is also
SS ability to respond to recipient           adequacy of the existing pool of available    investigating how the position can he
qu stions, specifically expediting           candidates, and the specific recruitment      enhanced and how duties can be
ne i essary computer system                  and development changes needed so that        restructured to make the position more
im rovements, holding employees and          SSA will have enough qualified                desirable. SSA has been developing
su ervisory personnel more accountable       candidates to fill future vacant positions;   criteria for selecting candidates to fill 40
fo notice quality, and determining the       (2) establish a formal program to identify    management or supervisory field
ex ent to which SSA field offices have       and develop managers at all levels of the     positions by end of 1989.
sui ficient information to explain notices   organization; (3) determine how SSA can
&recipients; and (4) more systematically     make staff more aware of requirements         Recommendation: The Commissioner of
identify field office problems in serving    and availability of training for new          Social Security should: (11 reassess the
Mbdicare beneficiaries and promptly          supervisors and managers and the              emphasis given to initial claims statistics
develop resolutions. The Commissioner        benefits that accrue from fulfilling the      by managers to determine whether
should seek assistance from the              current training curriculum; and (4)          changes would be appropriate to achieve
Secretary of Health and Human                develop a training program to enhance         a more balanced approach to all
Services, if necessary.                      the knowledge, skills, and abilities of       important work loads and other
Statue: Action in process. No standards      lower level staff to assume future            objectives; (2) more clearly define and set
have been set for post-entitlement work      supervisory and management positions.         objectives for the SSA goal of
loads. Much progress has been made in        Such a program could be similar to the        maintaining a favorable work climate,
improving notices, but more needs to be      training program SSA now has for newly        include such objectives in SES contracts
done. A new agreement is being               promoted or assigned supervisors and
                                                                                           and merit pay plans, and systematically
developed between SSA and the Health         managers.
                                                                                           measure progress; and (3) improve the
Care Financing Administration to better      Status: Action in process. SSA has
                                                                                           effectiveness of employee recognition
define roles and responsibilities.           begun to plan for turnover in executive
                                             and mid-level manager positions, but          efforts by allocating a portion of award
Recommendation: The Commissioner of          more needs to be done. SSA has designed       funds to all operational components
Social Security should assess what can       a three-tiered management development         based on unit performance, and
be done to address employee concerns         program and has implemented the first         emphasizing to supervisors and
about diminishing advancement                two tiers. Implementation of tier 3 is        managers, through training or other
opportunities, such as restructuring jobs    planned for late 1989, pending approval       means, the importance of prompt
or reevaluating grade structures for         from HHS. SSA has also acted to               recognition of employee contributions.
employees assuming greater or more           upgrade its overall training program.         Status: Action in process. SSA now
complex responsibilities as a result of                                                    apportions award funds based in part on
lncreased computerization and shifting       Recommendation: The Commissioner of           unit performance. There has been little
of responsibilities among units.             Social Security should reassess SSA           change in emphasis on initial claims.
6tatus: Action in process, Little can be     selection practices for supervisors to        SSA included an objective to improve
done while SSA continues staff               minimize the selection of employees who       employee work climate in SES plans.



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Execu@e Direction            and Management
Information Management: Leadership Needed in Managing
Fedgral Telecommunications
IMTE@-87-9,05/06/87
Backgbound                                   alternatives, including a cost-benefit      so that they, as central managers, can
In respo se to a congressional request,      analysis of principal alternatives; (4)     make informed decisions on these issues.
GAO ext mined whether the Office of          GSA did not consider the sharing of         Addressee: General Services
Manage % ent and Budget COMB) and the        telecommunications systems when it          Administration
General /Services Administration (GSA)       reviewed agencies’ requests for authority   Status: Action taken not fully
are providing the necessary leadership       to acquire their own systems; and (5) the   responsive. GSA officials believed that
and ma ing sound decisions for               government would have saved an              the redirection of FTS 2000 by the
        ki                                   estimated $16 million over a lo-year        congressional committees negates the
managing the federal government’s
telecommunications.                          period if GSA had approved shared,          need for developing a comprehensive
                                             rather than individual, systems in three    telecommunications plan. Although it is
                                             locations.                                  proceeding with FTS 2000, integrated
Findirigs                                                                                planning for meeting end-to-end
GAO noted that OMB is required to            Open Recommendations              to        telecommunication requirements is
develop, in consultation with GSA, a 5-                                                  needed. The study of information
year plan for meeting the federal
                                             Agencies                                    network requirements required under
government’s telecommunications needs,       Recommendation: In order to provide a       P.L. loo-202 was completed in July 1989.
but the agencies have not: (1) collected     framework for decisionmaking, to define
adequate information on agency               agency telecommunications needs, to         Recommendation: To enhance agency
requirements for various                     decide which services should be provided    decisionmaking on telecommunications
telecommunications services; (2) derived     centrally by GSA and which services         that would best satisfy needs and
appropriate methodologies for evaluating     should be provided by the agencies, and     objectives, OMB and GSA should
governmentwide costs; (31 made decisions     to establish responsibilities between the   establish an explicit, uniform
as to which services should be provided      central managers and the individual         methodology for comparing alternatives.
centrally; and (41 identified the need for   agencies, OMB and GSA should jointly        The methodology should describe the
specific technical standards. GAO found      develop, document, and implement a          essential cost elements and the
that the absence of meaningful               comprehensive plan for meeting              procedures for conducting analyses, and
governmentwide planning has: (1) left
                                             governmentwide telecommunications           should be enforced by OMB in its budget
the government open to the risk of
                                             needs. This plan should: (1) be developed   process, and GSA in its review process.
serious problems in developing and
replacing telecommunications systems;        using the guidance OMB and GSA              Addressee: General Services
and (2) made it impossible to determine      prescribed for the agencies in the B-year   Administration
whether the government is meeting            automatic data                              Status: Action in process. GSA drafted
overall telecommunications objectives. In    processing/telecommunications plan, but     proposed changes to its regulations on
addition, GAO found that: (11 GSA did        should be applied to the central            the acquisition of telecommunications
not support important procurement            management level; (2) be based on           resources. By Federal Register notice
decisions with meaningful analyses; (21 a    appropriate analyses that are necessary     published October 12,1989, GSA
GSA analysis of alternatives to replacing    for making decisions on how agencies’       proposed new regulations covering the
the existing Federal Telecommunications      needs will be met; and (31 include          life cycle of federal information
System (PI%) lacked credibility; (3) GSA     established economic and noneconomic        processing resources, including
awarded a contract for a more extensive      criteria. OMB and GSA should establish      requirements for the analysis of
analysis of FTS replacement                  a process to gather critical information    alternatives. GSA published a Handbook



                                             Page 121                                                                GAO/OP-90-1
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for &ife-Cycle Management of                  should direct the Information Resources    the agency’s consideration of sharing.
Telecommunications Systems.                   Management Service to ensure that          The GSA-proposed regulation will
                                              information identifying which agencies     require agencies to consider sharing
Recjommendation: The Director, OMB,           might share systems is acquired and        other agencies‘ existing facilities before
sho Id work with the Administrator of         used.                                      requesting authorization for exclusive-
Ge Pera1 Services, to establish and           Status: Action not yet initiated. GSA      use sewice or facilities. The regulations
systematically implement a policy             plans to identify agency resources         have not yet been issued in final form.
requiring agencies to share their             suitable for sharing by other agencies
proposed telecommunications systems           and publish a description of these         Recommendation: To implement the
when GSA determines, through a cost           resources in a regulatory bulletin.        policy concerning shared
and technical analysis, that sharing best                                                telecommunications systems, the
ac ‘ieves service requirements, efficiency,   Recommendation: To implement the           Administrator of General Services
an! the least overall cost to the             policy concerning shared                   should direct the Information Resources
government. This policy should be             telecommunications systems, the            Management Service to mandate an
      porated in the GSA Federal              Administrator of General Services          evaluation and cost comparison when
      mation Resources Management             should direct the Information Resources
                                                                                         GSA determines that a shared system is
      lations and in internal procedures.     Management Service to obtain
                                                                                         feasible. In this evaluation, GSA should
         see: General Services                additional information where the
                                              potential for sharing exists between the   clarify the alternatives to the
         stration
           Action in process. GSA proposed    requesting agency and other agencies.      government, including agencies’ claims
        s to its regulations requiring        This information should include: (1)       of adverse impacts from sharing, and the
ag ncies to consider sharing other            which telecommunications requirements      most sensible alternative from a
a k ncies’ existing facilities before         of these agencies can be met by a new,     governmentwide viewpoint.
rebuesting an authorization for               shared system; (2) the costs of existing   Status: Action in process. GSA is
exclusive-use service or facilities. The      services for all agencies involved and     changing its procedure for reviewing
regulations have yet to be issued in final    estimated costs for the requesting         agency requests to acquire
form. GSA plans to monitor sharing            agency’s proposed system; (31 physical     telecommunications resources to cover
through its reviews of agency delegation      requirements for the private branch        the agency’s consideration of sharing.
requests.                                     exchange; and (4) how long the agencies    The GSA-proposed regulation will
                                              will occupy their current locations.       require agencies to consider sharing
&commendation:     To implement the           Status: Action in process. GSA is          other agencies’ existing facilities before
policy concerning shared                      changing its procedures for reviewing      requesting authorization for exclusive-
telecommunications systems, the               agency requests to acquire                 use service or facilities. The regulations
Administrator of General Services             telecommunications resources to cover      have not yet been issued in final form.


Executive Direction          and Management

OPM Revolving Fund: Investigation                                          Activities During
Fiscal Years 1983 Through 1986
GGD-87-81,     06/26/87
  ..__ _...__-_-___.___
                     -___.              --..- “..^_
Background                                    Findings                                   to FY 1984, but decreased in FY 1986; (2)
GAO reviewed the Office of Personnel                                                     OPM did not hire sufficient investigators
                                              GAO found that: (1) the backlog of
Management’s (OPM) revolving fund to                                                     to keep current with agency
                                              uncompleted investigations grew
finance federal employee background                                                      investigation requests; (3) uncertainties
                                              significantly from fiscal year (FY) 1982
investigations.                                                                          about the OPM budget and personnel




                                              Page 122                                                                  GAO/OP-90-l
                                            General Government




ceilingscaused delays in recruiting in      reimburse it for all of its costs through    improve the timeliness of background
the regions; and (4) although OPM has       the revolving fund.                          investigations and reduce the backlog to
contracted with individuals and                                                          a manageable level.
companies to increase its investigator      Open Recommendations                to       Status: Action in process. Estimated
staff, it was dissatisfied with the                                                      completion date: 09/90. OPM reached its
contractors’ quality of work. GAO
                                            Agencies                                     authorized level in FY 1989; however,
believesi that OPM should not use fiscal    Recommendation: The Director, OPM,           the backlog is still high and OPM does
constramts to justify its lack of           should provide the investigative activity    not anticipate a great reduction in the
investig tive staff, since other agencies   authority to hire and maintain an            backlog during FY 1990 due to a
                                            investigator staff at levels which would     projected increase in work load.


Execqtive Direction          and Management
     /
Ma$aging IRS: Actions Needed to Assure Quality Service
in the Future
GGD-89-1,10/14/88
Background                                  designated a senior executive as the         sustained management commitment to
GAO evaluated the Internal Revenue          information resources focal point, he had    maintain quality at a daily operating
Service’s (IRS) management systems and      other responsibilities that precluded him    level. In addition, GAO found that: (1)
administrative support functions to         from devoting his full attention to this     IRS revenue and administrative
determine its effectiveness in: (1)         area; and (5) although IRS initiated a       accounting operations had internal
preparing for the future; (2) providing     strategic management process to help         control weaknesses that produced
quality lservice in an effective manner;    set agencywide goals, establish mission      inaccurate and untimely information;
(31 maintaining work-force quality          priorities, and create a benchmark, it       and (2) although IRS has reinstituted the
during a period of rapid change; and (4)    lacked effective methods to measure and      National Office Review Program
ensuring a strong system of clear           monitor its progress toward achieving        (NORP), the program’s lack of
management accountability for its           plan objectives, obtaining congressional     independence and performance measures
actions.                                    concurrence, and ensuring consistency        could hinder its effectiveness.
                                            with its budget requests. GAO also found
                                            that: (1) IRS was concerned about its
Findings                                    capacity to effectively deal with the        Open Recommendations               to
GAO found that: (1) the most critical       public and attract and retain quality        Agencies
long-term challenge IRS had was to          employees; (2) IRS could not offer           Recommendation: To enhance IRS
effectively modernize its computer-baaed    salaries sufficiently competitive with the   efforts to effectively prepare for the
tax processing system, since the system     private sector to attract quality            future, the Commissioner of Internal
was outdated and not capable of meeting     employees; (3) over half of the surveyed     Revenue should institutionalize the link
the growing IRS work load; (2) IRS          IRS senior executives would be eligible
                                                                                         between the Strategic Business Plan
modernization efforts were slow due to      to retire before 1993, and 60 percent
                                                                                         @BP) and budget development. IRS
ineffective management and changes in       indicated that they would leave within a
                                                                                         needs to clearly establish priorities and
leadership; (3) although IRS had pursued    year of eligibility; (4) IRS spent
                                                                                         make a concerted effort during the
four different proposed modernization       considerable time and effort correcting
                                            tax return errors instead of preventing      budget process to make decisions
plans, none had progresged beyond the
planning stage because of a lack of         problems from reaching the public; and       consistent with SBP strategies and
leadership information resources            (5) although IRS initiated processes to      priorities. Also, because IRS has not yet
management; (4) although IRS                improve its quality, it lacked the           used SBP to formulate a budget, it




                                            Page 123                                                                  GAO/OP-90-l
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shou/ld formalize its procedures              the initial issuance of the SBP 1990         consolidated into a new
con ‘ecting the two.                          through 1994. The general management         Telecommunications Division under the
Stat s: Action in process. Estimated          review follow-up review will validate this   Assistant Commissioner for Computer
corn letion date: 03/90. According to         accomplishment.                              Service. In the regions, they were
IRS, all budget initiatives are linked to                                                  consolidated under the Assistant
SB I strategies and actions. The              Recommendation: To enhance SBP, the          Regional Commissioner for Data
strategies and actions are prioritized and    Commissioner of Internal Revenue             Processing.
the+ priorities are used to formulate the     should establish measures of
bud@et.                                       accomplishment within the planning           Recommendation: The Commissioner of
                                              process. All SBP strategies should be        Internal Revenue should develop and
Recbmmendation: To enhance IRS                supported by a set of clearly defined        implement, as a high-priority initiative,
effo ts to effectively prepare for the        measures of accomplishment written in        a strategy for providing additional
fut re, the Commissioner of Internal          their supporting work plans. In addition,    technical training and expertise to the
     li
Re enue should assess the 198’7               IRS also should use such measures to         Deputy Commissioners and their senior
reoI ganization. This reassessment should     hold its executives and managers             management teams. In addition, the
be ‘nitiated in the fall of 1988, allowing    accountable for program performance.         succession planning system should
the t reorganization to be in place about a   Status: Action in process. Estimated         establish a career path to create a pool
ye 4 r.                                       completion date: 03/90. A new business       of technically qualified executives to
St&us: Action in process. Estimated           review process that evaluates the extent     meet future needs in critical senior-level
co pletion date: 03/90. GAO and IRS           to which an activity supports SBP is         technical positions.
ar conducting a joint assessment of the       being developed and includes
                                                                                           Status: Action in process. Estimated
re ! rganization. A GAO report will be        measurable critical success factors (CSF).
                                                                                           completion date: 03/90. According to
isa/led upon completion.                      This year’s annual business plans will
                                                                                           IRS, it has completed the first part of
                                              include CSF.
                                                                                           the recommendation by training all
Recommendation: To enhance IRS
                                                                                           executives beginning in June and ending
eff‘prta to effectively prepare for the       Recommendation: To enhance SBP, the
                                                                                           in September. The second part of the
future, the Commissioner of Internal          Commissioner of Internal Revenue
                                                                                           recommendation is ongoing and IRS has
&venue should examine service center          shohld implement an effective feedback
                                              mechanism to provide top executives          already advertised throughout the
and district office compliance roles.
                                              with nationwide evaluative feedback          nation for executive candidates with
St&us: Action in process. According to
                                              implementation of SBP strategies, action     information management skills.
IRS, several projects such as alternatives
to a traditional service center study,        plans, and accomplishments.
Austin compliance center study, and           Status: Action in process. Estimated         Recommendation: The Commissioner of
compliance strategies in the 1990 study,      completion date: 03190. According to         Internal Revenue should assess the
are dealing with different facets of this     IRS, the business review process under       current technology vision and
issue.                                        development will include feedback that       information system strategy and
                                              measures and monitors progress toward        initiatives for redesigning the tax
Recommendalion: To enhance SBP, the           plan objectives. Procedures that             processing system to ensure that they
Commissioner of Internal Revenue              establish business reviews on a              adequately support the objectives
should familiarize other key                  continuing basis will be published during    specified in SBP and accomplish the
organizations with IRS plans. TO               1990.                                       expected results.
facilitate the development and                                                             Status: Action in process. According to
implementation of IRS action plans, IRS       Recommendation: The Commissioner of          IRS, the Information Systems Plan is a
should explain and seek acceptance of its     Internal Revenue should consolidate          subject of SBP, is concurrent with SBP,
plans from the Department of the              below the Deputy Commissioner the            and shares its same strategies, thereby
Treasury, the Office of Management and        responsibility and accountability for        achieving consistency.
Budget COMB), antid ita congressional         managing the IRS telecommunications
oversight committees.                         program.                                     Recommendation: In order to help
Status: Action in process. Estimated          Status: Action in process. According to      correct the IRS accounting and financial
completion date: 03/90. According to          IRS, telecommunications functions            systems problems and provide a sound
IRS, this action has been completed with      (voice/data) in the national office were     basis for guiding its systems



                                              Page 124                                                                   GAO/OPdO-I
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development efforts, the Commissioner       improve the monitoring of AABES.             developed by September 1989 to address
of Internal Revenue should develop an       Operating accounting stations are            those needs.
overall f/nancial management                alerted to any unusual conditions in
improvement plan as part of SBP, to         monthly statements, while senior              Recommendation: In order to help
assist ins setting priorities, fixing       management is advised of any serious         correct the IRS accounting and financial
account bility and responsibility,          recurring operating problems.                systems problems and provide a sound
monitor ng financial systems operations                                                  basis for guiding its systems
and imp ovements, and providing a           Recommendation: In order to help             development efforts, the Commissioner
strategy for attracting and retaining       correct the IRS accounting and financial     of Internal Revenue should require, in
account’ng staff.                           systems problems and provide a sound         the long term, that a comprehensive cost
Status: I Action in process. Estimated      basis for guiding its systems                accounting system be developed to
complet/on date: 03/90. According to        development efforts, the Commissioner        account for all IRS costs and identify
IRS, the new fiscal year (FY) 1991          of Internal Revenue should designate a       them with the organizational
through 1995 financial management           project director to manage day-to-day        components and functions to which they
systems 5-year plan will be submitted to    efforts to develop the Automated             relate.
Treasur in August. Financial                Financial System (AFS) and ensure that       Status: Action in process. Estimated
manage L ent improvements have been         sufficient staff resources are devoted to    completion date: 01/94. According to
identifi d in FY 1991 SBP.
         9                                  the project.                                 IRS, detailed requirements for the
                                            Status: Action in process. Estimated         accounting module of AFS were
Keeom endation: In order to help
                                            completion date: 03190. According to         completed last year. The accounting
correct t he IRS accounting and financial
systems: problems and provide a sound       IRS, a project office with a GM-15           module of AFS is scheduled for
basis for guiding its systems               project manager is being established who     implementation in April 1992. Cost
development efforts, the Commissioner       will report directly to the Assistant        tracking on a project basis will be
of Internal Revenue should arrange for      Commissioner. The AFS section in             implemented 6 months after that.
IRS financial statements, prepared in       Bnance is being transferred to this office
accordance with Title 2 requirements, to    and four new staff positions will be         Recommendation: To ensure that the
be independently audited.                   added.                                       quality improvement process is
Status: Action in process. Estimated                                                     maintained and adopted as a means of
completion date: 10191. According to        Recommendation: In order to help             doing business, the Commissioner of
IRS, work has begun to identify changes     correct the IRS accounting and financial     Internal Revenue should build quality
that will be needed in IRS financial        systems problems and provide a sound         into IRS services using preventive and
statements to meet title 2 requirements.    basis for guiding its systems                quality assurance approaches.
The internal audit created and filled a     development efforts, the Commissioner        Status: Action in process. According to
position to coordinate financial audit      of Internal Revenue should identify          IRS, a number of efforts are underway
responsibilities.                           present and future staffing needs for        to ensure that quality improvement is
                                            accounting operations and look into          maintaining preventive approaches built
Recomqnendation: In order to help           alternatives for filling staffing            into the culture. These include: (1)
correct IRS accounting and financial        requirements in this area, such as           strategic initiatives on quality; (2) a
systems problems and provide a sound        seeking increased salary levels for          strategy that addresses quality planning,
basis for guiding its systems               accountants, complementing their ranks       control, and improvement; (3) annual
development efforts, the Commissioner       with contractor staff, and expanding a       business plans including critical success
of Internal Revenue should monitor the      career path for employees doing              factors on quality; and (4) testing a
Automated Accounting and Budget             accounting work.                             quality planning prototype.
Execution System (AABES) to determine       Status: Action in process. Estimated
that its internal controls and accounting   completion date: 03/90. According to         Recommendation: To ensure that the
processes protect the government’s          IRS, current staffing needs for              quality improvement process is
interesbs.                                  accounting operations service-wide will      maintained and adopted as a means of
Status: Action in proce*ss.Estimated        be identified and specific actions such as   doing business, the Commissioner of
completion date: 03190. According to        extension of special salary rates in         Internal Revenue should develop an
IRS, several actions are underway to        selected geographical areas will be          agencywide performance measurement



                                            Page 125                                                                  GAO/OP-90-l
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sysGm containing measures of quality,         Recommendation: The Commissioner of          Assistant Commissioner for Human
time/iiness, and efficiency that are          Internal Revenue should establish an         Resource Management and Support to
conststently used throughout the              agencywide strategy to develop,              comment on the human resource
org nization.                                 accumulate, and use information on           systems project prospecti and make any
Stat% a: Action in process. Estimated         employee quality throughout the IRS          recommendations believed to be
completion date: 06/90. According to          human resource management processes.         appropriate regarding the human
      in addition to the SBP and business     Status: Action in process. Estimated         resource issues involved, including the
l*i
review efforts, the quality initiatives       completion date: 03/90. According to         need for an HRMS liaison.
have focused on developing critical           IRS, in conjunction with the                 Status: Action not yet initiated. No
success factors specific to quality efforts   development of the Human Resource
                                                                                           action has been initiated by the agency
in key program areas. By June 1990,           Management Plan, a system will be
                                                                                           at this time.
standards for quality, efficiency, and        developed to define IRS human resource
timbliness will be developed. Completion      quality problems.
of the measurement system will follow                                                      Recommendation: The Commissioner of
de?lopment of the standards.                  Recommendation: The Commissioner of          Internal Revenue should integrate
                                              Internal Revenue should reformulate the      results of the executive attribute study
ReCommendation: To ensure that the            current human resource management            into executive succession planning
qu lity improvement process is                evaluation strategy to explicitly link it    system design. Because succession
m intained and adopted as a means of          to the new agencywide human resources        planning will be initiated before
do’ng business, the Commissioner of           plan, The evaluation strategy should         executive attributes have been fully
In rnal Revenue should develop reward         provide effective feedback to                defined, IRS must ensure that the
ani recognition systems for quality           management on the status of planned          results of this research, which could
management.                                   actions.                                     have an impact on the entire system, are
Statue: Action in process. Estimated          Status: Action in process. Estimated         subsequently integrated into the new
completion date: 03/90. According to          completion date: 03/90. According to         planning system.
IRS, revisions to IRM 0451, Incentive         IRS, this will be included in the            Status: Action in process. Estimated
Awards, that enable awards for quality        development of the human resource            completion date: 07/90. According to
improvements efforts have been                management plan, specifically the            IRS, a three-step approach is planned
completed, but are tied to team               integrated management information            that includes: (1) incorporating the
negotiations. National labor negotiations     system.                                      outputs and competencies from the
have been completed and local                                                               attributes study into position
negotiations are just beginning.              Recommendation: The Commissioner of           descriptions; (2) prioritization of
                                              Internal Revenue should strengthen the        executive attributes; and (3) development
Recommendation: The Commissioner of           information systems project approval          of an individual progression plan.
Internal Revenue should coordinate            process by requiring the identification of
human resource planning efforts               human resource requirements and issues
                                                                                           Recommendation: To strengthen the
through establishing an agencywide            when the project receives conceptual
                                                                                           effectiveness of the major IRS evaluation
human resources plan, This plan should        approval. These requirements should be
                                              specified in the prospectus for all          processes, the Commissioner of Internal
be an integral part of SBP.
Status: Action in process. Estimated          projects.                                    Revenue should improve IRS annual,
completion date: 03/90. According to          Status: Action in process. Estimated         nationwide assessments of its field
IRS, the Assistant Commissioner for           completion date: 03/90. According to         operations.
Health Resource Management and                IRS, after receiving HRMS input and          Status: Action in process. Estimated
Support (HRMSl will develop a                 concurrence, the Information Systems         completion date: 03/90. According to
comprehensive human resources                 Division will publish the formal             IRS, work is progressing on developing a
management plan that will interface            requirements for considering human          business review process to replace the
with SBP, consolidate all human                resource issues in the Information          NORP process that will evaluate the
 resources management initiatives, and         Systems Project Manager’s Guide.            extent to which an office supports SBP.
 lead to development of an integrated
 human resources management                   Recommendation: The Commissioner of          Recommendation: To strengthen the
 information system.                          Internal Revenue should require the          effectiveness of the major IRS evaluation



                                              Page 126                                                                   GAO/OP-90-l
                                           General Government




processes, the Commissioner of Internal     Recommendation: To make the NORP          include thorough followup on
Revenue jshould improve NORP.              process more useful to IRS top             recommendations. Procedures will be
Status: Action in process. Estimated       management, the Commissioner of            published in FY 1990.
completion date: 03/90. According to       Internal Revenue should provide a full-
IRS, as part of the annual business        time management function to ensure         Recommendation: To strengthen the
review process, critical success factors   consistent evaluation, appropriate         effectiveness of the major IRS evaluation
are being developed to provide uniform     independence, and sustained leadership.    processes, the Commissioner of Internal
expectatibns and evaluation among all      This evaluation function should also       Revenue should improve the regional
regions. ~                                 synthesize NORP and Regional Office        office review process.
                                           Review Program (RORP) results to           Status: Action in process. Estimated
                                           identify programmatic and cross-
Recommbndation: To make the NORP                                                      completion date: 10/90. According to
                                           functional issues of nationwide
process ’ore useful to IRS top                                                        IRS, following successful implementation
                                           importance.
manage ent, the Commissioner of            Status: Action in process. Estimated       of the business reviews of regions by the
Internal   evenue should implement an      completion date: 03/90. According to       national office, they will be extended to
annual I     wide NORP assessment          IRS, the service will provide sufficient   regional evaluation of district officers,
         1                                                                            service centers, etc. Procedures for
schedule as soon as possible. This         leadership resources. The Deputy
schedule [should provide top executives    Assistant Commissioner (Planning,          regional reviews will be published by
with IRStwide assessments to be used in    Finance, and Research) has been            October 1, 1990.
annual b dget proceedings.                 designated Business Review Executive
Status: k ction in process. Estimated      on a continuing basis as a collateral      Recommendation: To ensure that both
completion date: 03/90. According to       responsibility.                            the Regional Commissioners, the
IRS, procedures that establish business                                               primary RORP customers, and IRS
reviews on a continuing basis will be      Recommendation: To make the NORP           senior management receive sufficient
published by October 1,1989.               process more useful to IRS top             information on field performance, the
                                           management, the Commissioner of            RORP process should employ NORP
Recommendation: To make the NORP           Internal Revenue should ensure relative    measures and consistent IRS-wide
process more useful to IRS top             independence to enhance the credibility    methodology. This will require: (1) using
management, the Commissioner of            of NORP results to outside groups and to   the same performance measures and
Internal Revenue should develop            avoid duplication with other               evaluation standards applied in NORP;
detailed, standard NORP guidelines         management analyses functions.             (2) maintaining RORP with an
outlining minimum evaluation scope and     Status: Action in process. Estimated       appropriate level of independence; and
methodology and addressing functional      completion date: 03/90. According to       (3) developing a coordinated
                                           IRS, the service will provide sufficient   NORP/RORP evaluation plan
as well as cross-functional issues.
                                           leadership resources. The Deputy
Status: Action not yet initiated. There                                               nationwide.
                                           Assistant Commissioner (Planning,
have been no comments as to the status                                                Status: Action in process. Estimated
                                           Finance, and Research 1 has been
of this recommendation by IRS.             designated Business Review Executive       completion date: 10/90. According to
                                           on a continuing basis as a collateral      IRS, following successful implementation
Recommendation: To make the NORP           responsibility.                            of the business reviews of regions by the
process more useful to IRS top                                                        national office, they will be extended to
management, the Commissioner of            Recommendation: To make the NORP           regional evaluation of district officers,
Internal Revenue should use                process more useful to IRS top             service centers, etc. Procedures for
performance measures agreed upon           management, the Commissioner of            regional reviews will be published by
throughout the organization for NORP.      Internal Revenue should employ             October 1, 1990.
Status: Action in process. Estimated       rigorous follow-up procedures to ensure
completion date: 03/90. According to       prompt and sufficient implementation of    Recommendation: To make the NORP
IRS, critical success factors which        NORP recommendations.                      process more useful to IRS top
incorporate performance measures are       Status: Action in process. Estimated       management, the Commissioner of
being developed and will be applied        completion date: 03190. According to       Internal Revenue should balance IRS-
uniformly to all regions.                  IRS, the business review process will      wide/local needs with the need for a



                                           Page 127                                                                GAO/OP-90-I
                                             General Government




more structured RORP process to feed         Recommendation: To improve the                process and its relationship to the SBP is
into;NORP evaluations.                       usefulness of the IRS internal audit          in progress.
Staths: Action in process. Estimated         activities, the Commissioner of Internal
corn letion date: 10/90. According to        Revenue should independently evaluate         Recommendation: To improve the
IRS this will be included when a             strategic management and NORP                 usefulness of the IRS internal audit
dist I”ict/service center methodology        efforts. This should include reviewing        activities, the Commissioner of Internal
based on the business review process is      the effectiveness of business plan            Revenue should provide staff and funds
developed.                                   strategies and their supporting action        for broader internal audit coverage.
                                             plans, the implementation of strategic        Status: Action in process. Estimated
                                             initiatives, and the extent to which SBP      completion date: 10/90. According to
Rebommendation: To make the NORP
                                             is driving IRS budget decisions.              IRS, the FY 1989 internal audit received
process more useful to IRS top
                                             Status: Action in process. Estimated
mahagement, the Commissioner of                                                            an additional 62 part-time equivalents
                                             completion date: 03/90. According to
In&nal Revenue should improve                IRS, the strategic management process         and was exempted from the acroas-the-
independent evaluation coverage.             has already been incorporated into the        board budget cuts. IRS requested similar
Status: Action not yet initiated. No         universe of activities, functions, and        staff increases for FY 1990 and FY 1991
act/ion on this recommendation has been       programs subject to audit coverage.          if they fit within the service’s overall
iniliated by the agency at this time.         Audit of the IRS budget formulation          plans.



Ekecutive Direction          and Management

Telecommunications Privacy: GSA’s Planned FTS 2000
Telephone Record Controls Appear Reasonable
IhlTEG89-6,12/23/88
 -. ,.. -_..-_~.._-__ ~.-..__
                           --.
Background                                   maintain call-detail records; (4) conduct     Open Recommendations               to
In response to a congressional request,
                                             periodic audits of security compliance to     Agencies
GAO examined the General Services            ensure that the FI’S 2000 contractor
                                             controls information access; and (5)          Recommendation: In order to establish
Administration’s (GSA) plans to provide                                                    the basis for a policy on the releasability
privacy and security for users of the        provide other security measures to
                                             ensure the integrity of the call-detail       of call-detail data appropriate to the
Federal Telecommunications System                                                          circumstances of FTS 2000, the Director,
o?rS) 2000.                                  record data base. GAO also found that
                                             GSA: (1) established a committee to           Office of Management and Budget
                                             consider whether it should issue rules        (OMB): (1) as part of the responsibilities
 Findings                                    dealing with the privacy aspects of call-     under the Privacy Act and the
                                             detail records; (2) contracted for a report   Paperwork Reduction Act, should review
 GAO found that GSA plans to: (1)
                                             on privacy and security arrangements          the extent to which telephone call-detail
 provide security and privacy protection
                                             regarding preparation and processing of        records should be protected from
 over FTS 2000 telephone call-detail
                                             FTS 2000 records; and (3) could                disclosure and the circumstances under
 records that is reasonable and consistent
                                             implement, at the request of a customer        which they should be released; and (2)
 with the provisions of the Privacy Act
                                              and for a fee, a procedure to selectively     with the assistance of GSA and the
 and the Freedom of Information Act; (2)
 limit the number of people handling call-    search and strip data identifying called      Department of Justice, should explore
 detail data to safeguard against             numbers from the call-detail records.         various alternatives and, if applicable,
 unauthorized access and unintentional                                                      propose legislation or issue clarifying
 disclosure; (3) restrict access to the                                                     guidance for the treatment of such
 computer systems that generate and                                                         records.




                                              Page 128                                                                    GAO/OP-90-l
                                            General    Government




Status: Action in process. OMB is           policies for protecting and releasing call-   unresolved technical aspects on the new
working bith GSA and Justice on the         detail records. However, this action has      PI’S 2000. When new managers are
Federal Telecommunications Privacy          been delayed due to timing and                confirmed, action will proceed.
Advisory: Committee to review the           involvement of new managers and


Executive Direction         and Management
Imrr$.gration: Data Not Sufficient for Proposed Legislation

                                            legal status data were frequently             encouraging states with large immigrant
                                            unavailable; (3) there were only limited      populations to develop compatible data
                                            data on the impact of immigration on          bases; and (41 improving emigration
                                            resources, the environment, and foreign       data.
reporting requirements under S. 2104,       policy; (41 some data, such as the
which would revise numerical                decennial census, could be used only          Open Recommendations             to
immigration limitations and require the     once a decade to meet the S. 2104
                                            reporting requirements; and (5) there are     Congress
Attorney General to report: (1) annually
on the effects of immigration; and (21      no current or planned data that could be      Recommendation: Congress should
every 3 years on the need to revise         technically adequate for cause-and-effect     remove from proposed legislation the
immigration limitations.                    immigration analyses. GAO believes that       linkage between impact measures and
                                            the S. 2104 reporting requirements could      the process of periodic review of the
                                            be met through augmentation of existing       numerical limits. However, if Congress
Findings                                    data bases or through additional data         views this linkage as critical, then a
GAO found that: (1) although there are      collection by: (1) integrating different      variety of steps should be undertaken to
quantitative data relevant to conduct the   data sources within the Immigration and       strengthen immigration data. A number
required’studies, the data are inadequate   Naturalization Service (INS); (2)             of federal agencies could be involved in
to meet the proposed reporting              expanding INS data collection to include      such a data improvement effort.
requirements; (2) alien demographic and     more immigrant demographic data; (3)          Status: Action not yet initiated.


Executive Direction         and Management

Managing the Government: Revised Approach Could
Impirove OMB’s Effectiveness
GGD-89-65,05/04/89
Background                                  Findings                                      implementation strategies, and limited
GAO assessed the Office of Management                                                     integration with the budget process have
                                            GAO found that: (1) the OMB
and Budget’s (OMB) recent and long-                                                       hindered progress in many other areas;
                                            governmentwide management
term performance in providing                                                             (2) OMB concentration on short-term
                                            improvement effort, known as Reform
leadership and promoting improvements                                                     consequences has resulted in long-term
                                            88, has achieved success in some areas,
in executive branch management.                                                           problems; (3) OMB made some
                                            but a lack of sustained direction, poor




                                            Page 129                                                                  GAO/OPdO-1
                                              General Government




 improvements in debt and credit              Status: Action not yet initiated.            contracting out, they want to use to
 management, but complex problems                                                          achieve efficiency goals. To avoid any
 remain and nontax delinquencies rose         Open Recommendations                to       confusion by the agencies on whether A-
 fro+ $15 billion in fiscal year (FY) 1982                                                 76 is a contracting-out program or a
 to 432 billion in FY 1988; (4) legislation   Agencies                                     program to achieve management
and OMB efforts have improved the             Recommendation: The Director, OMB,           efficiency, perhaps A-76 should be
gov I, rnment’s financial management          should work with the Director of the         removed from OFPP. This step could
sy&ms, but contracting and                    Office of Personnel Management (OPM)         place all programs designed to achieve
procurement reform have been                  to reinstate the OPM leadership role and     management efficiencies in one
unsuccessful; (5) OMB failure to              outreach efforts. OPM needs to provide       organizational area of OMB.
integrate its management and budget           agencies with training and to support        Status: Action not yet initiated.
operations has limited its ability to         agencies’ efforts to develop measures of
provide management leadership; (6) the        productivity, quality, and timeliness.       Recommendation: In devising a more
0M)B A-76 program has encountered             Status: Action not yet initiated.            flexible strategy for implementing the A-
significant agency resistance, and many                                                    76 program, OMB should have its A-76
agencies did not know whether A-76 was        Recommendation: The Director, OMB,           technical staff work primarily with the
a contracting program or a program to         should phase out the multiple agency         budget divisions to help provide overall
imp ove efficiency; (7) 75 percent of         reporting requirements for productivity
                                                                                           guidance and direction to the agencies
gov 5 rnment procurement executives and       improvement information and                  and critique agency submissions and
87 percent of industry officials surveyed     concentrate the monitoring of the
                                                                                           plans. This will better ensure an
believed that the Office of Federal           agencies’ initiatives through the use of
                                                                                           integrated OMB approach and maximize
Pro ’urement Policy (OFPP) provided           productivity information in the budget       the use of limited staff resources that
ina d equate leadership; and (8) although     review process.                              have been greatly diluted by trying to
management improvement progress is            Status: Action not yet initiated.
                                                                                           implement the program on a
most likely when the President and
                                                                                           governmentwide basis.
Congress agree on broad reform                Recommendation: The Director, OMB,
objectives, OMB has generally opposed         should better link productivity              Status: Action not yet initiated.
management legislation proposed by            improvement with the budget process by
Congress and has had limited success in       having the management staffs                 Recommendation: In devising a more
generating congressional support for its      productivity specialists provide increased   flexible strategy for implementing the A-
proposals.                                    assistance to examiners.                     76 program, OMB should present its
                                              Status: Action not yet initiated.            plan, when developed, to the key
                                                                                           congressional committees and begin to
Open Recommendations               to                                                      work early to ensure Congress’
                                              Recommendation: In devising a more
Coirgress                                     flexible strategy for implementing the A-    acceptance.
Recbmmendation: Congress should               76 program, OMB should initially focus       Status: Action not yet initiated.
engage OMB in a dialogue on                   on a few key agencies in addition to the
approaches to its management                  Department of Defense that are more          Recommendation: The Director, OMB,
responsibilities with a view toward           likely candidates for contracting            should charge the OMB budget divisions
building consensus on actions needed to       activities and work to build expertise       with explicit responsibility for
ensure that results are achieved in           within those agencies for managing and       overseeing agency implementation of
resolving critical management problems.       doing the necessary analytical work.         selected management improvement
To facilitate discussion, Congress should     Status: Action not yet initiated.            efforts, evaluating the effectiveness of
consider statutorily requiring that OMB                                                    the management of individual agencies
continue its practice of preparing an         Recommendation: In devising a more           and programs, and ensuring that
annual report on the state of federal         flexible strategy for implementing the A-    corrective action is taken to solve
management and submitting it with the         76 program, OMB should work through          identified problems.
President’s budget. Such a report can be      the budget process to set broad goals for    Status: Action not yet initiated.
of value in hearings & OMB                    agencies to achieve greater efficiencies.
management leadership agenda and the          Agencies should be allowed latitude to       Recommendation: The Director, OMB,
resources it would require.                   decide what mix of processes, including      should take steps to either increase or



                                              Page 130                                                                 GAO/OP-90-l
                                             General Government




supplement staff resources. Options to       crosscutting policy and program               Recommendation: The Director, OMB,
consider, to meet the work-load demands      management problems.                          should secure presidential support for
include: ;(11increasing permanent            Status: Action not yet initiated.             undertaking, in conjunction with the
examiner staff; (2) increasing staffing in                                                 agencies and Congress, an active
the special studies divisions or the         Recommendation: The Director, OMB,            management program aimed at
technical management staff fully             should enlist the Assistant Secretaries       improving the agencies’ capacities to
dedicated to supporting examiner             for Administration to address the             perform their programmatic missions
management oversight; and (3) using          administrative management issues of           effectively and efficiently. Specifically,
reimbursable interagency details to          common concern.                               OMB will require presidential support
supplement permanent examiner staff          Status: Action not yet initiated.             for its efforts to oversee, as part of the
during peak budget review periods.                                                         budget process, agency implementation
Status: ‘Action not yet initiated.           Recommendation: The Director, OMB,            of a limited number of key policy,
                                             should enlist the Inspectors General to       program, and administrative
Recom endation: The Director, OMB,           help identify emerging problems and           management issues.
should     arge OMB management staff         evaluate the government’s progress            Status: Action not yet initiated.
        h                                    toward addressing its many
with: (111working as a team with the
budget divisions to identify agency          management issues and to provide              Recommendation: The Director, OMB,
management issues and assess progress;       suggestions for improvement.                  should consider the need for establishing
(2) work,ing with the agencies to identify   Status: Action not yet initiated.             a second Deputy Director to enhance the
important crosscutting management                                                          time and attention the OMB top
issues and establish needed policies; and    Recommendation: The Director, OMB,            management team can give to
(3) conducting special projects addressing   should engage in regular, early contact       strengthening its management
management issues of presidential            with Congress both to advance needed          leadership role and working with
interest.                                    management legislation and to keep            Cabinet heads and their top managers
Status: Action not yet initiated.            Congress informed about the status and
                                                                                           on critical policy implementation and
                                             priorities of the administration’s efforts.
                                                                                           program delivery issues.
Recommendation: The Director, OMB,           The annual management report could be
                                             useful in this regard.                        Status: Action not yet initiated.
should enlist the departmental Deputy
Secretaries to identify and resolve          Status: Action not yet initiated.


Execlitive Direction         and Management

Computer Security: Virus Highlights                                           Need for Improved
Internet Management
IMTEG89-57,06/12/89
Backbound                                    hours after it appeared, clogging systems     private information; (5) the incident
                                             and disrupting most of the nation’s           highlighted such vulnerabilities as the
Pursuant to a congressional
              tong           request,
                                             major research centers; (2) university        lack of an Internet focal point for
GAO reviewed the November 1988
                                             computer experts eradicated the virus at      addressing security issues, security
Internet computer virus incident.                                                          weaknesses at some sites, and problems
                                             most sites within 2 davs: (31 the virus
                                                                    ”   I..




                                             caused lost computer processing and           in developing, distributing, and
Findings                ”                    staff time, but no permanent damage; (4)      installing software fixes; ano (6) agencies
                                             a few changes to the virus program            and groups have taken such actions as
GAO found that: (1) the Internet virus
                                             could have resulted in widespread             creating computer emergency response
infected up to 6,000 computers within        damage and compromise of sensitive or         centers and issuing ethics statements.



                                             Page 131                                                                     GAO/OP-90-l
                                              General Government




GA/O also found that factors hindering        Engineering, and Technology, the             involvement of Internet users, systems
prosecution of computer-virus-type            establishment of an interagency group to     software vendors, industry and technical
inc I dents included the lack of federal      serve as an Internet security focal point.   groups, such as the Internet Activities
sta utes specifically directed at             This group should include                    Board, and the National Institute of
co 4 puter-virus-type incidents and the       representatives from the federal             Standards and Technology and the
technical nature of computer-virus-type       agencies that fund Internet research         National Security Agency, the
cases.                                        networks and should: (1) provide             government agencies with
                                              Internet-wide policy, direction, and         responsibilities for federal computer
Oien Recommendations                to        coordination in security-related areas to    security; and (41 become an integral part
                                              help ensure that the vulnerabilities         of the structure that emerges to manage
Agencies                                      highlighted by the recent incidents are      the National Research Network.
Itecommendation: The President’s              effectively addressed; (21 support efforts   Status: Recommendation valid/action
Science Advisor, Office of Science and        already underway to enhance Internet         not intended. OSTP has not decided
Tee noiogy Policy (OSTP), should              security and, where necessary, assist        upon action, but does not intend to
cooPdinate, through the Federal               these efforts to ensure their success; (31   follow this recommendation.
Coordinating Council on Science,              develop mechanisms for obtaining the


Ex/ecutive Direction         and Management

Phpervvork Reduction: Mixed Effects on Agency Decision
Processes and Data Availability
PEMD-89-20,09/07/89
Background                                    inconsistencies stemmed from the use of      methodology, or inadequate
Pursuant to a congressional request,          varying criteria for determining priority    questionnaire design; (9) OMB
GAO reviewed the Office of                    reviews and little or no on-the-job          regulations and guidelines heavily
Management and Budget’s COMB) efforts         training for new staff; (4) despite the      influenced the processes that agencies
to minimize the burden that information       variability in the review processes, OMB     used to make information-gathering
requests placed on the public, focusing       approved 95 percent of agency                decisions; (10) more than half of the
on: (1) how OMB handled agency                submissions; (5) 12 percent of the           managers interviewed stated that OMB
requests for data collection and the          research approvals and 8 percent of the      reviews had a negative effect on their
timeliness and technical adequacy of its      nonresearch approvals were formally          information collection; and (11) some
reviews; (21 how OMB policies and             modified and an unknown percentage           agencies attempted to avoid OMB
practices influenced agencies’ decisions      were informally modified during              reviews through mechanisms that could
to gather information; and (3) the            negotiations between OMB and agencies;       decrease quality and increase
influence of agency and OMB actions on        (6) although many agencies had perfect       information collection costs, while some
information availability.                     approval rates, about 7 percent of the       agencies stopped collecting some data
                                              agencies had persistent difficulties in      because of difficulties in the clearance
                                              obtaining approvals; (7) although OMB        process.
Findings                                      reviewed the majority of submissions
GAG found that: (1) OMB received over         within the mandated time limits, the         Open Recommendations              to
20,000 information collection requests        median time for reviews increased; (8)
from 211 agencies between 1982 and            many submissions had such technical
                                                                                           Agencies
1987; (2) although O$IB had a formal          inadequacies as low expected response        Recommendation: Given that many
review process, its office staff did not      rates, the potential for response bias,      agencies have developed systematic
consistently apply review policies; (3) the   underreliance on conventional sampling       procedures for reviewing data collection



                                              Page 132                                                                  GAO/OP-90-1
                                              General Government




requestsi the Director, OMB, should           of their data collections through           Recommendation: The Director, OMB,
employ existing authority to delegate         increased use of conventional sampling      should augment the Office of
primary 1review responsibility to the         procedures, measures to improve             Information and Regulatory Affairs’
senior opcials within designated              response rates, safeguards to control       capacity to perform technical reviews of
agencies/ that have demonstrated              response bias or estimate the bias, and     new and recurrent collections. Measures
capability. The performance of these          more precise design of data collection      appropriate to this end may include
agencies’could be monitored through           instruments.                                expansion of technical staff and
spot-the ks conducted by OMB. For             Status: Action not yet initiated.           consultation with external experts.
executiv agencies with less effective                                                     Status: Action not yet initiated.
         I
internal~means for procedural and             Recommendation: To facilitate sound
technic4 review, OMB should help              reviews within OMB, the Director, OMB,      Recommendation: OMB should conduct
improve! those means.                         should develop an ongoing training          its review of information collection
Status: b       not yet initiated.            program for the agency’s paperwork          requests concurrently with the public
                                              review staff to ensure that technical and   comment period for these requests.
Recomn/endation: OMB should enhance           nontechnical criteria are appropriately     Status: Action not yet initiated.
its guidance and assistance to agencies       and consistently applied to submissions.
for impqoving the efficiency and quality      Status: Action not yet initiated.


Genehal Property and Records Management

Government Civilian Aircraft: Central Management
Reforms Are Encouraging but Require Extensive Oversight
GGD-89-86,09/29/89
 _.__ . ._ .._.....-_.__..
                      -.~.
                        ._--..~-.---.~_-
Background                                    and other nonofficial passengers to         Open Recommendations                to
Pursuant to a congressional request,          accompany top officials aboard              Agencies
GAO followed up on earlier reviews of         government aircraft, which could expose
                                              the government to liability; (4) OMB        Recommendation: The Director, OMB,
civilian agencies’ management of their
                                              clarified guidance on ownership and use     should sustain efforts begun during the
aircraft, focusing on: (1) Office of
                                              of aircraft and established a leadership,   last administration to: (1) provide overall
Management and Budget (OMB) and
General Services Administration (GSA)         technical assistance, and supporting        management leadership aimed at getting
oversight of civilian agency aircraft         oversight role for GSA; (5) OMB directed    executive agencies to improve their
ownership and use; and (2) the                agencies to make special cost analyses to   management and use of aircraft; and (2)
continuing need for reform of agencies’       determine whether their aircraft were       rely on GSA to provide technical
aircraft management and use practices.        cost-effective compared to commercially     leadership, assistance to agencies, and
                                              available aircraft; (6) OMB and GSA         supporting oversight of agencies’ aircraft
                                                                                          operations and ensure that OMB, as well
Findings                                      actions provided a centralized
                                                                                          as GSA, devote the necessary staff to
                                              management framework for reforming
GAO found that: (1) some agencies are                                                     effectively oversee agencies’ actual
                                              agencies’ aircraft management; and (7)
still not justifying the cost-effectiveness                                               aircraft practices so that the ongoing
                                              OMB and GSA need to continue their
of government ownership or                                                                reform efforts do not dissipate from lack
administrative use of aircraft, as OMB        efforts to ensure that agencies comply
                                              with their guidance concerning              of sustained attention as did those in
policy required; (2) some usage practices                                                 1983.
did not appear justified by either cost or    ownership and use of aircraft.
                                                                                          Status: Action in process.
epecial mission requirements; (3) some
agencies continued to permit spouses



                                              Page 133                                                                  GAO/OP-90-l
                                               General Government




Redommendation: The Director, OMB,            cost-effective. Once agencies have           which government officials are
should integrate the executive branch’s       completed the special A-76 cost studies,     authorized to take spouses and other
aircraft oversight and enforcement            OMB should reevaluate the adequacy of        nonofficial passengers with them on
effdrts with the budget process and use       the governmentwide guidance and              domestic and overseas trips and under
the;budget, the President’s Council on        agencies’ data for making the studies, as    what circumstances, and who pays the
Integrity and Efficiency, and individual      well as the adequacy of the existing         costs of that transportation; and (2)
inspectors general to oversee and enforce     management controls in Circular A-126        limits the government’s liability.
agencies’ compliance with the aircraft        over the use of government aircraft for      Status: Action in process.
ownership, operation, and administrative      routine administrative travel.
use :requirements of Circulars A-76 and       Status: Action in process.
                                                                                           Recommendation: The Acting
A-126.
St&w     Action in process.                                                                Administrator, GSA, should provide the
                                              Recommendation: The Director, OMB,
                                              should complete the planned transfer of      aviation management group the staff
  Recpmmendation: The Director, OMB,          the A-76 function from the Office of         and other resources, as well as the top-
 should establish a new deadline for          Federal Procurement Policy to the            level management support and
 completing the special A-76 aircraft         Management Directorate as soon as            organizational placement within GSA,
 just,fication
      I        cost studies and, in the       possible and consolidate all aircraft        that it needs to effectively fulfill its
 meanwhile, issue the additional              ownership, management, and use               intended governmentwide leadership,
 executive branch guidance for making         policies and guidance into Circular A-       technical assistance, and supporting
 such studies that had already been           126.                                         oversight role in the aircraft area. This
 planned for later this year, to ensure       Status: Action in process.                   role should include: (1) implementing,
 that agencies have sufficient criteria and                                                overseeing, and fine-tuning the guiding
 time to do the special studies properly.     Recommendation: The Director, OMB,           aircraft ownership, management, and
 Agencies should be held accountable for      should establish an executive branch         use policies; and (2) improving the
 meebing the new deadline, and the            policy on the transportation of spouses      completeness, reliability, and usefulness
budget process should be used as              and other nonofficial passengers that: (1)   of the governmentwide aircraft
 levejage to ensure that the required         specifies when it is in the government’s     management information system.
studies are made and that agencies            best interest for them to accompany          Status: Action in process.
justify that their aircraft are needed and    officials aboard government aircraft,


Legislative Functions

Congressional Reports: Efforts To Eliminate or Modify
Reporting Requirements Need To Be Improved
AFMD-88-4, 04/19/88
Background                                    Findings                                     that: (1) agencies did not sufficiently
GAO reviewed the procedures that the                                                       communicate with Congress either
                                              GAO found that: (1) as of fiscal year
Office of Management and Budget               1986, there were approximately 3,300         before or after submitting the proposal;
(OMB) and five executive branch               recurring reporting requirements, which      (2) most of the justifications presented
agencies used to compile and present a        cost agencies about $240 million; and (2)    did not adequately demonstrate the need
legislative proposal for modifying or         although OMB used agency                     to eliminate or modify the reporting
eliminating 240 congressional reporting       recommendations to develop a legislative     requirements; and (3) agencies did not
requirements.          y                      proposal to modify or eliminate 240          use existing reports management
                                              reporting requirements, Congress only        processes to ensure that the
                                              changed or rescinded 23. GAO also found



                                              Page 134                                                                  GAO/OP40-1
                                            General Government




        /
recommendations they made satisfied         of Federal Regulations to include            agencies to perform recurring
congressional information needs.            congressional reporting requirements in      evaluations of congressional reports, The
                                            executive agencies’ recurring evaluation     initial regulation was expanded by GSA
Open Recommendations               to       of reporting needs.                          and rejected by OMB. GSA resubmitted
                                            Status: Action in process. Estimated         a new proposal, but OMB asked GSA for
Agencies                                    completion date: 06/90. The General          an extension on its reply. GSA now
Recommendation: The Administrator of        Services Administration (GSA) will be        expects to have a regulation published
General Services should amend the Code      issuing regulations to require executive     by June 1990.


Legislbtive Functions
U.S.~Government Printing Office: Materials Management
Service’s Charges for Handling Paper and Materials
GGD-88-108,08/08/88
Backdround                                  1965; (6) although the Service levied a      Recommendation: The Public Printer,
In response to a congressional request,     35-percent handling charge on all            GPO, should direct the Office of the
GAO examined the operations of the          customers buying paper and materials         Comptroller to evaluate the validity of
Government Printing Office’s (GPO)          from inventory and a 6-percent handling      the present handling charges for issues
Materials Management Service, to            charge on direct shipments, it levied no     from inventory and direct shipments of
determine: (1) the propriety of the         charges for other items; and (7) GPO         paper and materials from vendors, make
Service’s handling charges from the         could not provide specific data to support   any necessary adjustments, and make
standpoint of generally accepted            these rates.                                 such evaluations on a periodic basis.
accounting principles; (2) whether the                                                   Status: Action in process. GAO is
charges were equitable to the level of      Open Recommendations               to        following up on this report in the fall of
service provided; (3) whether the cost                                                   1989 as part of a JCP request. GAO was
                                            Agencies                                     unable to obtain the current status as of
centers were adequate to properly
determine and allocate costs; and (4)       Recommendation: The Public Printer,          November 7,1989, but expects to do so
ways to reduce operating expenses.          GPO, should direct the Office of the         within 1 month.
                                            Comptroller to review all allocation
Findings                                    bases used to distribute costs to            Recommendation: The Public Printer,
                                            Materials Management Service cost            GPO, should direct the Office of the
GAO found that: (1) the number of cost      centers. During this review, the basis for   Comptroller to develop handling charges
centers was adequate to record and          allocating costs in the engineering          applicable to recovery of costs of the
accumulate costs; (2) the Service           services and the buildings expense           Materials Management Service’s services
properly and accurately assigned direct     accounts should receive special              provided to users of procurement
costs to the centers; (31 the Service did   attention.                                   services not now subject to a handling
not properly and accurately assign some     Status: Action in process. GAO is            charge.
allocated costs under the engineering       following up on this report in the fall of   Status: Action in process. GAO is
service charges and building expense        1989 as part of a Joint Committee on         following up on this report in the fall of
accounts; (4) the Service did not always    Printing (JCP) request. GAO was unable       1989 as part of a JCP request. GAO was
allocate building space assignments
                                            to obtain the current status as of           unable to obtain the current status as of
according to the centers’ actual
                                            November ‘7, 1989, but expects to do so      November ‘7, 1989, but expects to do so
occupancy and square fobtage; (5) GPO
last reviewed space allocation rates in     within 1 month.                              within 1 month.




                                            Page 135                                                                  GAO/OP-90-l
                                                General Government




Legislative Functions
Legislative Mandates: State Experiences Offer Insights for
Federal Action
 I
HlkD-88-75,09/27/88
Bqckground                                      requirements; (5) in three states,           amendments with potentially significant
                                                reimbursement requirements had little        effects on state and local costs.
In response to a congressional request,
                                                impact on legislative mandates; and (6)      Committees and members should request
GAD reviewed state and federal
                                                only one state had appropriated              estimates on appropriation and tax bills
attempts to deal with legislative               sufficient funding to defray local costs.    that are identified as potentially
mandates imposed on lower levels of             GAO believes that the federal                affecting state and local costs.
government, focusing on: (11 their              government could focus attention on the
processes for estimating the mandates’                                                       Status: Action not yet initiated.
                                                impact of federal legislation on state and
cost impacts; and (2) states’                   local costs by providing estimates for key
reimbursement practices for such costs          bills prior to full committee reports and    Open Recommendations             to
                                                biennial reports to increase legislators’    Agencies.
Firdings                                        awareness of mandated costs.                 Recommendation: The Advisory
GAb found that: (11 although the cost                                                        Commission on Intergovernmental
estimates improved Congress’                    Open Recommendations               to        Relations should prepare a biennial
understanding of state and local costs,         Congress                                     report on the total estimated state and
they had little effect on five of eight bills   Recommendation: Congress may wish            local costs of new mandates contained in
it reviewed because legislators were            to ask the Congressional Budget Office       legislation passed by each Congress.
more concerned with programs and                to prepare state and local cost estimates    Status: Action not yet initiated.
policy issues than with state and local         for selected proposed legislation            Commission action is still pending
costs; (2) at the state level, cost estimates   scheduled for subcommittee or full           completion of ongoing research on
had a significant impact if the states          committee markup. Consultation with          related topics. GAO has discussed this
prepared them early in the legislative          state and local government interest          matter with the staff of the
process; (3) 14 states reimbursed local         groups could help legislators identify       Intergovernmental Subcommittee, House
governments for state-mandated costs;           significant mandate legislation              Committee on Government Operations,
(4) ibur of seven of those states deterred      warranting these estimates. Committees       which expects to be conducting oversight
legislators from passing unfunded               and members should also consider             hearings on the Commission in the near
mandates through reimbursement                  requesting estimates for floor               future.




                                                Page 136                                                                 GAO/OPdO-1
                                               General Government




LegisJative k’unctlons
Financial Disclosure: Legislative Branch Systems Improved
but iCan Be Further Strengthened
GGD-$9-103,
  ..__._
      ,....
         _-...    09/08/89
            . ..__.
                 -.__-
                    .._ .-. _---
Background                                     result of committee reviews; and (5)       offices to notify candidates of filing
                                               although the House reviewed some           requirements and promptly provide
Pursuant to a legislative requirement,
GAO evaluated the effectiveness of the         reports prior to release, the Senate did   names of candidates to the committees
                                               not, and the Senate notified the public    for followup.
legislatjve financial disclosure process,
                                               that reports could be amended, but the     Addressee: Senate Select Committee on
focusing on whether: (1) individuals
                                               House did not.                             Ethics
accura ly and timely filed their
require reports; (2) the House and                                                        Status: Action not yet initiated.
Senate 1; ommittees took steps to obtain       Open Recommendations               to      Addressee: House Select Committee on
                                                                                          Ethics
overdue reports; (3) the committees            Congress                                   Status: Action not yet initiated.
reviewed the reports to ensure that       .
individuals properly filled them out and,      Recommendation: To improve filing
if in error, whether the corrections were      compliance among House, Senate, and        Recommendation: To deal with the late
timely; and (4) the committees made the        legislative agency employees, the Senate   filing and nonfiling among candidates,
reports available to the public.               Ethics Committee and the Senate            the House and Senate Ethics
                                               Disbursing Office should work together     Committees should adopt policies of
                                               to revise procedures for more quickly      publicizing, at an appropriate time, the
Findings                                       identifying all new Senate employees       names of candidates who file late or
GAO found that: (1) the House and              who must file and notifying them of        refuse to file.
Senate have made substantial progress          requirements to file.                      Addressee: Senate Select Committee on
in improving their financial disclosure        Addressee: Senate Select Committee on      Ethics
systems, detecting and reducing                Ethics                                     Status: Action not yet initiated.
reporting errors, improving followup on        Status: Action not yet initiated.          Addressee: House Select Committee on
overdue reports, issuing clarified forms       Addressee: Senate: Disbursing Office       Ethics
and instructions, and developing report        Status: Action not yet initiated.          Status: Action not yet initiated.
review checklists, which resulted in
overall improved filing compliance; (2)        Recommendation: To improve filing          Recommendation: The House should
although political candidate filing            compliance among House, Senate, and        develop procedures for referring
improved since 1981, about one-half of         legislative agency employees, the House    nonfiling candidates to the Department
the candidates for the House and Senate        Ethics Committee should require            of Justice for consideration of
filed late or did not file in 1986; (3)        financial disclosure reporting from all    enforcement action.
although both the House and Senate             employees compensated at or above the      Status: Action not yet initiated.
 procedures for reviewing reports were         GS-16 salary level for more than 60 days
effective in detecting apparent errors,        during a calendar year as long as they     Recommendation: The House and
the House did not review requested             continue to be employed on May 15 of       Senate Ethics Committees should
corrections and while the Senate               the following year.                        explore options for obtaining legislative
 reviewed requested corrections, it did        Status: Action not yet initiated.          agencies’ assistance in improving filing
 not always ensure timely corrections; (4)                                                compliance of their employees. For
 both the House and Senate made                Recommendation: To deal with the late      example, the committees could ask for
 disclosure reports available to the public,   filing and nonfiling among candidates,     agencies to assist in tracking filing
 but did not always clarify whether the        the House and Senate Ethics                timeliness by their employees and
 reports were subject to change as a           Committees should request state election   following up when reports are overdue.



                                               Page 137                                                                 GAO/OP-90-l
                                             General Government




AddLessee: Senate Select Committee on        financial disclosure reports that the       Recommendation: The House and
Ethics                                       Committee has found to be in error.         Senate Ethics Committees should work
Statpls: Action not yet initiated.           Status: Action not yet initiated.           with the Office of Records and
Addtessee: House Select Committee on                                                     Registration and the Office of Public
Ethics                                       Recommendation: To strengthen its           Records, respectively, to institute a
States: Action not yet initiated.            report review procedures, the Senate        procedure for notifying the public that
                                             Ethics Committee should track the           the reports are undergoing committees’
Recbmmendation: To ensure that the           status of requested amendments until        reviews and are subject to change.
                                             they are received and approved to           Addressee: Senate Select Committee on
public has accurate financial disclosure
                                             improve the timeliness of the               Ethics
reports, the Chairman of the House
                                                                                         Status: Action not yet initiated.
Ethics Committee should implement            amendments.
                                                                                         Addressee: House Select Committee on
procedures to ensure that timely and         Status: Action not yet initiated.
                                                                                         Ethics
correct amendments are made to                                                           Status: Action not yet initiated.


Ot@er General Government

District of Columbia: P.L. 94-142 Compliance and
Mbnagement of Youth Services Administration
  I
GG!D-86-131,
 ._..            09/12/86
   &- -. .-..-----.---_-.
Baikground                                   staffing, and poor scheduling; (3) DHS      managers are complying with
In response to a congressional request,      and YSA failed to adhere to key internal    contracting and payroll policies and
GAO monitored the District of                controls designed to ensure proper          procedures.
Columbia’s (D.C.) efforts to comply with     contract review, monitoring, and
the Education for All Handicapped            payment; and (4) many YSA employees         Recommendation: The Mayor of DC.
Children Act’s requirements relating to      did not have position descriptions that     should ensure that YSA is managed in
juvenile delinquents, specifically aspects   accurately described their current duties   an effective, efficient, and economical
of the DC. Youth Services                    and responsibilities, due to                manner by directing the Deputy Mayor
Administration’s (YSA) payroll,              noncompliance with personnel                for Operations to exercise sufficient
contracting, and personnel functions.        regulations and procedures.                 oversight regarding the activities of the
                                                                                         Director, DHS, and the Commissioner on
                                             Open Recommendations               to       Social Services, by ensuring that an
Findings                                                                                 independent audit is conducted next
                                             Agencies                                    year of YSA payroll and contracting
GAG found that: (1) the D.C.
Department of Human Services’ (DHS)          Recommendation: The Mayor of DC.            functions.
lack of management oversight and             should ensure that YSA is managed in        Status: Action in process. In September
control of YSA resulted in considerable      an effective, efficient, and economical     1988, the City Administrator advised
overtime expenditures, noncompliance         manner by directing the Director, DHS,      that the recommended audit of YSA
with contracting procedures, and             and the Commissioner on Social Services     payroll and contracting functions will be
inaccurate position descriptions; (2) 22     to ensure that DHS, Social Service, and     completed around the end of 1989.
percent of the YSA personal services         YSA managers follow D.C. and DHS
budget for fiscal years (FYI 1983 through    contracting and payroll policies and        Recommendation: The Mayor of D.C.
1935 was charged to evertime expenses        procedures.                                 should ensure that YSA is managed in
which were caused by noncompliance           Status: Action in process. The City         an effective, efficient, and economical
with internal controls, insufficient         Administrator advised GAO that DHS          manner by directing the Deputy Mayor



                                             Page 138                                                                 GAO/OP-90-l
                                              General Government




for Operations to exercise sufficient         recommended audit of 1984 and 1985             positions and implement a schedule to
over-sigh/t regarding the activities of the   contracts should be completed by the           review each position at least once in
Director1 DHS, and the Commissioner on        end of 1989.                                   each 3-year period.
Social Services, by ensuring that an                                                         Status: Action in process. A survey and
independent audit of YSA FY 1984 and          Recommendation: The Mayor of D.C.              update of YSA staff classification is in
1985 contracts is conducted for the           should ensure that YSA is managed in           process. Two classification specialists
purpose ~ofidentifying disallowable and       an effective, efficient, and economical        have been assigned to YSA to review
unsupportable costs.                          manner by directing the Director, D.C.         and develop or update position
Status: IAction in process. The City          Office of Personnel, to immediately            descriptions, as warranted.
Administrator advised that the                begin a classification survey of all YSA


Other! General Government
Affikmative Action: Social Security Can Do More To
Imptrove Blacks’ Representation in Its Work Force
HRD-$‘7-2,01/02/87
Background                                    the same mainstream job series; (4) SSA        requirements are finalized at the end of
In response to a congressional request,       has not issued a report on its planned         1989.
GAO discussed: (1) the effect of the          study to identify artificial barriers to the
affirmative action plan at Social             advancement of underrepresented                Recommendation: The Secretary of
Security Administration (SSA)                 groups in the work force; and (5)              Health and Human Services should
headquarters on the representation of         components’ annual accomplishment              direct the Commissioner of Social
blacks in some job series; (2) how SSA        reports did not include information on         Security to request SSA organizational
developed and implemented affirmative         minority skills development activities.        components to include data in the
action plans; and (3) whether SSA                                                            annual accomplishment reports on skills
planning and reporting complied with          Open Recommendations                to         development activities, such as
Equal Employment Opportunity                                                                 individual development plans, bridge
                                              Agencies                                       position reassignments, and training
Commission (EEOC) requirements.
                                              Recommendation: The Secretary of               opportunities for targeted
                                              Health and Human Services should               underrepresented minority groups.
Findings                                      direct the Commissioner of Social              Status: Action in process. Estimated
GAO found that: (1) although the overall      Security to bring the affirmative action       completion date: 12/89. According to the
ratio of blacks employed at SSA               program into compliance with EEOC              GAO liaison at SSA headquarters, a
headquarters increased from 1982 to           directives by requiring that SSA compile       formal action plan and status report on
1986, black men were generally                race and sex profile data for all stages of    this recommendation have been drafted
underrepresented in the organizational        the internal selection process, including      and will be sent to GAO by December
components and job series reviewed; (2)       data on all qualified applicants, best-        1989.
SSA did not fully comply with                 qualified candidates, and selectees for
affirmative action requirements in            job vacancies.                                 Recommendation: The Secretary of
compiling and analyzing race and sex          Status: Action in process. Data                Health and Human Services should
profile data for each stage of the            continues to be collected on competitive,      direct the Commissioner of Social
selection process to fill vacant positions;   as well as noncompetitive vacancy              Security to bring the affirmative action
(3) SSA did not fully implement an            announcements. Processing has been             program into compliance with EEOC
agency-wide affirmative-action plan           delayed due to system modifications.           directives by requiring that SSA identify
because lower-level plans did not address     Added analysis will begin when system          and act to reduce or eliminate artificial



                                              Page 139                                                                    GAO/OP-SO-1
                                           General Government




barrdera that adversely affect the         Status: Action taken not fully               Opportunity Office officials, no
advabcement of underrepresented            responsive. According to SSA Civil           additional barrier analysis studies were
min+ity groups.                            Rights and Equal Employment                  conducted during FY 1989.
     I

     er General Government

    era1 Evaluation: Fewer Units, Reduced Resources,
Dibferent Studies From 1980
PElfID-87-9, 01/23/87
Background                                 decreased, especially for those              Open Recommendations               to
In re ponse to a congressional request,
                                           departments with block grant programs;       Congress
                                           (4) only about 20 percent of the units
GAO I provided information on the recent                                                Recommendation: Congress should
                                           with continued evaluation activity
than’ es in the status of program          reported any legislative set-aside funding   determine whether the agencies under
eval ation activities in the civil         for evaluation; (5) internal budget          its jurisdiction are developing and
exec tive departments and agencies,        allocations did not compensate for set-      reporting the information needed by
speci ically: (1) the current level of     aside reduction, and tended to decrease      committees for their oversight
pro J am evaluation activity in the        more rapidly than the set-asides             responsibilities. This would include
executive branch; and (2) changes that     themselves; and (6) despite the decreases    periodic reviews to ensure that agencies
occurred between 1980 and 1984.            in units, funding levels, and professional   are fulfilling legislated mandates for the
                                           staff, evaluation studies decreased by       provision of evaluative information. To
Findings                                   only 3 percent. GAO also found that: (1)     ensure the availability of information
                                           evaluation units increased their internal    required for oversight purposes, it might
GAO,found that, between 1980 and 1984:     staff work on less expensive studies and     be necessary to specify, in law or
(1) the total number of units in civil     non-technical reports and reduced the        accompanying committee reports,
departments and agencies engaging in       number of costlier, more time-consuming      additional set-asides, mandated studies,
program evaluation activities decreased    studies by external evaluators; (2)          or improved dissemination of evaluation
by 26 percent; (2) fiscal resources        program managers and top agency              findings.
decreased by 37 percent and personnel      officials were the primary recipients of
                                                                                        Status: Action not yet initiated.
decreased by 22 percent; (3) fewer         evaluation studies; and (3) findings from
evaluation units were in operation and     the studies were not easily available to
both budgetary and human resources         Congress and the public.




                                           Page 140                                                                   GAO/OP-90-l
                                            General Government




Other General Government
DC Government: Problems Have Created Delays in
Con@ructing Educational Facilities at Lorton
GGDSB-lBR, 10/23/87                                                                      -
Backg ound                                  that led to the establishment of DPW             improve departmental operations, the
In respo se to a congressional request,     disrupted its ability to give the projects       Mayor, after allowing sufficient time for
GAO rev:’ewed the status of $12.3 million   adequate management attention; (4) the           corrective measures to be implemented,
in appro riated funds intended for          contract procurement process was                 should direct the City Administrator to
construe Ping permanent educational and     lengthy; (5) DPW did not adequately              have an independent assessment made of
vocation 1 facilities at the District of    oversee construction activities; and (6)         the effectiveness of the operational
Columbi ‘a (D.C.) Lorton Prison complex,    DPW did not ensure continuity of                 improvements.
to deter d ine if DC. spent the funds in    program management. GAO also found               Status: Action in process. Estimated
accordaye with congressional intent.        that DPW has initiated action to: (1)            completion date: 06/90. DPW has hired
                                            improve overall departmental                     additional inspectors, established an
                                            operations; (2) strengthen its inspection        Engineering Branch for inspectors, filled
Findihgs                                    activities; and (3) improve contract             the Division Chief of Project
GAO found that: (1) although the D.C.       processing.                                      Management slot, and established
Department of Public Works (DPW)                                                             bimonthly internal coordination
assigned the projects a high priority,      Open Recommendations                to           meetings. The City Administrator
construction progress was slow; (2)                                                          reaffirmed the intent to conduct an
planning for the facilities’ construction
                                            Agencies                                         independent assessment after sufficient
was developed near the end of the fiscal    Recommendation: Recognizing that the             time has elasped for full
year; (3) a departmental reorganization     Director of DPW has taken action to              implementation.


Other General Government

Bank Powers: Issues Related to Repeal of the Glass-
Steagall Act
GGD-88-37,
,...I^ .___*__..
                    01/22/88
              -____.- -~...
Backqround                                  Findings                                         to gradually phase out the act’s
                                                                                             restrictions while ensuring adequate
In response to a congressional request,     GAO found that repeal of the act could:
GAO provided information on issues                                                           capitalization, requiring a bank holding
                                            (1) benefit consumers in terms of lower
concerning the expansion of banks’                                                           company structure, and increasing
                                            prices and better services; and (2) create
                                                                                             regulatory oversight; and (2) extending
securities powers through repeal of the     a need for regulatory oversight and
                                                                                             the moratorium would be unfair to other
Banking Act of 1933 (Glass-Steagall) and    legislation to protect consumers and
the ramifications of eliminating or                                                          lending institutions that are not
                                            enhance the safety and soundness of
extending the moratorium on expansion                                                        protected by the act’s provisions.
                                            banking and commercial institutions.
of bank powers.                             GAO believes that: (1) to protect
                                            consumer interests, it will be necessary




                                            Page 141                                                                      GAO/OP-90-l
                                              General Government




Open Recommendations                to        engaged in both banking and securities       Recommendation: Congress should
Cokgress                                      activities.                                  allow some transactions between
                                              Status: Action not yet initiated.            affiliates, but only on an arm’s-length
Reccpmmendation: If Glass-Steagall is                                                      basis, in order to adequately satisfy the
rep&led, Congress should organize             Recommendation: If Glass-Steagall is         liquidity needs of securities firms that
extended activities in a holding company      repealed, Congress should prohibit           are affiliated with banks. If necessary,
rather than in the bank. The holding          undercapitalized holding company             sections 23A and 23B should be
company organizational form provides          parents from engaging in extended            strengthened to provide additional
the bank and the deposit insurance fund       activities.                                  regulatory resources as may be
with’ the highest degree of insulation        Status: Action not yet initiated.            necessary for supervision and
from potential risks.                                                                      enforcement. Congress should also
Status: Action not yet initiated.             Recommendation: If Glass-Steagall is         consider increasing the penalties for
                                              repealed, Congress should require the        infractions of sections 23A and 23B.
Recc/mmendation: Congress should              holding company to act as a source of        Status: Action not yet initiated.
increase resources for banking and            strength to its bank components.
secui+ities industry regulators in order to   Status: Action not yet initiated.            Recommendation: Congress should
preserve safety and soundness and                                                          require the bank holding company to act
protect consumer interests. The               Recommendation: If Glass-Steagall is         as source of strength to the bank.
necessary increases in resources could be     repealed, Congress should stipulate that     Moreover, if the holding company avoids
                                              banks be allowed to lend to their            that responsibility, Congress should
obtained by raising fees and premiums
                                              securities affiliates, but that all such     consider making the holding company
for banks that have securities affiliates,
                                              transactions be conducted on an arm’s-       financially liable for any losses by the
or b$ instituting a new fee for
                                              length basis.                                insurance fund.
examinations of holding companies             Status: Action not yet initiated.            Status: Action not yet initiated.


Other General Government
International                Banking: Supervision of Overseas Lending Is
Inadequate
NSIAD-88-87,05/05/88
Background                                    Findings                                     debt-servicing problems; (2) did not
Pursuant to a congressional request,                                                       forecast the possible debt-servicing
                                              GAO found that the agencies: (11
GAO assessed the Department of the            required an inadequate reserve of $2.3       problems in countries with weak loans,
Treasury’s Office of the Comptroller of       billion for foreign loans; (2) restricted    although it rated 23.8 percent of its
the Currency’s (OCC), the Federal             use of their reserving authority to value-   loans as weak; (31 used an inaccurate
Reserve System’s (FRS), and the Federal       impaired loans, which constituted less       mathematical model in its ratings; and
Deposit Insurance Corporation’s (FDIC)        than 2 percent of loans to less-developed    (4) did not promptly communicate with
supervision of U.S. banks’ international      countries; (31 required inadequate           banks regarding weak ratings or debtor
lending, focusing on the agencies’: (1)       reserves for those loans; and (4) did not    countries’ probable debt-servicing
compliance with the International             require reserves for loans rated as other    problems. In addition, GAO found that
Lending Supervision Act of 1983; and (2)      transfer risk problems (OTRP) or             the agencies’ examiners did not
actions in response to 1982 GAO               substandard. GAO also found that the         adequately: (1) consider country risk and
recommendations.      W                       agencies’ Interagency Country Exposure       exposure concentrations in capital
                                              Review Committee (ICERC): (1)                adequacy assessments; (2) examine bank
                                              accurately ranked countries in terms of      compliance with required reserves,



                                              Page 142                                                                  GAO/OP-90-l
                                              General Government




account/ing procedures for profits from       Recommendation: The Comptroller of           secondary market price data, but not as
loan rescheduling fees, and public            the Currency and the Chairmen of the         a primary consideration.
disclosu/re requirements; (3) review the      Board of Governors of the Federal
accuracb of banks’ country exposure           Reserve System and FDIC should               Recommendation: The Comptroller of
reports lof international loans; (4) review   instruct their ICERC representatives to      the Currency and the Chairmen of the
banks’ country exposure management            use secondary market price data, or if       Board of Governors of the Federal
systems; or (51 comment on weak assets        unavailable, statistically estimated         Reserve System and FDIC should
or highlight significant foreign-owned        proxies, as the primary consideration in     instruct their ICERC representatives to
bank assets.                                  setting reserve requirements.                revise the rating scale so that ICERC
         ,                                    Addressee: Department of the Treasury:       can forecast the nonimminent
                                              Office of the Comptroller of the             development or elimination of debt-
Open ~Recommendations               to        Currency                                     servicing problems.
Agen$ies                                      Status: Action taken not fully               Addressee: Department of the Treasury:
Recomhendation:       The Comptroller of      responsive. The agency believes that         Office of the Comptroller of the
the Currency and the Chairmen of the          secondary market prices should not be        Currency
Board c/f Governors of the Federal            the primary consideration in setting         Status: Recommendation valid/action
                                              reserve requirements because: (1) volume
Reserve System and FDIC should                                                             not intended. OCC does not believe that
                                              on this market is small and does not
instruct their ICERC representatives to                                                    ICERC ratings should be used or
                                              measure fair market consideration; and
require1 reserves for bank loans rated                                                     regarded as forecasts of debt-servicing
                                              (21 factors other than credit value affect
OTRP, substandard, and value-impaired.                                                     problems.
                                              secondary market prices. However,
Addresbee: Department of the Treasury:        ICERC does consider secondary market         Addressee: Federal Reserve System:
Office of the Comptroller of the              price data, but not as a primary             Board of Governors
Currency                                      consideration.                               Status: Recommendation valid/action
Status: Recommendation valid/action           Addressee: Federal Reserve System:           not intended. The Board does not believe
not intended. The agencies believe that       Board of Governors                           that it is appropriate for it to speculate
reserves for GTRP and substandard             Status: Recommendation valid/action          as to which foreign borrowers with
loans are not needed because banks have       not intended. The agency believes that       correctable problems will fail to take
voluntarily increased general reserves        secondary market prices should not be        appropriate action. Examination reports
and substantially increased regulator’s       the primary consideration in setting         are given to banks which note
measure of banks capital.                     reserve requirements because these           concentrations of debt owed by a country
Addressee: Federal Reserve System:            prices reflect little about the ultimate     with weaknesses.
Board of Governors                            collectibility of LDC loans. Secondary       Addressee: Federal Deposit Insurance
Status: Recommendation valid/action           market prices basically reflect sales by     Corporation
not intended. Instead of requiring            banks exiting the business of lending to     Status: Recommendation valid/action
reserves for OTRP and substandard,            developing countries. However, ICERC         not intended. FDIC believes that the
bank supervisors have encouraged banks        does consider secondary market price         purpose of the ratings is not meant to be
to increase their overall resources           data.                                        a statistical exercise in the prediction of
available to stem future losses.              Addressee: Federal Deposit Insurance         actual debt-servicing problems. Rather
Increasing reserves does not affect the       Corporation                                  the intent is to highlight large loan
banks’ level of total resources,              Status: Recommendation valid/action          concentrations which are owed by
Addressee: Federal Deposit Insurance          not intended. The agency believes that       countries with a high potential for
Corporation                                   secondary market prices are not              incurring debt-servicing problems.
Status: Recommendation valid/action           necessarily indicative of debt
not intended. The agencies believe that       serviceability and should not be the         Recommendation: The Comptroller of
specific reserves for GTRP and                primary consideration in setting reserve     the Currency and the Chairmen of the
substandard loans are not needed              requirements. Supervisory and                Board of Governors of the Federal
because banks have voluntarily                managerial judgement should determine        Reserve System and FDIC should
increased general rese&es and                 reserve requirements using secondary         instruct their ICERC representatives to
substantially increased regulator’s           market prices and other factors.             communicate: (1) weak ratings to banks
measure of banks capital.                     However, ICERC does consider                 owning significant amounts of this debt



                                              Page 143                                                                   GAO/O&90-l



                                                                                                                                      i
                                            General Government




 immediately after ICERC meetings; and       New York (FRB-NY) to find a better        Addressee: Federal Reserve System:
(2) the probability of future debt-          alternative to the present screen.        Board of Governors
servicing problems when ratings are         Addressee: Department of the Treasury:     Status: Action in process. FRB-NY,
communicated to banks.                      Office of the Comptroller of the           which supervises most of the state
Addtesaee: Department of the Treasury:      Currency                                   member banks with significant
Office of the Comptroller of the            Status: Action in process. OCC supports    international lending exposure, has
Currency                                    FRB-NY efforts to seek alternatives to,    developed comprehensive examination
Status: Action taken not fully              and implement changes in, the screen of    procedures for country risk and has
responsive. OCC believes that these         economic indicators. FRB-NY is actively    reviewed these procedures as a result of
ratings are more appropriately used to      looking at alternatives to the present     the GAO study. The Board sent a letter
evaluate a bank’s exposure in relation to   screen.                                    to the other Federal Reserve Banks
potential debt-servicing problems. GAO      Addressee: Federal Reserve System:         concerning these procedures along with
is coucerned that the communication of      Board of Governors                         a request to review procedures.
weak ratings immediately after ICERC        Status: Action in process. The Board       Addressee: Federal Deposit Insurance
                                            states that FRB-NY frequently reviews      Corporation
meeting could lead the banks to regard
                                            the screen, used to categorize countries
the ratings as forecasts. However,                                                     Status: Action in process. FDIC is
                                            in the initial stages of the screening
ratings are communicated to some banks                                                 reviewing its existing procedures and
                                            process, to determine whether changes
when they request the rating.                                                          documentation requirements. A new
                                            can be made on a cost-effective basis.
Addiessee: Federal Reserve System:                                                     revision to the manual is expected to be
                                            FRB-NY reports that it is in the process
Board of Governors                                                                     official shortly.
                                            of studying alternative models in place
Statbs: Action taken not fully              of the screen, FRB-NY is actively
resp$nsive. The Board believes that if it   looking at alternatives to the present     Recommendation: The Comptroller of
inforjms banks of countries with weak       screen.                                    the Currency and the Chairmen of the
ratings along with lower-rated countries,   Addressee: Federal Deposit Insurance       Board of Governors of the Federal
ban may misconstrue this list as an         Corporation                                Reserve System and FDIC should
incl z,sive listing of countries which a    Status: Action in process. FRB-NY is in    require examiners to determine and
government agency has deemed as poor        the process of studying alternatives to    routinely document banks’ compliance
credit risks. However, weak ratings are     the screen. FRB-NY is actively looking     with requirements concerning required
informally communicated to banks when       at alternatives to the present screen.     reserves, accounting for fees, and public
they request the rating.                                                               disclosure.
Addressee: Federal Deposit Insurance        Recommendation: The Comptroller of         Addressee: Department of the Treasury:
Corporation                                 the Currency and the Chairmen of the       Office of the Comptroller of the
Status: Action taken not fully              Board of Governors of the Federal          Currency
responsive. FDIC believes that              Reserve System and FDIC should             Status: Action in process. As part of
communication to banks of the weak          develop standards to ensure that           OCC compliance examination
ratings may cause weak countries to be      examiners consider and document            procedures, conducted on a biannual
regarded as being poor credit risks when    country risk and exposure                  basis in banks with more than $1 billion
the intent is to highlight risk             concentrations in their assessments of     in assets, examiners will determine and
diversification concerns given the          capital adequacy.                          document required reserves, fee
potential for debt-servicing problems in    Addressee: Department of the Treasury:     accounting, and public disclosure
these weak countries. However, weak         Office of the Comptroller of the           compliance.
ratings are communicated to banks           Currency                                   Addressee: Federal Reserve System:
when they request the rating.               Status: Action in process. When            Board of Governors
                                            substantive, OCC examiners will include    Status: Action in process. FRB-NY,
Recommendation: The Comptroller of          in report comments its evaluation of the   which supervises most of the state
the Currency and the Chairmen of the        influence of country risk and exposure     member banks with significant
Board of Governors of the Federal           concentrations on capital adequacy. This   international lending exposure, has
Reserve System and PDIC should              assessment will be documented in the       developed comprehensive examination
instruct their ICERC representatives to     workpapers, although not more often        procedures for country risk and has
request the Federal Reserve Bank of         than annually.                             reviewed these procedures as a result of



                                            Page 144                                                                GAO/OP-90-1
                                           General    Government




the GAG study. The Board sent a letter     revision to the manual is expected to be   examiners highlight exposures in
to the other Federal Reserve Banks         official shortly.                          examination reports.
concerning these procedures along with                                                 Addressee: Department of the Treasury:
a request to review procedures.            Recommendation: The Comptroller of         Office of the Comptroller of the
Address;ee: Federal Deposit Insurance      the Currency and the Chairmen of the       Currency
Corporajtion                               Board of Governors of the Federal          Status: Action taken not fully
Status: ~Action in process. FDIC is        Reserve System and FDIC should require     responsive. When examination reports
reviewing ita existing procedures and      examiners to review and document the       are prepared, OCC examiners will
documentation requirements. A new          adequacy of banks’ country exposure        include a schedule listing cross-border
revision to the manual is expected to be   management systems.                        exposures by country when the
official shortly.                          Addressee: Department of the Treasury:     aggregate exposure exceeds 1 percent of
                                           Office of the Comptroller of the           capital. This schedule will not be
Recom$endation:      The Comptroller of    Currency                                   required more frequently than annually.
the Curkency and the Chairmen of the       Status: Action in process. On a biannual   OCC has not assured GAO that these
Board df Governors of the Federal          basis, OCC examiners will assess the       listings will occur in a prominent place
Reserve System and FDIC should ensure      adequacy of the bank’s country exposure    in the report or in a letter to the banks’
that examiners review and document the     examination systems.                       board of directors.
accura<ry of country exposure reports.                                                Addressee: Federal Reserve System:
                                           Addressee: Federal Reserve System:         Board of Governors
Addreebee: Department of the Treasury:
                                           Board of Governors                         Status: Action in process. FRB-NY has
Office of the Comptroller of the
Currency                                   Status: Action in process. FRB-NY,         developed comprehensive examination
Status: Action not yet initiated. OCC      which supervises most of the state         procedures for country risk and has
believes that the accuracy of country      member banks with significant              reviewed these procedures as a result of
exposure reports is verified and           international lending exposure, has        the GAO study. The Board sent a letter
documented biannually under existing       developed comprehensive examination        to the other Federal Reserve Banks
compliance examination procedures.         procedures for country risk and has        concerning these procedures, along with
Addressee: Federal Reserve System:         reviewed these procedures as a result of   a request to review procedures in the
Board of Governors                         the GAO study. The Board sent a letter     light of GAO findings.
Status: Action in process. FRB-NY,         to the other Federal Reserve Banks         Addressee: Federal Deposit Insurance
which supervises most of the state         concerning these procedures along with     Corporation
member banks with significant              a request to review procedures.            Status: Action not yet initiated. Not
international lending exposure, has        Addressee: Federal Deposit Insurance       checked with regularity; no new section
developed comprehensive examination        Corporation                                is planned in the new revision to the
procedures for country risk and has        Status: Action in process. FDIC plans to   manual.
reviewed these procedures as a result of   review its procedures in this area,
the GAO study. The Board sent a letter     although it believes that its examiners    Recommendation: The Comptroller of
to the other Federal Reserve Banks         do review the adequacy of bank country     the Currency should require OCC
concerning these procedures along with     exposure management systems.               examiners to comment on and document
a request to review procedures.                                                       that they reviewed country risk as do
Addressee: Federal Deposit Insurance       Recommendation: The Comptroller of         FRS and FDIC.
Corporation                                the Currency and the Chairmen of the       Status: Action in process. Corrective
Status: Action in process. FDIC is         Board of Governors of the Federal          actions on other GAO recommendations
reviewing its existing procedures and      Reserve System and FDIC should             will result in periodic comment on and
documentation requirements. A new          develop standards to ensure that           documentation of country risk reviews.




                                           Page 145                                                                 GAO/OP-90-I
                                            General Government




Other General Government

B$nking: Government Check-Cashing Issues
GG/D-89-12,  lo/O7188
    .._.__.--._.
Ba#kground                                  individuals without bank accounts were      government checks should not bear costs
                                            most likely to experience check-cashing     associated with the cashing of
Pursuant to a legislative requirement,
                                            problems; (5) 75 percent, 50 percent, and   government checks or should be assured
GAG studied the difficulties recipients
                                            14 percent of families receiving            of a low-cost option, Congress may wish
have in cashing government checks,          government checks for Aid to Families       to consider encouraging methods that
focusing on: (1) banks’ check-cashing       with Dependent Children, Supplemental       utilize plastic cards and electronic funds
policies; (21 nondepositors’ options for    Security Income (SSI), and Social           transfer technology.
cashing government checks; (3)              Security, respectively, did not have bank
characteristics of recipients who do not                                                Status: Action in process.
                                            accounts; (6) these families cited high
have bank accounts; and (4) government      service charges, minimum balance
responses to check-cashing issues.                                                      Recommendation: Congress may wish
                                            requirements, mistrust of banks, and        to consider requiring the Department of
                                            inconvenient hours and locations for not    Agriculture, the Department of Health
Fiddings                                    having bank accounts; and (7) federal,
                                                                                        and Human Services, and the
                                            state, and local government efforts to
GAG found that: (1) nondepositors                                                       Department of the Treasury, in
                                            facilitate government check cashing
cashkd government checks at banks,                                                      consultation with state and local
                                            include use of electronic technology
check-cashing centers, grocery and other    transfer, direct deposit of checks into     governments and banking and consumer
stores, and through friends or relatives:   bank accounts, and use of automatic         groups, to assess the present delivery
(2) check-cashing fees varied               teller machines.                            methods for all government benefits and
considerably and were generally                                                         to seek to develop coordinated delivery
unregulated; (3) urban area banks were                                                  systems that would better meet the
less likely than rural area banks to cash
                                            Open Recommendations               to       needs of recipients as well as reduce
nondepositors’ checks, citing               Congress                                    governmental delivery costs.
unreimbursed expenses, crowded lobbies,     Recommendation: If Congress                 Status: Action not yet initiated.
and potential fraud; (4) low-income         determines that recipients of certain


Other General Government
Congressional Award Program: Problems at the National
Level Must Be Solved if the Program Is To Progress
AFMD-89-14,       11/14/88
 _..*-..---- -..------
Background                                  daily operations; and (2) evaluated the     Findings
Pursuant to a legislative mandate, GAO:     effectiveness of the Board’s                GAO found that, at the local level: (1)
                                            Congressional Award Program, a locally
(1) audited the financial records of the                                                the program steadily increased its
Congressional Award- Foundation, a          administered program intended to
                                                                                        number of local councils and medal
nonprofit corporation the Congressional     promote youth initiative, achievement,
                                                                                        earners; (2) program volunteers and
Award Board established to carry out its    and excellence.
                                                                                        participants generally expressed




                                            Page 146                                                                 GAO/OP-90-l
                                              General Government




satisfaction with the program; and (31        Recommendation: The Chairman,               direct the Board to develop and
councils ithoroughly reviewed and             Congressional Award Board, should           implement a plan to pay off all existing
verified applications for medal eligibility   direct the Board to determine whether       debts, The possibility of seeking
and rais8d the minimal financial support      committees formed in the past are still     forgiveness for these debts, making them
they needed to sustain operations. GAO        relevant to current Board needs. For        interest-free, and working out long-term
also found that the Board and the             those that are, the Board should: (1)       repayments should be explored.
Foundat/on: (1) had difficulty raising        ensure that they have written mission       Status: Action in process. Forgiveness
adequate private-sector funding and           statements; and (2) redesignate Board       was obtained on over $325,000 in debts.
needed a congressional appropriation to       members to serve on them.                   The Board must obtain funds to pay off
sustain operations; (2) exercised             Status: Action taken not fully              the remainder of debts. All long-term
ineffective controls over expenses and        responsive. Executive and search            debt has been forgiven. While much of
missed obportunities to reduce costs; (3)     committees have been formed and put         the old debts were paid off, new ones
did not comply with financial control         into operation. More committees need to     have been incurred.
provisions; (4) experienced several           be established. The Board chairman does
management problems affecting                 not intend to prepare written mission       Recommendation: The Chairman,
successful program operation, including       statements.                                 Congressional Award Board, should
extended position vacancies, ineffective                                                  direct the Board to require the Board’s
consultapts, low meeting attendance,          Recommendation: The Chairman,
                                                                                          Treasurer to more actively carry out the
poor problem identification and               Congressional Award Board, should
                                                                                          responsibilities specified for that position
resolution, inactive Board committees,        direct the Board to: (1) work with the
                                                                                          in the Foundation’s bylaws. In the
lack of resolution follow-up, and lack of     congressional leadership to fill vacant
                                                                                          future, the Treasurer should review
role definition for the Foundation; and       Board positions with qualified, dedicated
                                                                                          Foundation expenditures and approve all
(6) had not yet implemented the               individuals who will make time
                                                                                          reimbursements of the Foundation
program’s scholarship feature, which          available for program work; and (2)
                                                                                          Director’s expenses before they are
could greatly increase public awareness       assess the performance of current Board
                                                                                          made. Further, the Treasurer should
and private funding.                          members and determine the desirability
                                              of their continued participation.           evaluate and recommend to the Board
                                              Status: Action taken not fully              whether any expenses paid for the
Open Recommendations                to                                                    Director after 1985 should be repaid to
                                              responsive. Four individuals have been
Agencies                                      proposed to congressional leadership for    the Foundation.
Recommendation: The Chairman,                 Board membership. More vacancies still      Status: Action taken not fully
Congressional Award Board, should             need candidates. The Foundation             responsive. The Treasurer has been
direct the Board to: (1) clearly define the   director is working with congressional      inactive since the GAO report was
Foundation’s role in writing; (2)             leaders offices. No assessment of Board     issued. No action has been taken to
determine the number and type of staff        members is intended.                        remove or replace the Treasurer. A
needed to carry out the Foundation’s                                                      decision was made not to have the
duties; and (3) identify the other            Recommendation: The Chairman,               Director repay any money. The Board
resources needed to fulfill the               Congressional Award Board, should           Treasurer is inactive and no effort is
Foundation’s role and select a director       require the Board to become more            being made to change the situation.
who is capable of leading the Foundation      actively involved in fundraising. A
in this role.                                 concerted effort should be made to          Recommendation: The Chairman,
Status: Action taken not fully                develop and implement a plan to             Congressional Award Board, should
responsive. The new director was named        successfully raise contributions from       direct the Board to develop appropriate
in June 1989. The amount of staff and         private-sector organizations.               guidelines for carrying out the
the role of the Foundation still needs to     Status: Action in process. The Board        scholarship feature of the program and
be determined. The organization is            has made and continues to make efforts      implement them as soon as funds are
preoccupied with trying to raise              to raise funds. A plan has been drafted,    available to award scholarships.
operating funds. While 9 new director         but has not been approved yet.              Status: Action taken not fully
was selected, nothing else is planned                                                     responsive. The Board decided that,
toward responding to this                     Recommendation: The Chairman,               since there was no money for
recommendation.                               Congressional Award Board, should           scholarships, it was not worthwhile to



                                              Page 147                                                                   GAO/OP.90-I
                                                 General   Government




develop guidelines for the scholarship           Status: Recommendation valid/action         and bylaw provisions and that full
feature of the program. A plan was               not intended. Other priorities have come    compliance is maintained.
predared by a Board member. The Board            before this. Lack of funds has caused the   Status: Action in process. Annual
votep to table any action on the plan            Board to forego any expansion of            reports were issued. Most of the debt,
inde/finitely. Money problems make               publicity efforts                           including all long-term liabilities, has
impIementation unlikely.                                                                     been eliminated. The remainder of debts
                                                Recommendation: The Chairman,                need to be retired. Required annual
Rec+mmendation: The Chairman,                   Congressional Award Board, should            reports have been submitted. However,
Congressional Award Board, should               direct the Board to take the actions         debt is still being carried over to the
direct the Board to expand program              necessary to ensure that the Board and       next fiscal year in violation of
publiicity and target it to reach potential     Foundation are brought into full             authorizing legislation.
program participants and supervisors.           compliance with authorizing legislation


Ot$er General Government
Tljoubled Financial                           Institutions:             Solutions to the Thrift
Influstry Problem
GG/D-89-47,02/21/89
Background                                      compel other reforms; (4) FSLIC should       the government’s exposure to deposit
In response to a congressional request,         isolate unhealthy thrifts so that they       insurance losses.
GAO discussed: (1) the benefits and             cannot compete with adequately funded        Status: Action in process.
disadvantages of merging the Federal            institutions; (5) the thrift industry
Deposit Insurance Corporation (FDIC)            should bear as much of the cost of           Recommendation: Congress and the
and the Federal Savings and Loan                resolving the savings and loan crisis as     deposit insurance agencies, in
Insurance Corporation (FSLIC); and (21          possible; (6) if Congress decides that the   consultation with federal and state
actions needed to restore the deposit           rest of the deposit industry should pay      chartering agencies, should pursue a
system’s financial health.                      the remaining cost, it should spread that    more comprehensive reform agenda
                                                burden as evenly as possible to avoid        after FSLIC funding needs are met and
                                                placing certain industry sectors at a        the other recommendations
Firldings                                       competitive disadvantage; and (71 a          implemented.
GAO believes that: (1) the current              merger of FDIC and FSLIC would               Status: Action in process.
strategy for resolving insolvent                merely divert needed FDIC resources to
institutions is costly and does not             cover FSLIC costs.                           Recommendation: Congress should
consider the total cost to the government                                                    authorize FSLIC to undertake short-term
of resolving insolvent thrifts; (2) to help     Open Recommendations               to        borrowing for liquidity purposes to
restore the deposit insurance system to                                                      enable FSLIC to move as quickly as
financial health and prevent repetition         Congress                                     possible to resolve problem cases.
of the savings and loan crisis, FSLIC           Recommendation: To help ensure that          Status:   Action   in process.
should take control of insolvent thrifts        the situation that has befallen FSLIC is
until they can be effectively                   not repeated within the deposit              Open Recommendations                  to
rehabilitated, merged, or liquidated; (3)       insurance system, Congress should direct
FSLIC should be separated from the              appropriate agencies to establish            Agencies
Federal Home Loan Rank Board                    consistency in regulation and                Recommendation: FHLBB should form
(FHLBB) and reorganized to allow it to          supervision of banks and thrifts in          a task force of regulators and insurance
impose higher capital requirements and          matters that have a material effect on       officials to assess the quality of assets in



                                                Page 148                                                                      GAO/OP-90-1
                                              General Government




insolver t thrifts for purposes of deciding   Status: Action in process. FIRREA will    Recommendation: FHLBB, FSLIC,
which t n-ifts should be rehabilitated,       require a report and an explanation of    FDIC, and the Federal Reserve Board
merged or liquidated.                         differences by August 1990.               should improve their supervisory
status: Action in process. FIRREA                                                       capability.
establis led the Resolution Trust             Recommendation: FDIC and FSLIC, in        Addressee: Federal Deposit Insurance
Corpora ion to implement a strategic          consultation with federal and state       Corporation
plan de eloped by the Oversight Board.        chartering agencies, should pursue a      Status: Action in process. FDIC
The Bor t-d’s plan, to be developed by        more comprehensive reform agenda          continues to add or redeploy staff to
Decemb !r 31, 1989, will include policies     after FSLIC funding needs are met and     handle increased responsibilities granted
for ass6 sing asset quality of insolvent      the other recommendations                 by FIRREA.
institut 3ns.                                 implemented.                              Addressee: Federal Reserve System:
                                              Addressee: Federal Home Loan Bank         Board of Governors
Recomi lend&ion: FHLBB, FSLIC,                Board: Federal Savings and Loan           Status: Action in process. FRS continues
FDIC, a id the Federal Reserve Bank           Insurance Corporation                     to reevaluate size, deployment, and
Board a rould strengthen capital              Status: Action in process. Treasury is    compensation for the supervisory
adequac y requirements and their              conducting a study in consultation with   function.
enforcet, lent.                               FDIC on reforms needed. The study is
Addresriee: Federal Home Loan Bank                                                      Recommendation: FHLBB, FSLIC,
                                              due by February 1991.
Board: kederal Savings and Loan                                                         FDIC, and the Federal Reserve Board
                                              Addressee: Federal Deposit Insurance      (FRB) should undertake efforts to
Insuranne Corporation
Status: : Action in process. FIRREA           Corporation                               enhance the effectiveness of the related
requires FDIC and banking agencies    to      Status: Action in process. Treasury is    risk control infrastructure in the private
develop’uniform accounting standards          conducting a study in consultation with   sector.
for detebmining capital ratios and report     FDIC on reforms needed. The study is      Addressee: Federal Deposit Insurance
on and explain differences in                 due by February 1991.                     Corporation
requirements to Congress by August                                                      Status: Action in process. By August
1990.                                         Recommendation: The Board of              1990, FDIC, Treasury, and FRB must
Addresgee: Federal Home Loan Bank             Governors of the Federal Reserve          implement rules governing real estate
Board                                         System (FRS) should develop a specific    appraisal procedures and provide for
Status: Action in process. FIRREA             proposal for clearly defining holding     uniform definitions of capital ratios for
requires a report and an explanation of       company financial responsibility for      audit purposes.
the differences by August 1990.               insured depository institutions.          Addressee: Federal Reserve System:
Addressee: Federal Deposit Insurance          Status: Action taken not fully            Board of Governors
Corporation                                   responsive. FIRREA applied source of      Status: Action in process. By August
Status: Action in process. FIRREA will        strength principle only to depository     1990, FDIC, Treasury, and the Board
require a report and an explanation of        institutions and subsidiaries of the      must implement rules governing real
the differences by August 1990.               holding company. This recommendation      estate appraisal procedures and provide
Addressee: Federal Reserve System:            should remain open pending further        for uniform definitions of capital ratios
 Board Qf Governors                           FRS action.                               for audit purposes.




                                              Page 149                                                                 GAO/OP-90-l
                                             General    Government




Other General Government
Check Collection: Competitive Fairness Is an Elusive Goal
GQD-89-61,05/12/t-39
Batikground                                  from 18 to 40 percent; and (‘71although          fairness. Specifically, the Board of
In rttsponse to a legislative requirement,   banks join clearinghouses to facilitate          Governors should require Federal
GAO assessed private banks’ ability to       check exchanges among banks, they still          Reserve officials, when deliberating on
compete with Federal Reserve banks in        negotiate arrangements to present                regulatory, price, and service changes, to
providing check collection services,         checks to banks outside the                      identify any practical and legal
focusing on: (1) the Federal Reserve         clearinghouse. GAO also found that the:          differences between Reserve and
Sys em’s exemption from the imposition       (1) differences between the collecting and       collecting banks that may hinder
of p esentment fees; (2) the impact of the   Reserve banks’ abilities to present              collecting banks’ ability to effectively
    \                                        checks are not essential for the safety,         offer competing check collection services.
imppsition of presentment fees on check
collection system efficiency; and (3)        soundness, or efficiency of the check            For differences that are found, Federal
whekher the Federal Reserve System           collection system; and (2) Federal               Reserve officials should provide the
required check clearinghouses to provide     Reserve had not developed criteria for           Board with proposals for eliminating the
ser$ces to the Federal Reserve banks         evaluating competitive fairness, making          differences or an explanation of why
andiwhether those banks should pay           it difficult to deal with potential              continuation of those differences are
check clearinghouses for any such            conflicts of interest between its roles as       necessary to promote the safety,
services.                                    a competitor and payment system                  soundness, or efficiency of the payments
                                             overseer.                                        system. Full disclosure of the basis for
                                                                                              decisions should be made to the public.
Findings                                                                                      Status: Action in process. The Federal
                                             Open Recommendations                  to
GAO found that: (1) the Federal Reserve                                                       Reserve informed GAO that it was
                                             Agencies                                         clarifying and refining its procedures for
usee its authority to deviate from state
laws governing private banks to advance      Recommendation: The Board of                     reviewing price and service changes,
check collection system efficiency; (21      Governors should clarify existing policies       particularly with regard to the
Resservebanks require paying banks to        and procedures covering the Federal              competitive equity of such changes, to
make payment on the same day Reserve         Reserve commitment to competitive                ensure they were thoroughly and
banks present checks and without             fairness. Specifically, the Board of             consistently evaluated.
charging fees, to make check payments        Governors should define its commitment
that Reserve banks have not endorsed,        to competitive fairness by explicitly            Recommendation: The Board of
and to make payment on checks Reserve        adopting the principle that collecting           Governors should clarify existing policies
banks present after the customary            banks should have the same abilities as          and procedures covering the Federal
presentment time; (3) collecting banks       Reserve banks to collect on checks               Reserve commitment to competitive
need to match Reserve bank collection        unless fulfillment of payments system            fairness. Specifically, the Board of
terms, including choosing which              safety, soundness, or efficiency objectives      Governors should require Federal
customers they serve, to be competitive;     indicate Reserve banks should take on            Reserve officials to closely oversee prices
(4) Reserve banks do not have the            unique abilities,                                on products that cannot be offered by
authority to unilaterally vary from state    Status: Action in process. An industry           collecting banks on an equal basis to
check collection laws; (5) collecting        advisory panel has been formed to                ensure that markups are not
banks negotiate agreements with other        review issues.                                   unreasonable and to make public
banks for check presentment and                                                               disclosure of what those markups are.
payment terms, which usually entail the      Recommendation: The        Board of              Status: Action not yet initiated. The
collecting banks paying presentment fees     Governors should clarify     existing policies   Federal Reserve has not informed GAO
to the paying banks; (6) presentment fees    and procedures covering     the Federal          of any intended action on this
increased bank check collection costs        Reserve commitment to      competitive           recommendation.



                                             Page 160                                                                       GAO/OP-90-l
                                              General   Government




 Recommendation: The Board of                Status: Action in process. The Federal         comprehensive same-day-payment
Governors should clarify existing policies   Reserve informed GAO that it was               proposal that both balances the interest
and procedures covering the Federal          expanding its existing procedures to           of paying collecting banks and
Reserve(commitment to competitive            address potential conflicts caused by the      eliminates differences in presentment
fairness/ Specifically, the Board of         Board’s multiple roles and would be            abilities between Reserve and collecting
Governors should require Federal             specifying what actions a complainant          banks that are not necessary for safety,
Reserveiofticials to develop a forum for     could take and how the Federal Reserve         soundness, or efficiency of the payments
hearing ~disagreements raised by private-    would proceed upon receipt of                  system.
sector p rticipants over changes made        complaints on competitive issues.              Status: Action in process. The Federal
by the I! ederal Reserve that may result                                                    Reserve informed GAO that it is
in the private sector being precluded        Recommendation: The Board of                   pursuing the development of a workable
from effbctively offering competing          Governors should, consistent with the          same-day payment proposal, as
check collection services.                   recommended policy and procedural              recommended, with members of private
                                             changes, develop a revised,                    industry.

        /
Other! General Government
Failjed Thrifts: Allegations                             at FirstSouth                Receivership in
Little Rock, Arkansas
GGD-$9-98,06/16/89
Back$round                                   a debtor whose loan was in default, since      who carry out federal functions under
Pursuant to a congressional request,         no law or regulation precluded such            direct federal supervision.
GAO investigated four allegations of         contracting. GAO also found that: (1) the      Status: Action not yet initiated. FSLIC
wrongdoing concerning a Federal              Federal Home Loan Bank Board’s                 has created 42 federal positions in
Savings and Loan Insurance Corporation       (FHLBB) Office of Inspector General            regional offices and will consider
(FSLIC!) receivership.                       (OIG) closed its investigation regarding       appointing more employees involved
                                             the former employee’s contract, stating        with receiverships as federal employees.
                                             that it could not apply federal conflict-of-
Findings                                     interest statutes to receivership              Recommendation: The Chairman,
GAO found that the receivership: (1) had     employees, since they were not federal         FHLBB, should instruct the Executive
an invalid contract with a former            employees; (21 FHLBB OIG did not               Director, FSLIC, to make no further
receivership property manager to appeal      investigate the restricted auction, since      payments to the former FirstSouth
property taxes, since the managing           it did not believe that the action violated    Receivership property manager for any
officer exceeded her authority in            any laws or regulations; and (3) FSLIC         work billed absent additional
entering the contract, and the contractor    suspended the receivership’s managing          information that the work was not
charged for work he performed while          officer pending further review of the          substantially completed while he was
still a receivership employee; (2)           contract with the former employee.             employed by the receivership and absent
improperly restricted a property auction                                                    clear evidence of a benefit to the
to employees and did not determine fair      Open Recommendations                to         receivership.
market value for the property; (3)                                                          Status: Action in process. At exit
approved a loan to a debtor with other
                                             Agencies                                       conference, agency officials stated that
loans in default, although, contrary to      Recommendation: The Chairman,                  no further payment would be made to
allegations, the loan was secured by an      FHLBB, should instruct the Executive           the former property manager. GAO is
escrow account; and (4) did not violate      Director, FSLIC, to appoint as federal         awaiting formal confirmation of this
procedures in obtaining insurance from       employees those receivership employees         decision.



                                             Page 151                                                                   GAO/OP30-1
                                           General Government




Recc)mmendation: The Chairman,             Recommendation: The Chairman,                Director, FSLIC, to adopt a policy on the
FHGBB, should instruct the Executive       FHLBB, should instruct the Executive         circumstances and conditions under
Direbtor, FSLIC, to take action to         Director, FSLIC, to take action to           which receiverships can and cannot do
reco er funds paid to the former           recover the property disposed of             business with debtors in default.
Firs YSouth Receivership property          inappropriately at the employee auction,     Status: Action not yet initiated. FHLBB
manager under the invalid contract for     Status: Action in process. FHLBB is          is in agreement with the
work he did or for which he was            looking into recovering property             recommendation, but no action taken
responsible as a receivership employee.    inappropriately disposed of at auction.      yet.
Statbs: Action in process. Agency          GAO is awaiting the results of FHLBB
officjals told GAO that they would look    efforts.
into irecovering payments already made
to the former property manager. GAO is     Recommendation: The Chairman,
awaiting the results of their efforts.     FHLBB, should instruct the Executive


Other General Government
FGtures Market: Automation Can Enhance Detection of
Trade Abuses But Introduces New Risks
IMTEC-89-68, 09/07/89
Bab kground                                orders, but could not determine the          exchanges. Such assessments should
                                           timing and trading sequences of floor        include analyses of proposed technical
Pursuant to a congressional request,
                                           traders’ personal trading; (3) although      solutions and alternatives to ensure that
GAO provided information on the: (11
potebtial benefits in using the Chicago    the planned systems had the potential to     the futures exchanges design, develop,
futures exchanges’ planned automated       better control trading abuses, the           and implement systems that maximize
systems to detect or prevent trade         systems introduced risks that the            the automation’s potential to control
practice abuses; (2) potential             exchanges planned to address to ensure       trade practice abuses. CFI’C should also
vulnerabilities associated with using      correct transaction processing,              assess the risks of using the exchanges’
automated systems in conjunction with      responsive operations, and secure and        automated systems to ensure that they
or in place of the current trading         continuous operations; and (4) although      are adequately controlled.
process; and (31 Commodity Futures         CFI’C responsibilities included              Status: Action not yet initiated.
Trading Commission’s (CFTC) activities     assessment of the exchanges’ automated
in assessing automated exchange            systems, CFTC did not conduct or set         Recommendation: To acquire the
systems.                                   guidelines for technical assessments of      expertise needed for such assessments,
                                           the systems’ capabilities to control trade   CFTC should consider: (1) obtaining its
                                           abuses and automation risks, since it did    own technical resources; (2) requiring
Findings                                   not have the technical resources for such    exchanges to have independent technical
GAO found that: (1) although the           assessments.                                 assessments performed on their systems
exchanges were developing automated                                                     under guidelines set by CFTC; or (31
order routing systems and researching      Open Recommendations              to         creating a technical advisory committee
the use of hand-held trading terminals                                                  consisting of government and private-
                                           Agencies                                     sector representatives to advise CFTC on
to improve the open-outcry trading
process, the extent tq which the systems   Recommendation: The Chairman,                the relative merits and risks associated
would detect trading abuses was            CFTC, should acquire the necessary           with using automated systems to better
unknown; (2) the systems would provide     expertise to technically assess the          detect or prevent trade practice abuses.
improved timing data for customer          systems planned by the futures               Status: Action not yet initiated.



                                           Page 152                                                                  GAO/OP-90-l
                                                 General Government




Other C;eneral Government
Futjres           Markets: Strengthening                               Trade Practice Oversight
GGD-8!-120, 09/07/89                           ___-
Backgiound                                       programs to determine whether the           Status: Action not yet initiated.
                                                 systems operated as intended, or require
Pursuanti to a congressional request,
                                                 independent documentation assessments;      Recommendation: CFTC should require
GAO ass ssed the Commodity Futures               (6) the number and severity of              exchanges to maintain complete
Trading ommission’s (CFTC) and                   disciplinary actions varied by exchange
          t                                                                                  documentation of automated
futures e changes’ effectiveness in              but generally increased between 1984
deterrin I! , detecting, and punishing trade                                                 surveillance systems.
                                                 and 1989; and (7) CFTC used                 Status: Action not yet initiated.
practice abuses.                                 investigative and disciplinary action
                                                 information to judge specific exchange      Recommendation: CFTC should expand
Findiqgs                                         decisions, but did not formally analyze     its reviewing and testing of exchange
                                                 trends or compare results across            automated surveillance systems, or
GAO found that: (1) futures exchanges            exchanges, since there were no uniform
did not always independently, precisely,                                                     require that they be independently
                                                 definitions to classify actions involving
and corn letely time all trades; (2)                                                         reviewed and tested, to determine
                                                 floor trade practice abuses.
improve (7 trade timing could eliminate                                                      whether they are operating as intended.
trading information manipulations that                                                       Status: Action not yet initiated.
give noncompetitive trades the                   Open Recommendations              to
appearance of competitive execution; (3)         Agencies                                    Recommendation: CEY’C should
although the exchanges attempted to              Recommendation: CF’TC should direct         establish milestones for completing
reconstruct trade sequences through              the exchanges to independently,             definitions of trade practice violations
audits, control weaknesses existed in            precisely, and completely time each         and trade practice investigations so that
each exchange that allowed dishonest             trade and specify a time frame for          they can be consistently differentiated
brokers opportunities to manipulate              meeting this requirement. Timing should     from other types of rule violations and
timing; (4) the exchanges planned to             be independent of the other trading data    so that the definitions are uniform
develop electronic audit trail systems to        supplied by floor participants. Time        across exchanges.
record transactions using hand-held              recording should include the precise        Status: Action not yet initiated.
terminals, but they did not plan full            time the broker receives and records as
implementation for over a year and did           executed each order, as well as the         Recommendation: CFTC should begin
not know the extent to which they would          precise execution of times of               making formal trend and comparative
use the systems to control abuses; (5)           noncustomer trades. CFTC should give        analyses of exchange investigations and
although CFTC reviewed the exchanges’            the exchanges flexibility in deciding how   disciplinary actions.
surveillance programs, it did not review         to meet the requirement, but should also    Status: Action not yet initiated.
system documentation, test screening             establish firm implementation dates.




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                                            General Government




Ot$er General Government
   /
D D Revolving Door: Processes Have Improved but Post-
D D Employment Reporting Still Low
N&AD-89-221,09/13/89
Bakkground                                  administrative enforcement actions               such as individuals who meet the
Pursuant to a congressional request,        available to it to enforce former                reporting criteria but do not hold a
GAG reviewed the Department of              employees’ compliance with reporting             security clearance; (2) following up to
Defense’s (DOD) implementation and          requirements; (6) DOD reviewed the               the extent deemed necessary for those
enfoicement of disclosure laws requiring    reports it received and certified them if        who fail to report; and (3) as a means of
certain former DOD employees to report      it did not identify conflicts of interest; (7)   demonstrating DOD commitment to
any isubsequent employment with             most reports generally complied with             enforcing the law, giving serious
certain DOD contractors.                    reporting requirements, although former          consideration to imposing fines against
                                            employees did not always honor DOD               those who, after being directly informed
                                            requests for additional information; and         of their obligation to report, still fail to
Fir$dings                                   (8) DOD regulations required former              do so.
GAO found that: (1) about 6,600 former      employees to report whether they                 Status: Action not yet initiated.
military officers and civilian employees    worked on major defense systems while
holding industrial security clearances      at DOD and at the defense contractor,
                                                                                             Recommendation: The Secretary of
worked for defense contractors during       but DOD did not provide space on its
                                                                                             Defense should direct the Standards of
fiscal years (FYI 1986 and 1987; (2) the    reporting form for such information.
                                                                                             Conduct Office to: (1) modify the
disc!osure laws exempted about 20                                                            reporting form to provide space for
percent of those former mid- and high-      Open Recommendations                 to          individuals to report positively or
leve). DOD personnel from reporting
their defense-related employment, since
                                            Agencies                                         negatively whether they worked on
                                            Recommendation: The Secretary of                 major defense systems while at DOD or
they did not work with major defense
contractors; (3) only 1,460 of the 4,900    Defense should direct the Standards of           at the defense contractor; (2) clarify the
nonexempt former employees reported         Conduct Office to take more aggressive           reporting instructions to specify that
their defense-related employment; (4)       enforcement action to increase                   negative reporting is also required; and
DOD could not determine the                 compliance with the reporting                    (3) begin enforcing the requirement that
compliance rate of former employees         requirement. This should include: (1)            former employees provide this
who did not have security clearances; (5)   developing a methodology for                     information on their reporting form.
DOD did not take all of the                 determining who is required to report,           Status: Action not yet initiated.




                                            Page 154                                                                        GAO/OP-90-1
                                           General Government




Other ‘General Government

Impbrt Duties: Assessment of Duties on Unfairly                                                     Priced
Imports Not Reviewed
GGD-8i9-124,09/29/89
Background                                 establish a task force to consolidate         Recommendation: To enhance the
Pursuant to a congressional request,       guidance on reporting procedures; and         administration of antidumping duty and
GAO re<iewed the Customs Service’s         (6) Customs officials were not reporting      countervailing duty laws, the Secretaries
and Co merce Department’s                  data needed for verifying duty                of Commerce and the Treasury should
adminis7 ation of antidumping and          settlement amounts, but neither agency        designate a team from their agencies to
counter iling duty assessment              studied the feasibility of collecting those   determine the feasibility of collecting
procedu %es, focusing on: (1) whether      data.                                         additional data needed to review
Commerbe is effectively using Customs                                                    antidumping and countervailing duty
duty est$nates to assess the established   Open Recommendations                to        settlements.
amounts/ and (2) Customs’ reporting        Agencies                                      Addressee: Department of the Treasury
accuracyi and the content of the                                                         Status: Action not yet initiated.
Commer~e-established duties.               Recommendation: To enhance the
                                                                                         Addressee: Department of Commerce
                                           administration of antidumping duty and
                                           countervailing duty laws, the Secretary       Status: Action not yet initiated.
Findings                                   of Treasury should direct the
GAO found that: (1) about 30 percent of    Commissioner, Customs Service, to             Recommendation: To enhance the
the commodity entries it reviewed had      ensure that accurate reports are              administration of antidumping duty and
report& discrepancies, largely because     provided to Commerce. In doing so,            countervailing duty laws, the Secretary
of Customs data entry problems; (2)        Customs should implement existing             of Commerce should establish procedures
because of reporting errors, Commerce      plans, such as instituting computerized       for using Customs’ reports, to the extent
did not effectively review Customs’ duty   control checks, and test the reports’         possible, to ensure that the established
assessments; (3) Customs officials         accuracy after these changes to               amount of estimated antidumping and
expressed their intention to improve       determine whether further                     countervailing duties are assessed on
report accuracy through automation         improvements are needed.                      individual entries.
improvements; (4) Customs plans to         Status: Action not yet initiated.             Status: Action not yet initiated.


Tax Administration
IRS and SSA Can Improve the Verification and Recording
of Data Provided by Self-Employed Taxpayers
GGD-85-21,05/28/85
Background                                 Service (IRS) and the Social Security         Findings
GAO reyiewed processing of self-           Administration (SSA) are properly
                                                                                         Workers are required to report self-
employment earnings information to         processing such information and
                                                                                         employment earnings on a form known
determine whether the Internal Revenue     crediting it to taxpayers’ accounts.
                                                                                         as schedule SE. IRS processes the




                                           Page 166                                                                   GAO/OP-90-1
                                                      General Government




schkdule, collects any social security                Open Recommendations             to        1987 so identified corrections can be
tax’ s that are due, and reports the                  Agencies                                   processed. SSA is awaiting data from
inf rmation to SSA, which credits                                                                IRS to complete its actions.
                                                      Recommendation: The Commissioner of
ea nings information to individuals’
                                                      Internal Revenue should identify and
soc’al security accounts. GAO found                                                              Recommendation: The Commissioner of
                                                      provide SSA, starting with the 1980
th t, while the system is functioning                                                            Social Security should credit the social
                                                      processing year, with self-employment
wei 1, IRS and SSA could: (1) increase the            records showing different SSN for the      security accounts of those self-employed
amount of self-employment earnings                                                               individuals whose records were never
                                                      same person or self-employment
that get properly credited; and (21 more              earnings that were not previously          processed and ensure that the trust
accurately account for due taxes. GAO                 provided.                                  funds are provided the correct tax
also found that: (1) IRS does not always              Status: Action in process. Estimated       amount from their earnings.
detect errors in computing self-                      completion date: 12/90. A request was      Status: Action in process. Estimated
employment earnings on SE schedules;                  made for an abstract of the Returns        completion date: 12/90. SSA stated that
(2JiIRS does not verify wage amounts                  Transaction File for tax years 1979        it is awaiting final action by IRS before
reported by self-employed persons who                 through 1982 for use by SSA. IRS stated    taking any action.
rebort other earned income, which                     that, because this action involves a
ca,)ises underpayments of social security             major change to the master file,           Recommendation: The Commissioner of
takes; (3) IRS could help SSA correctly               implementation is not expected to be       Social Security should periodically
crbdit earnings to individuals’ social                completed until 1990.                      conduct tests of the accuracy of self-
seburity accounts by ensuring that,                                                              employment earnings and identification
whenever it corrects social security                  Recommendation: The Commissioner of        data and work with IRS to resolve any
numbers (SSN) on tax returns, corrected               Social Security should use the self-       problems that are identified.
numbers are provided to SSA; and (4)                  employed persons’ records with different   Status: Action in process. Estimated
SSA and IRS need to establish better                  SSN obtained from IRS to correct           completion date: 12/90. IRS and SSA
control over SE schedules to help ensure              earnings accounts credited erroneously     agreed that some type of sampling could
 that all self-employed persons are                   and those not previously credited.         satisfy this recommendation. SSA stated
                                                      Status: Action in process. Estimated       that it developed specifications for a
 receiving credit for self-employment
                                                      completion date: 12190. SSA stated that    sample and provided the specifications to
 earnings.
                                                      it provided IRS with a format in March     IRS.


Tax Administration

IRS’ Examination Selection System for Exempt
Organizations’ Unrelated Business Income
GGD-85-64,07/08/85                           I_____




background                                            Findings                                   tax noncompliance to understand the
GAO analyzed the Internal Revenue                                                                nature and magnitude of UBI
                                                      GAO found that, although IRS assessed
Service’s (IRS) examination selection                                                            noncompliance and develop profiles of
                                                      over $41 million in additional tax and
system for tax-exempt organizations                                                              highly noncompliant tax-exempt
                                                      penalties upon UBI examinations in
earning unrelated business income                                                                organizations engaging in UBI activity.
                                                      fiscal years 1981 through 1983, a
(UBI).                                                                                           Without such information, the current
                                                      substantial number of UBI examinations
                 0                                                                               IRS selection system cannot focus on the
                                                      resulted in little or no additional tax
                                                                                                 most noncompliant tax-exempt UBI
                                                      revenue. GAO also found that IRS does
                                                                                                 organizations, which regularly fail to
                                                      not have sufficient information on UBI




                                                      Page 156                                                                 GAO/OP-90-I
                                              General Government




properly report UBI earnings or pay the       and result in more effective use of          to gain increased insight into the nature
UBI tax iiue. Because IRS data shows          resources.                                   and magnitude of UBI noncompliance.
increasing UBI activity, high estimates                                                    Status: Action in process. Estimated
of tax loss due to UBI nonreporting, and      Open Recommendations               to        completion date: 09/92. IRS is
low yield from most current UBI                                                            conducting a Taxpayer Compliance
examinations, IRS may want to focus on        Agencies
                                                                                           Measurement Program (TCMP), which
the UBI organizations with the highest        Recommendation: The Assistant                would address this issue. No action is
potential; for noncompliance. More            Commissioner of Internal Revenue for         expected until the results of TCMP are
targeting of highly noncompliant UBI          Employee Plans and Exempt                    back, which will not be until fiscal year
organiza ions could aid in generating         Organizations should further analyze         (FY) 1992.
more re t enue and increased compliance       existing data on UBI tax examinations


Tax Agministration

Com’puter Security: Contingency Plans and Risk Analyses
Nee /l ed for IRS Computer Centers
IMTEC-86-10, 03/27/86
Background                                    always maintain backup tape files            efforts to develop, certify, and
GAO reviewed the Internal Revenue             containing data and programs necessary       periodically test ADP contingency plans
Service’s (IRS): (1) plans for ensuring the   to continue operations; and (5) testing to   for all IRS computer centers according
continuity of its computer operations if      ensure the workability of ADP                to the criteria and procedures set forth
any of its 12 computer centers were           contingency plans has been limited.          in the IRS Internal Revenue Manual
destroyed or significantly disabled for an    GAO also found that: (1) IRS has not         and Office of Management and Budget
extended period; and (21 efforts to           periodically assessed potential risks to     (OMB) Circular A-130.
implement a risk management program           computer operations at its centers,          Status: Action in process. Estimated
to assess and reduce potential threats to     although it has recently started a risk      completion date: 09190. IRS has
computer operations.                          analysis program that it hopes to            completed a service-wide disaster
                                              complete in 1987; (2) several IRS centers    recovery strategy report for its
                                              had physical security problems, making       computing centers. Guidelines for
Findings                                      them susceptible to fire and smoke           preparing detailed contingency plans at
GAO conducted its review at IRS               damage or to unauthorized entry after        each center are being drafted.
headquarters, the IRS National                working hours; and (3) contingency plans     Contingency plans are expected to be
Computer Center (NCC), and 4 of the 10        at one center lacked adequate detail for     completed by September 1990.
service centers that process tax returns      emergency procedures.
and rela’ted documents. GAO found that                                                     Recommendation: The Commissioner of
IRS draft automatic data processing           Open Recommendations               to        Internal Revenue should direct the
(ADP) plans are incomplete and its            Agencies                                     Assistant Commissioner, Support and
emergency measures are inadequate                                                          Services (for the Detroit Data Center),
because: (11 NCC has no designated            Recommendation: The Commissioner of          and the Assistant Commissioner,
backup processing site; (2) computer          Internal Revenue should direct the           Returns and Information Processing (for
capacity’ problems may make it                Assistant Commissioner, Support and          all other computer centers), to expedite
impossible for one service center to back     Services (for the Detroit Data Center),      efforts to perform periodic risk analyses
up another, as currently proposed; (3)        and the Assistant. Commissioner,             to: (1) aid in developing and maintaining
IRS has not identified the most critical      Returns and Information Processing (for      effective ADP contingency plans; and (2)
work-load functions; (4) IRS does not         all other computer centers), to expedite     help assess the internal controls



                                              Page 157                                                                  GAO/OP-90-l
                                             General Government




enviironment, as required by the Federal     computer centers. The Martinsburg          Although the plan has been requested by
Managers’ Financial Integrity Act of         Computing Center (MCC) is preparing an     the Risk Analysis Branch, it has yet to
1982 and the OMB circular.                   action plan to address its risk analysis   receive the plan.
StaJue: Action in process. IRS has           recommendations. The plan is needed for
completed risk analyses at 11 of its 12      certification of the MCC risk analysis.


Tak Administration

T&x Administration: Administrative Changes Could Lead
tti Earlier Resolution of Tax Disputes
GC!rD-86-75.07/30/86
Background                                   $268,200 in filing fees; (3) some of the   language of the 30-day letter, various
G& examined the U.S. Tax Court’s case        processing and filing costs could have     IRS publications, and the information on
loah to determine whether the number         been eliminated had the cases been filed   the appeal procedures given to taxpayers
of cases filed with the court could be       with IRS; and (4) more than one-third of   by IRS auditors and revenue agents.
reduced by settling more cases through       the taxpayers did not fully understand     These changes should: (1) emphasize the
the Internal Revenue Service’s (IRS)         the dispute resolution process before      advantages of going to the appeals
appeals process, at less cost to the         filing with the tax court. GAO believes    division before filing with the tax court;
taxpayers and the government.                IRS could do more to involve the appeals   and (2) point out that, even if taxpayers
                                             division in resolving cases by better      bypass the appeals division, the cases
                                             informing taxpayers about the process      will still be assigned to it for attempted
Findings                                     and encouraging them to go to the          settlement.
GAO found that: (1) many taxpayers who       appeals division before filing with the    Status: Action in process. Estimated
initially bypassed the IRS internal          court.                                     completion date: 12/89. IRS revised
appeals process and filed with the court                                                Publication No. 556. It stated that the
eventually settled their cases out of        Open Recommendations             to        language of Publication No. 5 has been
court with the appeals division; (21 cases
ultimately settled by IRS cost the
                                             Agencies                                   approved and should be published in
                                                                                        December 1989.
government approximately $1.2 million        Recommendation: The Commissioner of
in court processing costs and taxpayers      Internal Revenue should revise the


Tax Administration

Tax Administration:                          Tip Income Reporting Can Be
Increased
GGD-86-119,09/30/86
Background        w                          Service’s (IRS) efforts to improve tip     Act’s (TEFRA) tip income reporting
                                             income reporting and the impact of the     requirements on both the food and
In response to a congressional request,
GAO reviewed the Internal Revenue            Tax Equity and Fiscal Responsibility




                                              Page 168                                                                GAO/OP-90-l
                                              General Government




beverage; industry and tip income            result in inequitable treatment of              proven effective in conducting tip
reporting.                                   taxpayers.                                     income reporting projects and
           /                                                                                communicate this information to all IRS
Findinlgs                                    Open Recommendations                 to        regions and districts; and (2) design and
                                                                                            implement an overview and evaluation
GAO foubd that: (1) of the four IRS          Agencies                                       process to monitor the progress of tip
regions i tt visited, two were more active
                                             Recommendation: To enhance IRS                 enforcement activities, identify potential
and WCC ssful in pursuing tip income
nonrepo I! ing than the others; (21 tip      efforts to improve compliance with the         problem areas, and devise the actions
income r porting has increased since the     requirements for reporting tip income,         needed to deal with them.
impleme t tation of the new TEFRA            the Commissioner of Internal Revenue           Status: Action in process. Estimated
reportin ’requirements; (3) food and         should formulate and implement an              completion date: 12/89. The IRS study
beverage employers indicated that            overall strategy for identifying and           has been completed and the report
impleme 1 tation of these new reporting      reducing tip income nonreporting. In           forwarded to Treasury for comment.
requirements was not as costly as they       formulating this strategy, the                 Treasury requested further analysis of
original1 projected; and (41 IRS districts   Commissioner should, in conjunction            the study results and revisions in the
used var 5:ing procedures in                 with providing TEFRA tip income                report. The Assistant Commissioner
administering the TEFRA provision,           information to the regional and district       (Planning, Finance and Research) has
which allowed employers a rate               offices: (1) identify and evaluate, for IRS-   revised the report to include the
reductioh from the reporting of 8            wide applicability, those detection            additional analysis. The report was
percent Qf gross receipts, which could       techniques and tools which have been           forwarded to Treasury for its review.


Tax Administration

Computer Capacity: IRS Must Better Estimate Its
Computer Resource Needs
IMTEC-8%5BR, 1l/03/86
Background                                   decided to postpone upgrading and              growth to 8 or 10 percent could be
Pursuant to a congressional request,         identified a series of initiatives which it    difficult to achieve because IRS plans to
GAO: (I! determined the status and           felt would extend the existing                 install new equipment and introduce
progress of the Internal Revenue             mainframe computers’ usefulness. GAO           new on-line applications that could
Service’s (IRS) Capacity Enhancement         found that the Department of the               increase demand for tax account
for the Processing System (CEPS)             Treasury endorsed the IRS decision to          information; and (3) if IRS does not
procurement; and (2) analyzed the need       abandon CEPS in favor of: (1) adopting         successfully implement its initiatives, it
for and timing of CEPS, which IRS            the initiatives; and (2) combining the         could experience capacity problems at its
designed to upgrade or replace its large     procurement strategy of CEPS with the          larger service centers as early as mid-
mainframe computers.                         planned Tax System Redesign (TSR).             1988. GAO also believes that: (1) without
                                             GAO believes that: (1) the existing            a work-load analysis and a continuing
                                             mainframes will have the capacity to           analysis of current system utilization,
Findings                                     handle IRS tax processing work loads           IRS will not have adequate assurance
IRS believed that, with CEPS, its            through at least mid-1991, assuming that       that its initiatives are working and could
existing mainframe computers would           no large unexpected increase in work           unexpectedly find itself short of
have sufficient capacity to process          loads occurs and IRS effectively carries       computer capacity when it implements
taxpayer information and update              out its planned initiatives; (2) the IRS       TSR; and (2) such an unexpected
computer files beyond 1989. IRS later        initiative to constrain annual work-load       shortage could have a devastating




                                             Page 159                                                                    GAO/OP-90-l
                                            General Government




impact on operations, as was evidenced      in its investment decisions on these      determine the relationship between
in the 1935 tax filing year.                critical computer resources, the          physical work load and computer work
                                            Commissioner of Internal Revenue          load. IRS intends to complete a study of
Ol$en Recommendations             to        should develop and maintain               current work loads processed on its
                                            comprehensive work-load data for          mainframes by January 1990. IRS also
A$encies                                    current and planned automatic data        developed a strategy to annually collect
Retommendation:      Because of the         processing (ADP) requirements.            data on planned ADP requirements. IRS
importance of the mainframe computers       Status: Action in process. Estimated      is in the process of collecting this data.
to IRS ability to accomplish its mission    completion date: 01/90. IRS hired a
and the need for continued improvement      private consulting firm to help


T&x Administration
Tax Administration: IRS Can Improve Its Collection
Fkocedures for Taxpayers Living Overseas

Background                                  telephone and personal contact, with      Commissioner has approved
                                            U.S. taxpayers living in foreign          centralization of APO/FPO returns at
G&O: (1) evaluated Internal Revenue
                                            countries.                                the Philadelphia Service Center. Process
Service (IRS) collection policies and
procedures as they relate to taxpayers                                                has been delayed because returns are
                                            Open Recommendations              to      currently processed in 10 service centers,
using Army Post Office (APO) and Fleet
                                            Agencies                                  and establishment of a centralized data
Post Office (FPO) addresses; and (2)
identified alternatives for needed                                                    base is not possible, according to IRS,
                                            Recommendation: The Commissioner of       under current processing procedures.
improvements in the APO/FPO                 Internal Revenue should assign
collection process.                         responsibility for APO/FPO collection     Recommendation: The Commissioner of
                                            cases to the Assistant Commissioner       Internal Revenue should arrange for
Findings                                    (International).                          access to the Defense Manpower Data
                                            Status: Action in process. Estimated
UAO found that: (1) IRS domestic offices,                                             Center’s information base.
                                            completion date: 03190. The Deputy
which are responsible for handling          Commissioner has approved an internal     Status: Action in process. Estimated
APO/FPO collection cases, are not in the    recommendation that responsibility for    completion date: 03/90. IRS has
best position to deal effectively with      APO/FPO collection cases, as well as      arranged for a quarterly match of
overseas taxpayers; (2) telephone and       other responsibilities relating to        delinquent taxpayers with the Defense
personal contact, which are two essential   APO/FPO taxpayers, be assigned to the     Manpower Data Center’s data base to
tools for dealing with delinquent           Assistant Commissioner (International).   obtain more current address
taxpayers, are generally not available to                                             information. Implementation of that
domestic offices to resolve overseas        Recommendation: The Commissioner of       match has been delayed until the IRS
collection cases; and (3) the IRS Foreign   Internal Revenue should require           Computer Services offIce can make the
Operation District, which has collection    APO/FPO taxpayers to file their tax        systemic changes needed to facilitate
responsibility for overseas taxpayers       returns at the Philadelphia Service        that match. According to Computer
other than those with APO/FPO               Center.                                    Services, that work has been delayed
addresses, has offices overseas and is      Status: Action in process. Estimated       because of other commitments.
experienced in dealing, through both        completion date: 03/90. The Deputy




                                             Page 160                                                                GAO/OP-90-l
                                              General Government




Tax Agministration

Tax IAdministration: IRS Can Improve on the Success of Its
Proljlem Resolution Program
GGD-8~8-12,
         12/22/8’7
Background                                    received special assistance. In addition,     questions on when contacts were made
                                              GAO found that IRS: (1) staff frequently      to assess how well IRS employees are
Pursuant, to a congressional request,
                                              failed to identify or timely refer            identifying special assistance cases; (2)
GAO evc/luated the Internal Revenue
                                              taxpayers to PRP; (2) did not direct          including questions addressing the
Service’4 (IRS) Problem Resolution
Prograd (PRP), focusing on: (1) its work      taxpayers to call their district office’s     reasons for taxpayers’ repeated contacts
load and; effectiveness; (2) the impact of    toll-free telephone line instead of writing   with IRS; (3) revising the question
compute 1 systems; and (3)                    to service centers; (3) methodology for       assessing taxpayer satisfaction to avoid
implemebtation of prior GAO                   evaluating program effectiveness did not      prompting taxpayers to give a positive
recomm&dations.                               provide sufficient information for            response; (4) monitoring and evaluating
         I                                    comprehensive systemwide assessment           the appropriateness of service center and
                                              and improvement; and (4) case-coding          district office decisions to exclude certain
Findir)gs                                     system failed to effectively detect the       taxpayers from follow-up; and (5)
GAO f&d that the special assistance           common causes of taxpayer problem             obtaining a more statistically projectable
work load increased 800 percent between       inquiries.                                    response rate.
1979 and 1985, because of: (1) computer                                                     Status: Action in process. Estimated
problems that resulted in late refunds or     Open Recommendations                to        completion date: 04/90. IRS contracted
erroneous notices; (2) unclear verbal and                                                   with Price-Waterhouse to determine the
                                              Agencies                                      best survey approach to use in obtaining
written communications with taxpayers;
and (3) the normal system’s inability to      Recommendation: The Commissioner of           customer feedback. The Internal
resolve taxpayers’ problems. GAO also         Internal Revenue should improve the           Revenue Manual will also be revised to
found that taxpayers’ satisfaction            usefulness of the PRP questionnaire           require at least an annual review of PRP
increased significantly after they            follow-up effort by: (1) including            cases exempted from followup.


Tax Administration
Tax Administration:                          Opportunities Exist for Improving
IRS’ Administration                          of Alien Taxpayer Programs
GGD-$8-54,04/11/88
             .._.____-
Backiruund                                    aimed at identifying and collecting legal     requirements, or the effectiveness of its
                                              aliens’ income taxes.                         compliance efforts; (2) advised aliens of
Pursuant to a congressional request,
                                                                                            tax requirements, including the need to
GAO studied the: (1) extent to which
                                              Findings                                      obtain a tax compliance cert,ificate,
legal aliens complied with tax filing
                                                                                            through a publication it distributed to
requirements; and (2) eff%ctiveness of        GAO found that IRS: (1) lacked sufficient     aliens as they entered the country; (3)
Internal Revenue Service (IRS) programs       information to measure the extent to          did not monitor these requirements, but
                                              which legal aliens complied with



                                              Page 161                                                                     GAO/OP40-1
                                               General Government




relied on aliens to voluntarily comply; (4)    obtained; (3) results that derive from      available. State has agreed with IRS to
did not receive sufficient information         final tour accountings; and (4) overall     display a poster at embassies and
from the Immigration and                       program costs and tax revenues              consulates to alert aliens to their
Nafuralization Service (INS) concerning        associated with IRS administration of its   responsibilities. According to IRS,
nonresident aliens; (5) did not administer     alien compliance efforts.                   implementation has been delayed due to
its alien compliance programs according        Status: Action in process. Estimated        problems with funding and designing the
to its procedures; (6) has not designated      completion date: 03/90. IRS has             poster.
spebific district office personnel to          completed an alien compliance study
coordinate compliance efforts; (7) used        using leads obtained from INS. This         Recommendation: The Commissioner of
an unrevised and outdated withholding          study will provide information on the       Internal Revenue should obtain from
agent contest letter to obtain                 extent of alien nBtiCQOn@ianoowhioh, in     INS the kinds of information neC&WWJ’
information regarding some aliens’             turn, will provide the basis for deciding
                                                                                           to better meet IRS nonresident alien
income; and (8) declined to further            whether a broader study is warranted.
                                                                                           information needs. This might include
invbstigate 59 GAO-identified cases of         Data from the study is being analyzed. A
                                               management information system has           the possibility of INS revising Form I-
possible noncompliance, citing the
potential costliness of further efforts.       been designed to control alien leads from   171C to include additional information
                                               INS and to determine costs and benefits.    that would be useful to IRS or sending
                                                                                           Form I-129B to IRS.
Olpen Recommendations                 to       Recommendation: The Commissioner of         Status: Action in process. Estimated
Agencies                                       Internal Revenue should arrange with        completion date: 03/90. INS and IRS
&ammendation:        The Commissioner of       the Department of State to have U.S.        have agreed to exchange additional
Inhrnal Revenue should begin collecting        embassies distribute information on the     information. INS is automating the
the kinds of management information            potential tax obligations of aliens,        process that produces the basic data that
needed to assess the effectiveness of its      including, where applicable, the need to    has been shared with IRS. Form I-171C
alien compliance efforts. That                 obtain a tax compliance certificate.        will be obsolete. INS will provide IRS
infbrmation should include, but not            Status: Action in process. Estimated        with a tape of information previously
necessarily be limited to, the: (1) number     completion date: 03/90. Meetings            included on I-171C and will make
of tax compliance certificates issued and      between IRS and State have been held.       programming changes to accommodate
the amount of tax collected as a result of     A U.S. Tax Guide for Aliens has been        IRS needs when the automation effort is
that process; (2) number of alien leads        mailed to embassies and consulates. IRS     up and running.
reteived from INS and the results              has proposed that State make other data


Tax Administration
Tax Administration: Investigating Illegal Income-Success
Uncertain, Improvements Needed
GGD-88-61,04/25/88
f&&ground                                      enforcement results and tax revenues        Findings
In response to a congressional request,        generated from program operations; and
                                                                                           GAO found that: (1) since 1980, SEP
GAO reviewed the Internal Revenue              (2) management improvements that            efforts have resulted in fewer
Service’s (IRS) Special Enforcement            could enhance program operations.           discontinued investigations, more
Program (SEP), which IRS uses to                                                           indictments, and more convictions; (2) of
investigate tax law violations and                                                         the SEP cases closed in fiscal year 1985,
potential taxable income related to                                                        47 percent resulted in tax-related
illegal activities, to identify: (1) the law                                               convictions, 68 percent of those



                                               Page 162                                                                 GAO/OP-90-l
                                             General Government




convictiohs resulted in jail sentences, 42   interdivisional coordination and prompt      capturing information on civil tax
percent (esulted in criminal fines, and      civil action on closed criminal cases.       assessed and collected on each criminal
38 perce t of those investigated were                                                     investigation. Implementation is
major cr’?minals; (31 IRS referred 55        Open Recommendations               to        scheduled for August 1990.
percent of the cases closed in 1985 and
64 percent of the cases closed in 1982 for
                                             Agencies                                     Recommendation: To improve the
tax assessment examinations; (4) IRS         Recommendation: To improve the               management of SEP operations, the
collected i$11.2 million of the $37.6        management of SEP operations, the            Commissioner of Internal Revenue
million in assessed taxes, interest, and     Commissioner of Internal Revenue             should establish a district office program
penaltiesi $2.2 million of which was on      should collect management information        to monitor the civil actions taken by
illegal-source income; (5) 76 percent of     relating to key program objectives, and      various IRS components on closed
the 509 c es included inaccurate or          identify the tax revenues generated by       criminal cases.
incomple management information              SEP cases.                                   Status: Action in process. Estimated
that res lted in misleading reports; (61     Status: Action in process. Estimated         completion date: OW90. IRS is reviewing
IRS offic ale inconsistently interpreted     completion date: 08/90. IRS formed a         plans established by several regions and
what co tituted grand jury information;      task force to review its reporting system.   will consolidate the best aspects of each
and (‘7) ‘E7,of 8 district officers had no   The task force recommended that the          plan before implementing a nationwide
management system to ensure                  Criminal Investigative Division begin        system.
         ,
Tax A#ministration

Tax ‘Administration: IRS Could Reduce the Number of
Unproductive Business Nonfiler Investigations
GGD-88-7’7,05/24/88
Background                                   numbers (EIN) to businesses which filed      Internal Revenue should adopt
                                             their returns under only one EIN; and        additional research techniques, such as
Pursuant to a congressional request,
                                             (2) 369, or 19 percent, involved cases in    using variations of the business name
GAO reviewed the Internal Revenue
                                             which businesses did not follow IRS          and the actual signature name on the
Service’s (IRS) efforts to detect business   regulations to file returns even though      return, and actively pursue the receipt
nonfilers, focusing on ways IRS could        they owed no taxes. GAO also found           of forms to identify businesses with
reduce the number of unproductive            that, in 317 cases, or 16 percent, IRS did   previously issued EIN.
investigations.                              not accurately update its master file        Status: Action in process. Estimated
                                             with the results of its investigations.      completion date: 07/90. IRS added
Findings                                                                                  additional research procedures to the
GAO found that, of 1,976 business            Open Recommendations               to        Internal Revenue Manual and plans new
nonfiler investigations IRS closed in        Agencies                                     follow-up procedures to secure the
fiscal year 1987: (11298, or 15 percent,                                                  receipt of forms to identify businesses
                                             Recommendation: To reduce the
involved cases in which IRS erroneously      number of unproductive nonfiler              with previously issued EIN. IRS revised
issued multiple employer identification      investigations, the Commissioner of          the implementation date to July 1990.




                                             Page 163                                                                   GAO/OP-90-l
                                             General Government




Tab Administration

Internal Revenue Service: Need to Improve the Revenue
Accounting Control System
ItiTEC-88-41,
       ._~-.. 06/17/88
          ~.. __.-
               -._I_.._..--
Bqckground                                   two-stage approach to improve RACS; (2)      thorough requirements and
                                             established computer tape interfaces         compatibility analysis that clearly
GAG reviewed the Internal Revenue
                                             with another automated system to             specifies actions to reduce manual data
Service’s (IRS) Revenue Accounting           record transactions affecting revenue        input, reduce manual balancing and
Control System (RACS) to: (1) determine      receipts; (3) planned additional tape        reconciliation, and improve RACS
the/ extent to which IRS automated its       interfaces to reduce the need for manual     capability to identify and track errors.
revenue accounting procedures; (2) assess    data input; (4) drafted a proposal to        Status: Action in process. Estimated
RACS analysis and reporting capability;      replace RACS with a fully operational        completion date: 01/92. The planned
and (3) obtain IRS plans for improving       system by 1992 and to consolidate and        enhancement of RACS is now scheduled
R&S.                                         automate all manual subsidiary files         for completion in 1992 and will reduce or
                                             into one computer system by 1995; (5)        eliminate manual data input, manual
Fibdings                                     planned to redesign the entire tax           balancing and reconciliation, and will be
                                             processing system, including revenue         designed to improve identification and
GAO found that RACS was inefficient          accounting functions, but did not
and susceptible to errors because: (1) IRS                                                tracking of errors.
                                             determine how the functions would fit
had to manually enter, balance, and          into the overall redesign; and (6) had not
reaoncile the RACS account files with                                                     Recommendation: In reviewing the IRS
                                             determined the requirements for data
information in files maintained in other      interchange, balancing and reconciling,     plan for replacing RACS, the
IRS systems, which resulted in errors in      and reporting, or identified the changes    Commissioner of Internal Revenue
classifying tax revenues; (2) RACS did        needed to ensure compatibility between      should ensure that it is supported by a
not have the capability to identify           the replacement systems and other           thorough requirements and
categories of errors that occurred            systems.                                    compatibility analysis that identifies
repeatedly, or analyze the growing                                                        changes needed to ensure compatibility
accounts-receivable balance; and (3) at                                                   between RACS and other automated
                                             Open Recommendations               to        systems with which it interacts.
the time RACS became operational, IRS
was reluctant to modify other systems to     Agencies                                     Status: Action in process. Estimated
interface with it and did not think that     Recommendation: In reviewing the IRS         completion date: 01/93. Automation of
some balancing functions were                plan for replacing RACS, the                 feeder systems which currently interface
 neoessary. GAO also found that IRS: (1)     Commissioner of Internal Revenue             with RACS will be phased in between
 recognized the problems and initiated a     should ensure that it is supported by a      November 1989 and January 1993.




                                              Page 164                                                                 GAO/OP-90-I
                                            General Government




         I

Tax Abministration
Tax iAdministration: IRS’ Service Centers Need to Improve
Handling of Taxpayer Correspondence
GGD-ij8-101,07/13/88
BackgPIound                                 acknowledgement letters and interim          the new automated correspondence
In response to a congressional request,     responses to taxpayers. GAO also found       system will satisfy the requirements
GAO diqussed the Internal Revenue           that IRS: (1) planned to implement a         specified in this recommendation. IRS
Service’4 (IRS) efforts to improve its      new computer system in 1990 which            plans to test the system in 1989 and
handling of taxpayer correspondence to      would facilitate the selection of            implement it in early 1991.
determi+e whether the IRS                   appropriate responses to taxpayer
AdjustdenWCorrespondence        Branches:   inquiries; (2) lacked specific information   Recommendation: The Internal
(1) accu+ately and clearly correspond       on the quality of its cases involving        Revenue Service should determine
with tagpayers; and (2) comply with         correspondence; and (3) had difficulty       whether the qualifying requirements,
administrative procedures.                  retaining examiners because of the strict    the quality and quantity performance
                                            requirements and lack of advancement.        standards, and the opportunity for
                                                                                         advancement for the
Findihgs                                                                                 Adjustments/Correspondence Branch
                                            Open Recommendations               to
GAO reviewed a random sample of IRS                                                      tax examiner position need to be revised.
                                            Agencies                                     Status: Action in process. Estimated
cases involving correspondence and
found that: (1) about half of the           Recommendation: The Internal                 completion date: 03/90. IRS is assessing
correspondence contained correct,           Revenue Service should ensure that the       the qualifying requirements for tax
complete, and clear information; (2) 31     system being developed to help tax           examiners to see if changes would have
percent contained critical errors           examiners compose responses to               a bearing on quality. Quality and
involving incorrect adjustments and         taxpayer inquiries: (1) allows examiners     quantity standards are being tested. The
unresponsive letters to taxpayers; (3) 16   to review letters after they have been       feasibility of a pass/fail test for new
percent contained noncritical problems      composed; and (2) facilitates the            examiners is being explored. An
involving unclear or incomplete letters     preparation of responsive answers to         upgraded journeyman level (GS-8)
or incomplete actions; and (4) in 68        taxpayer correspondence involving more       position is under consideration within
percent of the cases, IRS personnel         than one inquiry.                             IRS and a number of centers are trying
failed to comply with administrative        Status: Action in process. Estimated          this new level for the more difficult
procedures requiring them to send           completion date: 01/91. IRS expects that      cases.




                                             Page 165                                                                 GAO/OP80-1
                                               General   Government




Tair Administration
T&x Administration:                           IRS’ Abusive Tax Shelter Efforts Need
I+provement
GCj;D-88-69,07/25/88
Bdckground                                    penalty guidance, internal controls to       and offering documents to their
In response to a congressional request,       ensure appropriate penalties, and            respective IRS district offices at the time
GAO examined the Internal Revenue             procedures to detect errors and              of registration,
Se&ice’s (IRS) legislatively mandated         oversights and ascertain compliance          Status: Recommendation valid/action
efforts to curtail abusive tax shelters,      with regulations.                            not intended. IRS does not believe it is
focusing on the effectiveness of: (1) the                                                  beneficial to require submission of the
tax/ shelter registration abusive shelter     Open Recommendations               to        prospectus and/or offering documents as
                                                                                           part of the registration process.
detection team programs in identifying        Congress                                     Therefore, IRS is not planning to
abusive tax shelters; and (2) IRS efforts
to administer penalties.                      Recommendation: To reduce the                implement this recommendation. From
                                              financial incentive for promoting            further review, GAO determined that
                                              abusive tax shelters, Congress should        the registrations dropped from about
Fihdings                                      modify Internal Revenue Code (IRC)           14,000 in 1986, before the Tax Reform
GJ& found that: (1) the registration          section 6700 to significantly increaee the   Act, to about 3,000 in 1988, after the act.
p&ram did not provide district                penalty above the current 20 percent of
examination personnel with enough             gross income derived, or to be derived,      Recommendation: To improve the
information to identify abusive tax           by any party involved with the               efficiency and effectiveness of the
shelters or to initiate investigations; (2)   promotion or sale of an abusive shelter.     abusive shelter identification programs,
the detection team program did not            Status: Action not yet initiated.            the Commissioner of Internal Revenue
provide district personnel with selection                                                  should require districts to review those
criteria to properly identify the types of    Recommendation: To reduce the                documents in deciding whether to
shelter cases coneidered potentially          financial incentive for promoting            initiate an examination to determine if
subject to penalties; (3) although            abusive tax shelters, Congress should        the shelter is subject to penalty.
Congress raised the penalty to deter          modify IRC section 6701 to reduce the        Status: Recommendation valid/action
promotion and sale of abusive tax             level of proof from knowingly to “knows      not intended. From additional work, IRS
shelters from 10 percent to 20 percent of     or reasonably should have known” that        has restructured its program by
the gross income derived or to be derived     the investor would understate tax            expanding its identification teams to
from the shelter, promoters continued to      liability to ensure all abusive shelters     cover all compliance issues resulting
have financial incentives for promoting       are subject to penalty for aiding and        from the Tax Reform Act of 1986. Unless
abusive shelters; (4) although IRS            abetting.                                    the type or volume of abusive tax
assessed some penalties for persons who       Status: Action not yet initiated.            shelters that surface after act
knowingly aided or abetted tax shelter                                                     implementation reverses the decline,
abusee, it could have assessed more           Open Recommendations               to        IRS will not implement the
penalties if the law required a lesser                                                     recommendation.
burden of proof; (6) IRS either
                                              Agencies
overlooked or incorrectly computed the        Recommendation: To improve the               Recommendation: To improve the
penalties in 16 of 29 cases GAO reviewed      efficiency and effectiveness of the          efficiency and effectiveness of the
in three districts; (6) IRS computational     abusive shelter identification programs,     abusive shelter identification programs,
errors totalled $4.2 million in penalty       the Commissioner of Internal Revenue         the Commissioner of Internal Revenue
underasseeements; and (7) most of the         should require organizers of registered      should develop and periodically update
errors occurred because IRS lacked            shelters to provide the shelter prospectus   national selection criteria that can be



                                              Page 166                                                                   GAO/OP-90.1
                                                  General Government




used by IRS service center detection              Recommendation: To ensure that               been considered and accurately
teams anrl district examination                   penalties are assessed when appropriate      computed.
personnel to identify the tax shelter             and computed correctly, and that             Status: Recommendation valid/action
returns most likely to contain a gross            enjoined parties comply with the terms       not intended. IRS is relying on its fine
overevaluation of an asset or false or            of the injunctions, the Commissioner of      management quality assurance system
fraudulent statements.                            Internal Revenue should: (1) develop         to have group managers review all
Status: I&ommendation       valid/action          clear and complete guidance for districts    closed examination cases to, among
not inter$ied. From additional work, IRS          so that they know when and how shelter       other things, verify the accuracy of
has restructured its program by                   penalties are to be computed; and (2)        penalty calculations. Therefore, no
expandi g its identification teams to             follow up with districts after issuance to   further guidelines will be issued for the
cover all compliance issues resulting             verify that the guidance is understood       low volume of identified abusive tax
         1                                        and correctly applied.                       shelter cases.
from thelact. Unless the type or volume
of abusive tax shelters that surface after        Status: Recommendation valid/action
                                                                                               Recommendation: To ensure that
act implementation reverses the decline,          not intended. From additional work, IRS
                                                                                               penalties are assessed when appropriate
IRS will hot implement the                        has restructured its program by
                                                                                               and computed correctly, and that
recomm d ndation.                                 expanding its identification teams to
                                                                                               enjoined parties comply with the terms
                                                  cover all compliance issues resulting        of the injunctions, the Commissioner of
Recom ’ ndation: To improve the                   from the act. Unless the type or volume      Internal Revenue should develop an
efficient and effectiveness of the                of abusive tax shelters that surface after   effective program for monitoring
         %
abusive vhelter identification programs,          act implementation reverses the decline,     enjoined parties’ compliance with
the Corn issioner of Internal Revenue             IRS will not implement the                   decrees and continue exploring
should nr,aximize the use of computers to         recommendation.                              opportunities to computerize monitoring
identify snd thus reduce cases for                                                             when developing service center return
detection team review.                            Recommendation: To ensure that               identification criteria.
Status: Recommendation valid/action               penalties are assessed when appropriate      Status: Recommendation valid/action
not intended. From additional work, IRS           and computed correctly, and that             not intended. IRS is relying on its fine
has restructured its program by                   enjoined parties comply with the terms       management quality assurance system
expanding its identification teams to             of the injunctions, the Commissioner of      to have group managers review all
cover all compliance issues resulting             Internal Revenue should develop and          closed examination cases to, among
from the act. Unless the type or volume           implement district internal control          other things, verify the accuracy of
of abusive tax shelters that surface after        procedures that require supervisory          penalty calculations. Therefore, no
act implementation reverses the decline,          review of all penalties and a quality        further guidelines will be issued for the
IRS will not implement the                        assurance review of selected penalties to    low volume of identified abusive tax
recommendation.                                   ensure that appropriate penalties have       shelter cases.


Tax Administration

System Integrity: IRS Can Reduce Processing Errors With
Better Controls and Information
IMTEC-88-25,
__--..._ .- . . .
                  08/02/88
                      .---...-            ~___-           .-___             -
-    _
Background                                        issuing refunds and notices; and (2)         Findings
GAO assessed the Internal Revenue                 efforts to identify the causes of
                                                                                               GAO found that: (1) automated controls
Service’s (IRS): (1) controls for correcting      proc8ss1ng errors’                           detected errors in 327 of the 389 IRS
errors in processing tax returns and                                                           adjustment cases GAO reviewed, with



                                                  Page 167                                                                   GAO/OP-90-1
                                              General Government




taxiPayers causing 57 percent of errors,      center managers did not believe that the        errors identified in these reviews is
IRsi coding and editing causing 29            reports addressed certain management            provided promptly to the processing
per ent, and IRS data conversion              needs.                                          units responsible for missing or creating
cau ing 36 percent; (2) in at least 281                                                       the errors, and to national office
casJ a, error resolution examiners did not    Open Recommendations                 to         managers, so that both parties can take
proberly correct the errors or follow IRS                                                     timely corrective action and thus help
instructions to compare master file
                                              Agencies                                        prevent future errors.
sy&m data with return data; (3) data          Recommendation: The Commissioner of             Status: Action in process. Estimated
tra&cribers should have corrected 49 of       Internal Revenue should require service         completion date: 10/90. Implementation
the $ases that examiners overlooked           center directors to implement a program         has been delayed. Current plans are to
befcjre sending them to the next              to review tax returns corrected by the          implement a review during FY 1991.
pro#essing phase; (4) IRS stopped and         Error Resolution Units before sending
cortected incorrect refunds and tax-due       them to the master files, as is being done      Recommendation: The Commissioner of
not’ces in 306 cases, causing a 3- to ll-     by the Fresno and Kansas City Service           Internal Revenue should direct his staff
we 1 k delay in sending them out; (5) IRS     Centers. Service center directors should
                                                                                              to review the completeness, timeliness,
sen’ incorrect refunds and tax-due            have flexibility to adjust the percentage
                                                                                              and accuracy of management
not ces in 86 cases, resulting in             of returns reviewed to their units’
                                                                                              information produced by IRS quality
tax ayers receiving $7 to $5,000 more in      performance.
                                                                                              monitoring and modify those reports
ref nds than IRS owed them and others         Status: Action in process. Estimated
   i                                          completion date: 10/90. Implementation          that do not meet management needs.
receiving   notices requiring them to pay
$1 to $8,100 more than they owed; (6) the     has been delayed. Current plans are to          Status: Action in process. Estimated
cost to correct these errors after initial    implement a review during fiscal year           completion date: 01/90. Most planned
pr4cessing was about $4.00 per case, but      (FYI 1991.                                      agency actions were completed as of May
onlv $0.30 during the error resolution                                                        1989. The Internal Revenue Manual will
atape; (7) some IRS quality monitoring        Recommendation: The Commissioner of             be revised for the January 1, 1990
act$vities’ management reports were           Internal Revenue should ensure that             publication.
inaccurate and untimely; and (8) service      feedback on the nature and source of


Tax Administration
Tax Administration: Difficulties                                     in Accurately                  Estimating
Tax Examination Yield
GGD-88-119,
._.-.... ...-..-.   08/08/88
               -- ~~...
                      --~ -
Background                                    Findings                                        specific number of auditors in 1987, since
                                                                                              it did not use all of the staff years
In response to a congressional request,       GAO found that: (1) since 1978, IRS has
                                                                                              Congress authorized; and (4) IRS used
GAO examined the Internal Revenue             consistently underestimated the amount
                                                                                              data from audits it closed in 1972 instead
Service’s (IRS): (1) computation of the       of additional taxes that its examination
revenue it actually realized as a result of                                                   of current information in developing its
                                              staff would recommend each year; (2) the
ita implementation of a revenue                                                               estimates. GAO also found that: (1) to
                                              annual underestimate averaged 28
                                                                                              support its request for additional staff
initiative, which added 2,500 to the          percent over the period and ranged from
                                                                                              years, IRS expected to audit 120,000
examination staff; and (2) assumptions        about $100 million in 1978 to about $3.8
                                                                                              more returns and assess $829 million in
in estimating the $eld derived from the       billion in 1986; (3) it was difficult for IRS
                                                                                              additional taxes, penalties, and interest;
increased staff.                              to estimate the exact amount of revenue
                                                                                              (2) IRS calculated that it would generate
                                              that it would generate by adding a
                                                                                              $847.5 million in assessed taxes,



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                                                General Government




                                            -
penalties, and interest in 1987 as a            on the actual amount of revenues            average yield assumptions, and writing
result of,the additional audit staff; (3)       derived from its audits.                    procedures to demonstrate the quality
IRS based its calculation on an increase        Status: Action not yet initiated.           controls used in the process.
in staff that was more than double what                                                     Status: Action in process. Estimated
actually bccurred; and (4) IRS did not          Open Recommendations                to      completion date: 03/90. A group in IRS
take into account the amount of                                                             has drafted a report which apparently
potential revenue lost because it used
                                                Agencies
                                                                                            identifies problems with the IRS
experienced staff to train the new staff.       Recommendation: The Commissioner of         estimating process and describes
                                                Internal Revenue should complete a          corrective actions. The report has not
Open Recommendations               to           systematic reexamination and validation     yet been approved within IRS. Once it is,
                                                of the IRS estimating process. This
Congress                                        should include an analysis of the use of
                                                                                            and GAO has had a chance to analyze it,
                                                                                            it will have a better idea as to the IRS
Recom&ndation:       Congress should            historical trends, updating of the audit
                                                                                            overall action plan.
consider: requiring IRS to include in its       tracking data used to compute
annual budget submission information            assessment rates, validation of the


Tax Administration

Taxi Administration: Availability and Completeness of
Rethrns for Tax-Exempt Organizations
GGD-88-128,09/30/88
 Background                                     name that the organization used to          Open Recommendations              to
 In response to a congressional request,
                                                obtain its tax-exempt status; (2) IRS       Agencies
 GAO reviewed Internal Revenue Service          would provide about 95 percent of the
                                                                                            Recommendation: The Commissioner of
 (IRS1 procedures to determine whether:         requested returns, with the remaining
                                                                                            Internal Revenue should expand the
 (1) IRS could locate and provide               returns in use internally; (3) 48 percent   criteria for the Incomplete Returns
 requested Form 990 annual information          of Form 990 returns were missing one or     Program to ensure that missing Form
 returns, which tax-exempt organizations        more of the required supporting             990 return supporting schedules are
 filed; and (2) the Form 990 returns were       schedules, and 95 percent were              obtained from tax-exempt organizations.
 complete.                                      incomplete, according to IRS criteria;      Status: Action in process. Estimated
                                                and (4) although supporting schedules       completion date: 03/90. New Forms 990-
                                                provided detailed information               EZ and reviews of other forms and
 Findings                                       concerning such activities as fund-         supporting schedules are being compiled.
 GAO analyzed 450 sample Form 990               raising and payments to affiliates, IRS     Management is considering the need for
 returns and estimated that: (1) IRS could      did not include them in its Incomplete      schedules or whether to standardize
 locate about 99 percent of requested           Returns Program criteria.                    those that are required. This evaluation
 returns if the requester provided the                                                       is to be completed by 1990.




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Tak Administration

T&x Administration:                          Improving             IRS’ Business Nonfiler
Ptogram
GCiD-89-39,
  / .._..._  03/08/89
      - _._-_--- -
Background                                   have little or no tax liability; (3) 21 of    investigations and explore similar
                                             100 businesses had 31 delinquent federal      opportunities for using other states’ tax
GAG reviewed the Internal Revenue
Service’s (IRS) efforts to detect business   employment tax returns because they           information in the business nonfiler
tax: nonfilers, focusing on whether: (1)     paid wages during periods for which           program.
state employment tax information data        they reported paying no wages; (4) IRS        Status: Action in process. Estimated
could aid IRS in investigating business      mailed publications to nonfilers with         completion date: 12/89. IRS is examining
nonfilers; and (2) IRS continued to send     invalid addresses because a computer          how to obtain California employment
busbness tax forms to known invalid          code that automatically generated             tax data on a regular and, if possible,
addresses.                                   mailing lists was still on the master file;   automated basis to assist in business
                                             and (5) it was unable to estimate the cost    nonfiler investigations.
                                             of the erroneous mailing because IRS did
Fibdings                                     not track the numbers of publications         Recommendation: The Assistant
GAO analyzed 201 selected businesses in      forwarded to invalid addresses.               Commissioner for Collections should
California that IRS identified as                                                          direct appropriate collection staff to
potential nonfilers, and found that: (1)      Open Recommendations                  to     work with computer services staff to
IR$ could use California state                                                             correct the computer coding problem so
employment tax information to verify
                                              Agencies                                     that Publication 393 is not mailed to
businesses’ statements about their            Recommendation: The Assistant                invalid addresses.
employment tax liability and to estimate      Commissioner for Collections should          Status: Action in process. Estimated
their federal employment tax liability;       direct IRS collection staffs in the          completion date: 12/89. IRS plans to
(2) the state’s employment tax                California district offices to use           determine what specific changes are
information could help IRS to quickly         California state employment tax              needed to correct the problem of mailing
close investigations of nonfilers that        information in business nonfiler             Publication 393 to invalid addresses.


Tax Administration

Tax Administration: Reducing Delays in the Pursuit of Tax
Revenue on Closed Criminal Cases
GGD-89-41,03/16/89
Background                                    collected; and (2) IRS process for           Findings
In response to a congressional request,       referring completed cases for civil
                                                                                           GAO reviewed selected GEP cases
GAO evaluated the Internal Revenue            action.
                                                                                           completed in fiscal year 1984, and found
Service’s (IRS) Gengral Enforcement                                                        that IRS: (11 assessed about $204 million
Program (GEP), focusing on the: (1)                                                        in penalties on 2,470 criminal cases, and
amount of civil tax assessed and                                                           was still auditing another 408 cases; (2)




                                              Page 170                                                                   GAO/OP-90-l
                                             General Government




collect@ $89 million, was actively           Open Recommendations                to        delays in the issuance of closing
attempt ng to collect an additional $58      Agencies                                      memoranda to authorize civil action on
million, 9and determined that $67 million                                                  criminal prosecution cases.
was uncollectible; (3) failed to timely      Recommendation: To better protect the         Status: Action in process. Estimated
refer cases with the potential for           collection of tax revenues on completed       completion date: 08/90. IRS is revising
criminal prosecution; (4) failed to timely   criminal prosecution cases, the               the Criminal Investigation Division’s
authorize tax assessment or collection       Commissioner of Internal Revenue              Case Management and Time Reporting
when criminal actions were completed,        should establish appropriate internal         System to track the status of cases
and failed to timely notify the IRS Chief    control mechanisms in the Criminal            subsequent to closure of the criminal
Counsellso that it could initiate civil      Investigation Division to better ensure       case. The system will be piloted in
actions; land (6) lacked internal controls   prompt notification to the Office of the      January 1990, with implementation by
to track, cases that could be referred for   Chief Counsel about actions taken on
                                                                                           August 1990.
civil action.                                criminal prosecution cases and about


Tax Administration

Tax: Policy: Status of IRS’ Studies of the Refund Offset
Program
GGD-@9-60,04/25/89
Background                                   matched its offset and control groups on      delinquent behavior. IRS plans to
                                             some tax characteristics, there was a         incorporate characteristics such as age
Pursuant to a legislative requirement,
                                             risk of bias in its findings because it did   and geographic location in follow-on
GAO studied the effects of the Internal
Revenue Service’s (IRS) Refund Offset        not account for all relevant preexisting      studies. Date action will be completed is
Program on voluntary tax compliance,         differences; and (6) IRS did not use          not known at this time.
focusing on: (1) IRS improvements to its     updated information to measure the
methodology; and (2) ways to make            level of IRS enforcement action required      Recommendation: To improve future
future studies more precise.                 to make taxpayers compliant and to            studies of the effect of the Refund Offset
                                             assess whether noncompliance was              Program on compliance with tax laws,
                                             temporary or permanent.                       the Acting Commissioner of Internal
Findings                                                                                   Revenue should incorporate the most
GAO found that: (1) IRS improved its         Open Recommendations                to        current taxpayer information. This will
studies of the effects of offsetting                                                       result in a better understanding of the
                                             Agencies                                      magnitude of any noncompliance
refunds on taxpayer compliance by
incorporating previous filing behavior       Recommendation: To improve future             problem, enable IRS to measure the
into its analysie to establish patterns to   IRS studies of the effect of the Refund       level of enforcement actions required to
compare with post-offset filing patterns;    Offset Program on compliance with tax         make taxpayers compliant, and provide
(2) the IRS methodology was limited          laws, the Acting Commissioner of              a better basis to analyze the temporary
because it did not consider whether the      Internal Revenue should make the offset       versus permanent nature of compliance.
offset and control groups exhibited          and control groups as comparable as           Status: Recommendation valid/action
similar taxpayer compliance                  possible. The studies should statistically    not intended. IRS disagrees with the
characteristics before the offsets; (3)      control for prior tax-delinquent behavior     recommendation and plans no action.
although IRS improved”the quality of its     and nontax characteristics, such as age       IRS does not see the need to use updated
study data and its documentation of          and geographic location.                      taxpayer information because it believes
study programming requirements, some         Status: Action in process. The IRS April       its definition of noncompliance is
limitations remained; (4) although IRS       1989 report was controlled for prior tax-      consistent.



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                                            General Government




Tak Administration
Tix Administration: State and Local Compliance With IRS’
Idformation Reporting Requirements
GdD-89-63, 05/04/89
Baikground                                  contracted with the National Association     offices for state and local government
In response to a congressional request,     of State Auditors, Comptrollers and          officials to get help.
GAO reviewed state and local                Treasurers (NASACT) in 1988 to review
govc/rnments’ compliance with Internal      information return procedures and            Recommendation: The Commissioner of
Revenue Service (IRS) reporting             compliance levels in six states; (6) the     Internal Revenue should encourage state
requirements for payments made to           review showed that states’ accounting        and local audit agencies to routinely
independent contractors.                    systems that were not tailored to            check the agencies they audit for
                                            information reporting hampered               information returns compliance.
                                            compliance; (7) IRS reviewed local           Status: Action in process. Estimated
Fihdings                                    governments in California as part of a       completion date: 12/89. IRS plans to
GAG found that: (1) most state and local    special project; and (8) IRS planned to      issue a revised state agency review plan
governments’ policies and procedures        provide all 50 states with a consolidated    that will recommend regular, ongoing
were not in full compliance with IRS        report on the NASACT reviews, along          compliance check requirements in state
requirements because they did not fully     with a model review plan, and encourage      audit procedures.
undlerstand the requirements; (2)           them to do compliance reviews.
although the governments usually                                                         Recommendation: The Commissioner of
reported payments for such professional     Open Recommendations               to        Internal Revenue should use the
ser$ces as attorneys and consultants,                                                    NASACT study of six states and the IRS
thef did not report payments for such
                                            Agencies                                     reviews of California local governments
services as construction, auto repairs,     Recommendation: The Commissioner of          to aid in the development of an IRS
and janitorial services because they did    Internal Revenue should establish an         program for monitoring and enforcing
not consider those services professional;   IRS focal point to provide assistance to     state and local governments’ information
(3) state and local governments only        those state and local government             returns compliance.
reported about 10 percent of the $9         officials needing further clarification or   Statue: Action in process. Estimated
million in payments that they should        elaboration on their reporting               completion date: 12/92. IRS plans to visit
have during 1985 and 1986; (4) IRS          requirements.                                and coordinate with state officers
examined businesses’ income tax             Status: Action in process. Estimated         responsible for information return
returns, but did not monitor state and      completion date: 12/89. IRS examination      compliance and to selectively examine
local governments’ compliance with the      officials have initiated a plan to           certain states to assess and improve
reporting requirements; (5) IRS             establish a focal point in IRS district      compliance.




                                            Page 172                                                                   GAO/OPdO-1
                                             General Government




         ,
Tax A4ministration
ADFjM o d ernization: IRS Needs to Assess Design
Altebnatives for Its Electronic Filing System
IMTE&89-33,
 .__-_ .._..           05/05/89
          I...__...-__-_-_.
Backgbound                                   major system component did not work as       Open Recommendations                to
Pursuan to a congressional request,
                                             intended; (5) replaced the defective         Agencies
GAO re ,”iewed the Internal Revenue          software prior to the 1989 tax season,
                                                                                          Recommendation: The Commissioner of
Service’s (IRS) development of an            but continued to experience similar          Internal Revenue should validate the
electronh filing system, intended to         problems; and (6) expected installation of   design approach for the nationwide
streamline the tax processing system by      new software in time for the 1990 tax        electronic filing system before selecting
using computers instead of the               season and proposed to enhance the           and funding a system.’At a minimum,
traditional paper forms for filing           interim system, rather than replace it.      IRS should: (1) clearly define system
individual tax returns.                      GAO also found that IRS: (1) in the task     requirements for nationwide
          /                                  order, failed to clearly define critical     implementation, including determining
                                             performance requirements or allow            how it will minimize the burgeoning,
Findijgs                                     adequate time for approving                  paper-intensive nature of the current
GAO found that IRS: (1) issued a task        deliverables; (2) paid the contractor for    system and accommodate the processing
order @its automatic data processing         the defective software; (3) took 4 months    of tax-due returns; and (2) identify and
(ADP) contractor to develop software for     to reject the software but eventually        analyze the costs and benefits of various
the electronic filing system; (2)            paid the contractor for its installation;    alternatives for meeting the
implementad an interim system in             and (4) has not yet clearly identified its   requirements for a nationwide system.
several districts for the 1988 tax season,   needs or evaluated the costs, benefits,      Status: Action in process. Estimated
processing about 583,000 returns             and technical feasibility of alternative     completion date: 01/91. Electronic filing
electronically; (3) believed that it         approaches.                                  will be operational nationwide by the
processed the electronically filed returns                                                1990 filing season, and system
faster and with fewer errors than paper                                                   requirements have been clearly defined.
returns; (4) was able to process the                                                      The acceptance of balance-due returns is
returns, although the software for a                                                      projected for the 1991 filing season.


Tax Administration

ADP Modernization: IRS’ Automated Examination
System-Troubled   Past, Uncertain Future
IMTEC-89-54,06/22/89
Background                                   examination of income tax returns,           streamline tax processing through
                                             focusing on: (1) IRS progress in             increased automation.
Pursuant to a congressional request,
GAO reviewed the Inter’nal Revenue           developing and implementing AES; and
                                             (2) AES compatibility with the IRS Tax
Service’s (IRS) Automated Examination
System (AES), intended to automate the       System Modernization effort, intended to




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                                               General   Government




Fihdings                                       its plans to eventually integrate AES        should be compared with actual benefits
                                               into the system may require costly           achieved as components of the system
GAO found that IRS: (1) projected a total      system modifications; (9) concurred with     are deployed, and the Commissioner
cost of $77 million for AES development        the Office of Management and Budget’s        should make this comparison available
an4 implementation when it established         reduction of its 1990 AES budget request     to Congress as part of the agency’s
thelproject in 1982; (2) significantly         from $110 million for continued              annual budget submission.
exp nded the project in 1984 and 1986,         development and operations and               Status: Action in process. IRS plans to
pro 1ecting completion by 1989 at a total      maintenance to $19.6 million for             hire a contractor to establish a method
cost of $1 billion; (3) spent about $187       operations and maintenance only; and         of evaluating productivity and tracking
million on AES from its inception              (10) believes that AES should not be         actual usage and impact.
through fiscal year (FY) 1988; (41 due to      abolished and plans to restructure the
management and direction problems,             project and seek increased funding in        Recommendation: In view of the
currently estimates project completion         the FY 1991 budget,                          unresolved questions concerning AES
by I996 at a total cost of $1.8 billion; (5)                                                integration with Tax System
currently projects AES benefits at $16.2       Open Recommendations              to         Modernization, the Commissioner of
billion over its g-year life, down from a                                                   Internal Revenue should develop a
contractor estimate of $42.7 billion in        Agencies                                     strategy to enable AES to function
1987; (6) has not convincingly                 Recommendation: In light of AES              effectively with other components of the
demonstrated or verified any dollar            troubled past, before additional             modernized system. In particular, IRS
benefits from the single currently             investments are made in this project, the    should determine how AES standards for
operational AES component; (7) cited           Commissioner of Internal Revenue             data structures can be made consistent
software development problems as the           should establish a sound and consistent      with the standards of other systems
primary cause of AES cost overruns and         methodology for estimating its benefits.     within the modernization effort.
schedule slippages; (8) developed AES          To validate this methodology and             Status: Action in process. ISD plans to
inclependently from its Tax                    measure the success of further               develop such a strategy during fiscal
Modernization System effort, although          development efforts, estimated benefits      year (FYI 1990.


Tax Administration

Tax Policy: Insufficient Information                                         to Assess Effect of Tax
Free Education Assistance
GGD-89-76,06/23/89
Background
     -                                         should not be extended; (2) in reaching      required information was not sufficiently
                                               its conclusion, Treasury relied on           specific; and (4) the 11 data elements
Pursuant to a congressional request,
                                               information that, although the best          would be useful in assessing the section,
GAO: (11 evaluated data that the
                                               available, was insufficient to support its   but none of them were available from
Department of the Treasury used to
                                               conclusion, since the data came from         reliable sources.
assees the effect of section 127 of the
                                               surveys that were not specifically
Internal Revenue Code; and (2) assessed
                                               focused on gathering data to evaluate        Open Recommendations               to
the availability and reliability of 11 data
                                               the success of section 127, had low
elements relating to section 127.
                                               response rates, or were not
                                                                                            Congress
                                               representative of the population being       Recommendation: Congress can decide
Findings            y                          surveyed; (3) in 1984, Congress enacted a    to not reinstate the expired section 127
GAO found that: (1) in June 1988,              reporting requirement to provide a basis     or to reinstate it permanently or
Treasury concluded that section 127            for assessing the section, but the           temporarily. If the decision is to




                                                Page 174                                                                  GAO/OP40-1
---
                                                 General Government




reinstate it, Congress may want to revise        average benefit at each salary level. To     length of time to adequately measure
the reporting requirement to better              help make any further assessment of the      any effects.
assess the provision’s effects. This could       section, Congress could also specify that    Status: Action taken not fully
be done by requiring information on the          the data be reported for a sufficient        responsive.
salary 1i vel of participants and the


Tax Abministration
Tax) Administration: IRS Can Improve the Process for
Col+cting loo-Percent Penalties
GGD-$9-94,
    i     08/21/89                           -
Backiround                                       incorrect amount of money to satisfy the     Recommendation: To help ensure that
                                                 delinquencies, due to inadequate             IRS uses its collection resources as
Pursual)t to a congressional request,
                                                 accounting and internal controls; (71        efficiently as possible, the Commissioner
GAO rebiewed the Internal Revenue
                                                 lacked adequate documentation to             of Internal Revenue should establish
Service) (IRS) collection of loo-percent
                                                 determine whether it had under- or over-     appropriate controls to ensure that levy
penalties, assessed as 100 percent of the
                                                 collected some of the penalties; and (81     sources obtained during the loo-percent
amount: of withheld taxes which
                                                 was in the initial stage of developing       penalty investigations are documented
businesses failed to pay.
                                                 procedures to monitor accounts               in the IRS computerized levy source file
                                                 receivable for loo-percent penalty cases.    so that they are readily available during
Findings                                                                                      the collection phase.
GAO found that IRS: (11 sent loo-percent                                                      Status: Action not yet initiated.
                                                 Open Recommendations              to
penalty cases directly to revenue agents
for collection, bypassing its Automated
                                                 Agencies                                     Recommendation: To help ensure that
Collection System (ACS), which provided          Recommendation: To ensure that IRS           IRS uses its collection resources as
more efficient case management and               uses collection resources more               efficiently as possible, the Commissioner
more timely and effective collection of          efficiently, the Commissioner of Internal    of Internal Revenue should develop a
other delinquent taxes and penalties; (2)        Revenue should establish a milestone for     procedure to ensure that financial
in March 1989, successfully tested ACS           completing as quickly as possible service-   statements obtained during the
for processing loo-percent penalty cases         wide implementation of procedures for        investigations are available on the ACS
in two districts, Wnding that the                processing loo-percent penalty cases         computerized data base to facilitate
improved computerized recordkeeping,                                                          processing of loo-percent penalties
                                                 through ACS.
telephone technology, and management                                                          through ACS.
                                                 Status: Action not yet initiated.
control’ made for more efficient use of                                                       Status: Action not yet initiated.
resources and revenue agents; (3) spent          Recommendation: To help ensure that
an average of $247 to close, via revenue                                                      Recommendation: To improve
                                                 IRS uses collection resources as
agents, loo-percent penalty cases, while                                                      accounting and internal controls, the
                                                 efficiently as possible, the Commissioner
it spent only $57 on cases processed                                                          Commissioner of Internal Revenue
                                                 of Internal Revenue should revise the
through ACS; (4) did not maintain                                                             should establish milestones for: (1)
                                                 Internal Revenue Manual to conform to
financial information investigating                                                           completing the development of
                                                 the stated practice of obtaining financial   procedures to systematically provide
agents obtained from businesses for
                                                 information when responsible parties are     collection employees with the
collection agents’ subsequent use for
levying purposes; (5) did not enter such         identified during initial investigations     information needed to accurately
information into ACS; (61 in about 9             and it is appropriate to do so.              determine the status of delinquencies;
percent of 793 cases, collected an               Status: Action not yet initiated.            and (2) developing a way to more



                                                 Page 175                                                                   GAO/OP-90-l
                                                 General Government




I .__._...
      ,..-_--^.-
accurately report the accounts receivable        balance as it relates to lo&percent           Status: Action not yet initiated.
                                                 penalties.


Tak Administration

Tax Policy: Options for Civil Penalty Reform
GGD-89-81,09/06/89                           -
Background                                       compliance because of complex program         abatement/waiver criterion, except for
                                                 regulations.                                  fraud; and (4) statutorily defining
Pursuant to a congressional request,
                                                                                               substantial authority.
GAQ analyzed changes to the civil
                                                 Open Recommendations                  to      Status: Action not yet initiated.
penalty provisions of the Internal
Revenue Code proposed in a                       Congress                                      Recommendation: Congress should
con rkressional bill and an Internal
                                                 Recommendation: To support the                increase the monetary value of return
Revenue Service (IRS) report, focusing                                                         preparer penalties to improve their
                                                 statutory requirement that all taxpayers
on whether the economic value of the                                                           economic deterrent value and use a two-
                                                 timely file a tax return, Congress should
penalty, its potential coverage, and its         establish a time-sensitive failure-to-file    tier penalty, with the first tier consisting
assessment criteria could effectively            penalty that would be assessed against        of negligence and the second tier
mo$vate taxpayer compliance and deter            all delinquent taxpayers regardless of        consisting of willful understatement or
noncompliance.                                   whether or not they had a tax liability,      intentional disregard.
                                                 unless the failure is due to reasonable       Status: Action not yet initiated.
Fihdings                                         cause.
                                                 Status: Action not yet initiated.             Recommendation: Congress should not
GAO found that: (1) both the legislation                                                       establish a statute of limitations, as in
and IRS report recommended changes to                                                          the case of fraud.
                                                 Recommendation: Congress should
restructure and better rationalize the           retain an underreporting penalty similar      Status: Action not yet initiated.
existing penalty system; (2) the existing        to the existing presumptive negligence
penalty system was not time-sensitive,           penalty, but that would be subject to
since it penalized late filers by the same                                                     Open Recommendations                 to
                                                 abatement for reasonable cause. With
amount regardless of when they                   regard to penalty rates, Congress should
                                                                                               Agencies
sublmitted their returns; (3) although           consider setting higher rates than the        Recommendation: To simplify
both the legislation and IRS report              House bill or reducing the threshold of       administration, IRS should treat all
probsed a new compliance incentive to            understated tax liability that would          types of information returns
encourage more prompt information                trigger the substantial understatement        consistently. Within that context, all
return filing, eliminating the penalty for       penalty to at least partly restore the        caps should be eliminated, there should
underreporting taxable income on                 economic value of the penalties.              be a single abatement criterion,
information returns could weaken the             Status: Action not yet initiated.             magnetic media filing thresholds should
compliance effort; (4) although both                                                           be set administratively, and only returns
proposals made penalty provisions more           Recommendation: To bolster taxpayer           exceeding thresholds should be
consistent and better coordinated                confidence in the fairness and equity of      penalized.
penalties to avoid overly harsh                  these penalties, Congress should add the      Status: Action not yet initiated.
assessments against taxpayers, they              following changes: (1) eliminating
needed to provide for more equitable             stacking of the accuracy/conduct              Recommendation: Making information
treatment of simila;ly situated                  penalties; (2) targeting the application of   return penalties time-sensitive is a good
taxpayers; and (5) the federal tax deposit       the negligence penalty; (3) establishing      idea; however, IRS should
 penalty may not effectively promote             reasonable cause as the                       administratively set the penalty dates.



                                                 Page 176                                                                     GAO/OP-90-I
                                            General Government




Further,: to promote voluntary correction   assessed against payors who voluntarily      Status: Action not yet initiated.
of returns, penalties should not be         correct their returns.


Tax Administration
Tax ~Administration: Missing Independent Contractors’
Information Returns Not Always Detected
GGD-$9-110,09/08/89-_
Backdround                                  requirements; (5) IRS did not stress the     quality reviewers stress the importance
Pursuant to a congressional request,        importance of these checks because such      of doing compliance checks, enforce
GAO rekiewed whether Internal               other issues as overstated deductions        workpaper standards, and assess the
Revenue Service (IRS) examinations          and unreported income took higher            effectiveness of the checks.
effectively identified businesses that      priority during examinations; (6) because    Status: Action not yet initiated.
failed t(i Ale information returns for      IRS managers did not enforce workpaper
paymen s made to independent                standards that required agents to            Recommendation: To improve IRS
contrac 1 r-8.                              document the scope and depth of the          compliance checks of information return
                                            checks, they did not know the extent of      reporting requirements, the
                                            the revenue agent’s checks; (7) current      Commissioner of Internal Revenue
Findings                                    IRS compliance check procedures were         should establish minimum requirements
GAO found that: (1) IRS examinations of     specific; (8) agents did not use available   for revenue agents to follow in doing
business tax returns did not effectively    data to do better compliance checks; and     compliance checks.
identify businesses that failed to file     (9) data were not always generated in
                                                                                         Status: Action not yet initiated.
required information returns on             time to assist revenue agents because of
contractor payments; (2) revenue agents     competing priorities for computer
                                            processing time.                             Recommendation: To improve IRS
did not identify an estimated 1,261
                                                                                         compliance checks of information return
information returns that businesses
                                                                                         reporting requirements, the
should have filed, involving $6.2 million   Open Recommendations              to         Commissioner of Internal Revenue
in payments; (31 IRS revenue agents
examined only about 2 percent of the 11
                                            Agencies                                     should require that the payor master file
million business income tax returns tiled   Recommendation: To improve IRS               data summarizing businesses’
annually; (41 the limited examinations      compliance checks of information return      information return filings be made
and ineffective compliance checks could     reporting requirements, the                  available to, and be used by, revenue
result in extensive business                Commissioner of Internal Revenue             agents when doing compliance checks.
noncompliance with information return       should require that field managers and       Status: Action not yet initiated.




                                            Page 177                                                                   GAO/OP40-1
G;eneral Science, Space, and Technology


--.


Sdtellite Data Archiving:                          U.S. and Foreign Activities                                and
Plans for Environmental                            Information
R&D-88-201,09/29/88
Ba+kground                                  future increase in satellite data and, to    environmental    satellites between 1988
                                            varying degrees, have begun planning         and 1997.
Pursuant to a congressional request,
GAG reviewed U.S. and international         for the expected increase; (31 NOAA is
enviironmental satellite data archiving     examining the possibility of private         Open Recommendations                 to
activities and plans.                       firms taking over its archiving functions;   Congress
                                            (4) NASA is planning on significant
                                            technological advances and interagency       Recommendation: Considering that the
Firidings                                   cooperation to archive the data; and (51     Department of Commerce has not
                                            possible future reductions in archiving      requested or provided funds for creating
GAG found that: (11 the National                                                         the National Satellite Land Remote
OceQnic and Atmospheric                     funding could reduce USGS archiving
                                                                                         Sensing Data Archive and that officials
Administration (NOAA), the National         activities. GAO also found that: (1) since
                                                                                         told GAO that they do not anticipate
Aeronautics and Space Administration        1977, Japan, France, India, and a group
                                                                                         doing so in the future, Congress, if it still
(NASA), and the U.S. Geological Survey      of 13 European countries have launched       wants the archive to be created, may
(USGS) are primarily responsible for        at least 9 environmental satellites; and     wish to provide specific funding for the
archiving environmental satellite data;     (2) several countries have plans to          archive.
(21 the agencies expect a significant       launch at least 30 additional                Status: Action in process.


General Science and Basic Research

Patent Policy: Recent Changes in Federal Law Considered
Beneficial
RCED-87-44,04/16/87
Background                                  to inventions that nonprofit                 government-owned, contractor-operated
Pursuant to a congressional request,        organizations and small businesses           facilities. GAO also found that: (1) the
GAO reviewed federal agency                 develop with federal funds; (2) extend       amendments have been significant in
implementation of three recent patent       title rights to federal contractors to       stimulating business sponsorship of
policy changes and their impact on          inventions they developed with federal       university research and the removal of
universities, small businesses, and other   funds; and (3) establish a Statutory         licensing restrictions on nonprofit
nonprofit organizations.                    Invention Registration (SIR) procedure       organizations; (2) the Small Business
                                            to reduce the federal patent inventory.      Innovation Research program and lower
                                            GAO found that implementation of these       maximum capital gains tax rates had an
Findings                                    amendments was delayed because the           equal or greater impact on small
GAO noted that federal agencies are in      Department of Commerce disagreed with        business research and innovation efforts;
the process of implementing legislative     the Department of Energy (DOE) over          and (3) DOE plans to issue a regulation
amendments that: (1) change title rights    proposed regulations affecting DOE           establishing criteria and procedures for



                                            Page 178                                                                     GAO/OP-90-1
                                                                                          I


                                             General Science, Space, and Technology




large business contractors to retain title   Addressee: Department of Defense            which incorporates SIR, has been
rights to some or all of their inventions.   Status: Action in process. Estimated        delayed.
                                             completion date: 03/90. The Navy            Addressee: Department of Energy
Open Pecommendations                to       incorporated SIR into its incentive         Status: Action in process. Estimated
                                             award program through Civilian              completion date: 03/90. DOE Order
Agencies                                     Personnel Instruction 451.9, dated          3460.1A on incentive awards was
Recomn)endation: The Secretaries of          August 11, 1988, and the Air Force          published for coordination. Comments on
Defense land Energy should encourage         incorporated SIR through Air Force          DOE draft Order 3450.1A on incentive
the use of SIR by recognizing SIR in         Regulation 900-4, dated July 23, 1987.      awards are being reviewed before the
their incentive awards programs.             Publication of Army Regulation 672-20,      final order is issued.


General Science and Basic Research

Labbratory Accreditation:                               Requirements Vary Throughout
the Federal Government
RCElS89-102,03/28/89
Background                                   testing, generally did not overlap,         to international trade and U.S.
Pursuant to a congressional request,         although there was some overlap             competitiveness; and (9) one
CA0 exbmined federal government              between the NIST National Voluntary         accreditation program had bilateral
programs’ laboratory accreditation           Laboratory Accreditation Program and        agreements with several countries to
requirements to determine whether any        the Federal Communications                  recognize each country’s accredited
had overlapping requirements which           Commission (FCC) Description of             laboratories.
could be streamlined.                        Measurement Facilities Program; (41
                                             programs differed in their accreditation    Open Recommendations             to
                                             application requirements, with 70
Findings                                     percent requiring both paperwork and
                                                                                         Agencies
GAO found that: (1) a National Institute     on-site reviews; (6) laboratory officials   Recommendation: The Director, Office
for Standards and Technology (NIST)          believed that some of the programs’         of Management and Budget (OMB),
study identified 13 federal agencies with    requirements were burdensome; (61 most      should examine federal accreditation
33 laboratory accreditation programs; (2)    programs did not separate accreditation     programs to determine whether user
accreditation typically involved             costs from other expenses, eince they       fees can and ehould be appropriately
evaluation of organizational information,    believed that accreditation was only a      charged.
quality control, personnel, facilities and   small part of the complete program; (7)     Status: Action in process, Estimated
equipment, testing methods,                  only two programs charged fees for          completion date: 12/89. OMB is
recordkeeping, test reports, and             participation in their programs; (8)        currently soliciting information from
proficiency testing, although programs       laboratory officials believed that          various agencies on the potential for
required differing degrees of specificity;   accreditation at the national level         charging user fees. OMB would like to
(3) the programs, which typically            provided greater credibility for their      incorporate any potential savings into
involved different fields of laboratory      services and was of growing importance      the fiscal year 1991 budget.




                                             Page 179                                                                GAO/OP-90-1
                                            General Science, Space, and Technology




Spgce Flight
Space Shuttle: Follow-up Evaluation                                        of NASA’s Solid
Racket Motor Procurement
NSIAD-89-89,05/23/89
.---.L-.--~---..----
Background                                  Air Force continue to identify hazards      Marshall Space Flight Center, to prepare
Pursuant to a congressional request,        and violations and have applied             an economic analysis as part of its
GAG reviewed the National Aeronautics       financial penalties a5 an incentive for     efforts during contract negotiations to
and:Space Administration’s (NASA): (1)      the contractor to resolve recurring         update requirements for redesigned solid
plans to establish and maintain             problems; (6) the Air Force has not         rocket motors.
competition in the future procurement       performed all needed independent safety     Status: Action in process. NASA has
of space shuttle solid rocket motors; and   inspections of shuttle motor                begun the economic analysis. The
(2) quality assurance and industrial        manufacturing facilities due to a lack of   expected completion date is uncertain as
safety programs at its contractor’s solid   personnel; and (‘7) in 1989, NASA plans     contract negotiations will not begin until
rocket motor manufacturing plant.           to contract with its current contractor     late 1989.
                                            for an additional 142 redesigned motors
                                            at an estimated cost of $2.3 billion, but   Recommendation: The Administrator,
Findings                                    may have overestimated the number of        NASA, and the Secretary of the Air
GAO found that: (1) NASA provided for       motors needed.                              Force should determine safety inspection
full and open competition in the initial                                                staffing requirements at the Thiokol
contract award and protected it5 option     Open Recommendations               to       plant.
to compete future contracts for advanced                                                Addressee: Department of the Air Force
motor production; (2) to maintain
                                            Congress                                    Status: Action in process. Estimated
competition, NASA will require either       Recommendation: Congress may wish           completion date: 12/89. The Contract
government ownership of the                 to obtain periodic status reports from      Management Division headquarters has
manufacturing plant or transfer of          NASA on its efforts to maintain             reviewed the staffing at the Thiokol Air
ownership to the government or another      competition in the program.                 Force Plant Representative Office
contractor; (3) government ownership of     Status: Action not yet initiated.           (AFPRO) and upgraded one position to a
the plant will facilitate, but not                                                      GS-13. AFPRO is currently interviewing
guarantee, future competition; (4) NASA     Open Recommendations               to       applicants for this position, which has
and its contractor have improved quality                                                been vacant since May 1988. AFPRO is
assurance; (5) the contractor has reduced   Agencies                                    to select one of the candidates and
industrial safety hazards at its motor      Recommendation: The Administrator,          report his selection to DOD/IG
 manufacturing plant, but NASA and the      NASA, should require the Director,          headquarters by mid-November 1989.




                                             Page 180                                                                 GAO/OP-90-l
                                             General Science, Space, and Technology




Space! Science, Applications,             and Technology

Spa e Operations: NASA Efforts to Develop and Deploy
Adv i riced Spacecraft Computers
IMTEb9-17,        03/31/89
Backgjround                                 integration, modification for the space     Open Recommendations               to
In respoLe to a congressional request,      environment was difficult, NASA used        Agencies
GAO provided information on: (1) the        older and less powerful systems, and
                                            launch delays further outdated the          Recommendation: The Administrator,
capabilities of existing National
                                            computers; (2) NASA was monitoring          NASA, should consider further
Aeronautics and Space Administration
                                            DOD research and development                strengthening the agency’s ongoing
(NASA) /spacecraft computers; (2) NASA
                                            programs to avoid duplication of effort     activities by establishing an independent
and Department of Defense (DOD)
                                            and help meet future space mission          expert panel to comprehensively
programs to develop advanced, general-
                                            needs; (3) NASA began funding its own       examine the process by which advanced
purpose; space-qualified computers; and
                                            research in advanced spacecraft             spacecraft computers are developed and
(3) the t$pe of primary onboard
                                            computer technologies to incorporate        deployed, and determine the further
computer system NASA planned to use
                                            DOD-developed equipment into NASA           steps that could be taken to shorten the
for the space station.
                                            spacecraft; and (4) although NASA was       process. At the discretion of the
                                            trying to incorporate newer technology      Administrator, members of the panel
Findings                                    in the space station, the time lag          could be gathered from appropriate
GAO found that: (1) most NASA onboard       problem would still exist, because the      federal agencies, the scientific
computers were outdated when the            station’s primary computer would be 10      community, and private industry.
spacecraft were launched because NASA       years old if the station were launched in   Status: Action in process. The expert
chose them early in the development         1995.                                       panel is in the process of preparing its
process to allow sufficient time for                                                    report to the Administrator, NASA.


Space Science, Applications,            and Technology

Space Operations: NASA’s Communications                                                  Support for
Earth Orbiting Spacecraft
IMTEC-89-41, 04/07/89
Background                                  Findings                                    TDRSS, and planned to phase out 4
Pursuant to a congressional request,        GAO found that NASA: (1) before             more, pending successful on-orbit
GAO reviewed the National Aeronautics       implementation of its space-based           testing; and (3) originally believed that
and Space Administration’s (NASA)           Tracking and Data Relay Satellite           three special substations and three
plans for providing emergency backup        System (TDRSS), primarily relied on its     remaining ground stations could provide
communications supper\ for earth-           worldwide network of ground stations to     adequate backup communications
orbiting spacecraft.                        provide communications support; (2)         support for spacecraft emergencies, but
                                            phased out 13 ground network stations       later requested Goddard Space Flight
                                            between 1980 and 1985 as it deployed        Center to review the four planned



                                            Page 181                                                                 GAO/OP-90-l
                                             General Science, Space, and Technology




closijngs, citing concerns about how the     malfunctions resulting in little or no      appropriate risk analyses are performed
closures could endanger future missions,     permanent damage to the spacecraft;         and documented for present and future
the ground stations’ other activities, and   and (4) NASA planned to construct a         earth-orbiting spacecraft missions before
transmission of scientific data. GAO also    replacement for its ground terminal         the four ground stations located at
found that: (1) Goddard did not perform      which was most critical to the              Guam, Hawaii, Santiago, and Ascension
a risk assessment, but affirmed its belief   operational reliability of earth orbiting   Island are closed; (2) plans for support
that the closings posed an extremely low     spacecraft, based on concerns about the     for launches of expendable vehicles are
risk; of spacecraft loss or damage; (2)      reliability of the original terminal.       finalized before the Ascension Island
Goddard maintained that TDRSS was                                                        station is closed; and (3) a plan is
intended solely for emergency backup         Open Recommendations               to       developed to provide support for Small
support for spacecraft safety and                                                        Explorer Missions in equatorial orbits.
functioning, and not for transmission of
                                             Agencies                                    Status: Action in process. NASA is in
sciejltific data; (3) spacecraft averaged    Recommendation: The Administrator,          the process of developing a plan to
2.2 malfunctions annually, with most         NASA, should ensure that: (1)               support small explorer missions.




                  Y




                                             Page 182                                                                 GAO/OP-90-l
 Health



Canker Treatment: National Cancer Institute’s                                                   Role in
En&waging the Use of Breakthroughs
PEMIh-89-4BR
..“._
   .__._             10/20/88
      ._._.I... _ -2 ..-..
                        -. ..-......
                               ----.-.-..----_-----______
Background                                  conflicting responses to requests for        efforts to promote the adoption of cancer
In response ta a congressional request,     advice on treatments; (3) NC1 efforts at     treatment advances may want to
GAO ex ‘mined the role that the             disseminating information on new             consider steps to specifically mandate
Nationa t Cancer Institute (NC11 plays in   treatments to physicians had limited         federal action. This could include
promoting physicians’ utilization of        success; and (4) many cancer patients did    directing NCI, or some other office
breakthroughs in cancer therapies.          not receive what NC1 considered state-of-    created for this purpose, to undertake
                                            the-art treatment because physicians         efforts to clearly identify and promote
                                            often did not adopt treatments even          the use of cancer therapies that have
Findi(gs                                    after they received information              been sufficiently proven to warrant
GAO found that: (1) problems existed at     concerning them.                             being classified as recommended
many points in the process that                                                          treatments.
breakthiough treatments take to reach       Open Recommendations               to        Status: Recommendation valid/action
cancer patients; (2) NC1 had difficulties                                                not intended.
in coordinating its position on
                                            Congress
recommended treatments, so that             Recommendation: Congressional
physicians sometimes received many or       committees that are concerned about




Breast Cancer: Patients’ Survival
PEMD-89-9, 02/28/89
Background                                  chemotherapy had demonstrated a              inadequate or inappropriate treatment
                                            significant increase in disease-free         could account for the lack of detectable
Pursuant to a congressional request,
GAO assessed the extent to which the        survival and a significant reduction in      improvement in survival rates.
use of adjuvant chemotherapy changed        mortality in premenopausal women with
the survival rates of premenopausal         breast cancer which had spread to the        Open Recommendations               to
                                            lymph nodes; (3) data from the National
women with breast cancer which had
                                            Cancer Institute’s Surveillance,
                                                                                         Agencies
spread to the lymph nodes.
                                            Epidemiology, and End Results program        Recommendation: The Secretary of
                                            indicated that there was no statistically    Health and Human Services should
Findings                                    significant increase in the 1375 through     initiate a study to determine why there
GAO found that: (1) in 1975, two studies    1985 survival rates of patients identified   has been no detectable improvement in
concluded that adjuvant chemotherapy        as most likely to benefit from adjuvant      the survival of premenopausal, node-
showed promise as an effective cancer       chemotherapy; and (4) lack of treatment,     positive breast cancer patients since the
treatment; (21 in 1985, medical experts     inadequate control conditions, difficulty    advent of chemotherapy in 1975. In light
reached a consensus that adjuvant           in detecting therapy benefits, and           of the potential methodological obstacles



                                            Page 183                                                                  GAO/OP-90-l
                                              Health




---
that! such a study faces, the Secretary       recommended research and the study             Status: Action not yet initiated.
should seek expert advice on the              design most likely to provide valid
feaslbility of conducting the                 conclusions.




Phblic Health: Centers for Disease Control Staffing for
AIDS and Other Programs
HIiD-89-65,        04/27/89
 ...I. .._..--- ...____
                     -.--.-               -
Bqckground                                    fiscal year 1988, of which about 251 were      Open Recommendations                to
In +esponse to a congressional request,
                                              diverted from other programs; (2) CDC          Agencies
                                              estimated that it actually used about 489
GAO provided information on the               staff years for AIDS activities in 1988; (31   Recommendation: The Director, CDC,
Cerjters for Disease Control’s (CM=) staff    between 1981 and 1988, CDC staff years         should devise a system to keep track of
reallocation to support acquired              for other programs decreased by about          employees’ actual time spent on each
immunodeficiency syndrome (AIDS)              1,250, while it increased its staffing for     program or activity.
activities, and the impact of reallocation    AIDS activities; (4) CDC did not track         Status: Action not yet initiated. CDC
on other CDC public health programs.          staff years by program activity, and           concurred with the thrust of this
                                              could not accurately verify the actual         recommendation, but it does not agree
Ftndings                                      time its staff spent on programs or            that agency managers need better
                                              activities; and (5) CDC believed that its      program data to allocate resources.
GAO found that: (1) CDC allocated about       staff reallocation did not impact other
41f staff years for AIDS activities for       program or activities.




FDA Resources: Comprehensive Assessment of Staffing,
Facilities, and Equipment Needs
HRD-89-142.09/15/89
Background                                    Findings                                       administration’s fiscal year 1990 budget
                                                                                             called for an FDA staffing level of about
Pursuant to a congressional request,          GAO found that: (1) new legislation,
                                                                                             1,800 less than those needs; (3) FDA
GAO assessed whether the Food and             public health crises, and product
                                                                                             lacked the uniformity in its internal
Drug Administration (FDA) had                 tampering incidents have significantly
                                                                                             management information systems to
sufficient resources to meet its current      increased FDA responsibilities, but its
                                                                                             substantiate its staffing needs; (4)
and future responsibilities, focusing on      staffing level has declined 7.5 percent
                                                                                             although FDA studied how to use its
its: (1) staffing requirements and staff      since 1980; (2) although FDA estimated         declining resources more efficiently and
recruitment and retention rates; and (21      that it would need more than 2,000             effectively, it neither assessed all of its
laboratory, space, and equipment needs.       positions to replace those lost and to         activities to determine what to
                                              handle its increased responsibilities, the     accomplish with its limited resources,



                                              Page 184                                                                      GAO/OP-90-1
                                               Health




 considered shifting work to other             Open Recommendations                 to        priority responsibilities (e.g.,
agencies/or industry to accomplish it          Congress                                       consolidation, shifting of low-priority
mandatea, nor identified activities no                                                        tasks to third parties).
                                               Recommendation: To provide a more              Status: Action not yet initiated.
 longer needed; (51 FDA also had
                                               accurate basis for determining FDA
difficulties in filling senior-level
                                               resource needs, Congress should require        Recommendation: In order to
positiona because of pay and fringe
                                               the Commissioner, FDA, to make an              effectively carry out the
benefitsi inadequate office and                agencywide assessment to identify and
laboratory space, and the high cost of                                                        recommendations, the Commissioner,
                                               prioritize its activities and                  FDA, should determine the agencywide
living inI the Washington, DC., area; (6)      responsibilities.                              management information systems it will
FDA headquarters offices and                   Status: Action not yet initiated.              need to ensure that officials have the
laboratories, located in 23 facilities, were
                                                                                              data to accurately assess: (1) FDA staff
decentraaized and dispersed across 7 sites
throughout the Washington, DC., area,          Open Recommendations                 to        and resource needs; and (2) how well its
                                               Agencies                                       mission is being carried out and how
and had iinadequate electrical, heating                                                       effectively current resources are being
and cooling, and waste disposal systems;       Recommendation: The Commissioner,              used. Due to the urgency of FDA
(7) officeispace for staff at all levels was   FDA, should assess the agency’s                problems, FDA should place a high
far below the amount prescribed in             responsibilities and the staffing              priority on completing its comprehensive
General /Service Administration (GSA)          requirements to meet these                     assessment.
standards and were so cramped in some          responsibilities, based on present and         Status: Action not yet initiated.
cases that staff could only partially open     future projections.
some doers; (8) FDA and GSA both               Status: Action not yet initiated.              Recommendation: The Commissioner,
agreed that FDA needed to consolidate                                                         FDA, should use the information it
its activities in one location, which          Recommendation: The Commissioner,              develops as a basis to assess its facility
would cost between $447 million and            FDA, should determine the activities           and equipment needs. This assessment
$477 milIion, depending on the buildings       FDA can effectively undertake given a          would be intended to ensure that space,
already present at the chosen site; and        specified level of staffing increases (e.g.,   laboratory, and equipment plans are
(9) based on government equipment              a 2-percent, lo-percent, or 15-percent         synchronized with the agency’s
replacement criteria, FDA should have          increase over 19891.                           concentration of staffing resources on
replaced 29 percent of its scientific          Status: Action not yet initiated.              higher priority activities. Furthermore,
equipment.                                                                                    FDA should prepare a timetable for the
                                               Recommendation: The Commissioner,              staffing, systems, and management
                                               FDA, should identify the management            changes it will implement as a result of
                                               changes FDA would implement to match           its assessment.
                                               specified staffing levels with higher          Status: Action not yet initiated.


Consumer and Occupational                 Health and Safety
Pesticides: Need To Enhance FDA’s Ability                                                     To Protect the
Public From Illegal Residues

Background                                     protect the public from exposure to            monitoring of the nation’s domestic food
In response to a congresgional request,        illegal pesticide residues in the domestic     supply for illegal residues; and (2) efforts
GAO reviewed the Food and Drug                 food supply under the Food, Drug, and          to prevent food containing illegal
Administration’s (FDA) activities to           Cosmetic Act, specifically its: (1)            residues from reaching the market.




                                               Page 18.5                                                                     GAO/OP-90-I
                                                 Health




%%ddings                                         require continuous or periodic             use existing authorities to prevent the
GAG noted that, since FDA could not              monitoring because they are known as       marketing of domestic food containing
motbitor all food that might contain             potential health hazards and are likely    illegal pesticide residues and the need to
illegal pesticide residues, it designed its      to be used; (2) prevent the marketing of   provide a strong deterrent against such
moihitoring program to selectively spot-         most of the food that contains illegal     shipments, Congress may wish to give
check a very small amount of                     pesticide residues; and (31 penalize       FDA legislative authority to assess civil
domestically produced food and remove            growers who market food with illegal       penalties against growers of such food
foot1 that it found to contain illegal           pesticide residues when FDA is unable      when it is not removed from the
residues. GAO found that the FDA                 to remove it from the market.              marketplace.
pesticide monitoring program has two                                                        Status: Recommendation valid/action
ma/or shortcomings because FDA does              Open Recommendations               to      not intended.
noti (1) regularly test food for a large
number of pesticides that might be
                                                 Congress
present in food, including a number of           Recommendation: In view of the
pesbicides that, according to FDA,               difficulties that FDA faces in trying to


Cc/nsumer and Occupational                    Health and Safety
Medical Devices: Early Warning of Problems Is Hampered
bk Severe Underreporting
PEMD-87-1, 12/19/86
Background                                deterioration of devices was the major            (PMS) system; and (10) 53 percent of
In response to a congressional request,   cause of problems in one-third of the             surveyed health care professionals were
GAO provided information on the           hospital reports, while other causes were         not aware of the FDA system for
communications network and its flow       defective components, design flaws, and           reporting problems. GAO believes that:
patterns for problems associated with     improper use; (4) hospitals reported only         (1) the information loss will not improve
medical devices that the Food and Drug    51 percent of identified medical device           significantly, despite a new rule that
Administration (FDA) has reviewed or      problems to such outside organizations            requires manufacturers to report to FDA
approved for marketing, specifically: (1) as device manufacturers, distributors,            problems that have caused or may cause
how hospitals report problems that OCCUR and independent distributors; (51                  injury or death, since hospitals fail to
in the use of medical devices; (2) how    hospitals made 83 percent of their                report many of those problems to the
hospitals, manufacturers, and FDA         reports orally and without                        manufacturers; and (2) representative
respond to these problems; and (3) how    documentation; (6) hospitals reported             sampling would be an efficient way to
other federal programs monitor the        more manufacturer-related problems                obtain necessary monitoring
safety of selected technologies and       than user-related problems; (7) hospitals         information.
identify promising practices that FDA     repaired or replaced defective
might apply to medical devices.           components to avoid a recurrence of 85            Open Recommendations               to
                                          percent of the problems they
                                          experienced; (8) 52 percent of the                Agencies
Findings                                  problems hospitals reported to                    Recommendation: The Secretary of
GAO found that: (1) hospitals were        manufacturers and distributors resulted           Health and Human Services should
aware of most medical device problems;    in the repair or replacement of a failed          correct the underreporting of medical
(219 percent of th;! problems identified  device; (9) hospitals did not report              device problems by recommending that
with the 10 devices GAO studied           problems to FDA, preventing an                    FDA explore the possibility of
involved actual injuries; (31 wear or     effective postmarketing surveillance              establishing a voluntary, PMS system



                                                 Page 186                                                                GAO/OP-90-l
                                              Health




involving a representative sample of          people that could ensue, and recent          February 1989 (PEMD-89-10). Legislation
hospitals/ that would report directly to      developments indicating a more               is under consideration by Congress to
device manufacturers. This                    cooperative attitude by hospitals.           require medical device problem
recomme dation is made in light of the        Status: Action in process. A GAO             reporting by hospitals.
          P
void of i formation on problems with          follow-up study of implementation of
medical a evices, the potential harm to       medical device reporting was completed


Consu@er and Occupational                  Health and Safety
Medical Devices: FDA’s 510(k) Operations Could Be
Improved
PEMD;88-14,08/17/88
Backgfound                                    market access to them; and (5) FDA           marketed device was introduced or
In response to a congressional request,       reliance on products marketed prior to       delivered for introduction into interstate
GAO examined the Food and Drug                1976 to determine substantial                commerce,
                                                                                                 or...”
Administration’s (FDA): (1)                   equivalence could cause problems.            Status: Action in process.
implemehtation of the premarket
notification provision of the Medical         Open Recommendations               to        Open Recommendations                to
Device Amendments of 19’76; and (2) day-      Congress                                     Agencies
to-day operations in making its
determinations of substantial                 Recommendation: Congress may want            Recommendation: The Secretary of
equivalence.                                  to consider: (11 clarifying the extentto     Health and Human Services should
                                              which FDA should evaluate, within the        instruct the Commissioner, FDA, to
                                              premarket notification process, the          establish a requirement that written
Findings                                      effects of technological changes in          documentation of the review and
GAO found that: (1) although FDA              medical devices on their safety and          decisionmaking process be included in
guidance for determining substantial          effectiveness; and (2) developing            each premarket notification file. The
equivalence was generally adequate and        alternative approaches to the regulation     extent of documentation should vary
consistent with the less restrictive          of devices currently placed in classes II    depending on the seriousness of the
reading of the act, its description of        and III that could accomplish the            questions raised during the review.
performance assessment contained some         original purposes of the amendments.         Status: Action in process. The
ambiguities; (21 differences among the        Status: Action in process.                   Department of Health and Human
reviewing divisions within the Office of                                                   Services (HHS) is in the process of
Device Evaluation (ODE) concerning            Recommendation: Congress should              implementing this recommendation.
manufacturer information suggested a          amend the Federal Food, Drug and
lack of clear office-wide policy and          Cosmetic Act to make the determination       Recommendation: The Secretary of
coordination; (3) documentation of            of substantial equivalence relative to a     Health and Human Services should
premarket notifications was inadequate        currently marketed device rather than a      instruct the Commissioner, FDA, to
to evaluate ODE compliance with formal        predicate device. This can be                develop and implement processes, first
review policy; (4) because of                 accomplished by amending section             for identifying scientific issues that
implementation problems, certain              513(fj(1l(A)(iil of the act (21 U.S.C.       require uniform treatment across the
classes of medical devices did not meet       360(c)(fXl)(Al(iiN to read as follows: “is   divisions of ODE, then for developing
requirements appropriate to their             substantially equivalent to a currently      policies, and finally for ensuring that
classification and FDA relied on              marketed device within such type             these policies are implemented in the
premarket notifications to control            regardless of when that currently            review of premarket notifications.



                                              Page 187                                                                   GAO/OP-90.1
                                                Health




Gtus:    Action in process. HHS is in the
process of implementing this
recemmendation.


Cdnsumer and Occupational                   Health and Safety

FbA’s Reviews of New Drugs: Changes Needed in Process
for Reviewing and Reporting on Clinical Studies
HRD-88400,
_ 1.         09/12/88
       -.-.___.........
              ---
Background                                      backlog and make the data base more          such as product-tampering
In response to a congressional request,         reliable; and (3) FDA revised its policy     investigations, delayed timely
GAO reviewed the Food and Drug                  manual to assign joint responsibility for    completion of reviews.
Adbinistration’s     (FDA) Division of          selecting studies for review to the drug
Sci/entific Investigations’ (DSI) activities,   review divisions and DSI. GAO also           Open Recommendations                  to
specifically: (1) its responsibilities          found that: (1) DSI conducted over 400
                                                for-cause investigation8 of clinical         Agencies
relating to the approval of new drug and
biological products; (2) the accuracy of        investigators over the past 10 years         Recommendation: To enable FDA to
FDA data and adequacy of oversight of           usually due to indications of wrongdoing,    carry out its bioresearch monitoring
clinical investigators, review boards, and      unusually large numbers of                   responsibilities in a more timely
laboratories involved in studies                investigations, or the importance of a       manner, the Secretary of Health and
supporting new drug applications (NDA);         study to a new drug application; (21         Human Services should require the
and (31 the adequacy and timeliness of          although DSI participation was               Commissioner, FDA, to give DSI direct
for-cause inspections.                          necessary to maintain staff knowledge of     access to the FDA automated
                                                particular drugs and improve interaction     management information system on
                                                with drug review divisions, its              incoming NDA to facilitate inspection
Findings                                        participation had little effect on           scheduling.
GAO found that: (1) the FDA data base           inspection results; (3) FDA completed        Status: Action in process. Estimated
of information on review boards and             only 88 of the 190 reviews scheduled         completion date: 12/89. FDA purchased
laboratories was adequate and complete          within 12 months of receipt of NDA and       and installed a computer system on
for use in scheduling inspections; (2)          did not notify its district offices of the   January 18, 1989, and plans to complete
FDA increased its data-base                     need to make reviews until at least 1        a cable hookup with DSI in July 1989 to
maintenance staff and changed its               year after receipt on almost 73 percent      provide it with NDA data. DSI personnel
regulations for easier investigator             of the remainder; and (41 district           will complete examining this system by
identification to eliminate a O-month           involvement in other high priority work,     December 1989.




                                                Page 188                                                                      GAO/OP-90-l
._---   ___--
                                             Health




ConsuFer and Occupational               Health and Safety
Whi&leblowers: Management of the Program to Protect
Truciking Company Employees Against Reprisal
GGD-8$-123,09/22/88
Rackgjound                                   information system (MIS) being              Health to identify the problems, factors,
                                             developed will provide accurate and up-     and conditions that are causing delays in
Pursuant to a congressional request,         to-date information on the current status   case processing and take action to
GAO reviewed the Occupational Safety         of Section 405 cases.                       correct them.
and Health Administration’s (OSHA)           Status: Action in process. Estimated        Status: Action in process. Estimated
management of the Whistleblower              completion date: 03/90. OSHA is: (1)        completion date: 03/90. OSHA plans to
Protection Program for trucking              redesigning MIS; (2) increasing staff to    do the analysis needed to identify all
company; employees who allege safety         do investigations; and (3) finding better   probable problems, factors, and
violations by employers.                     ways to publicize the program. The
          I/                                                                             conditions causing delays in case
                                             Department of Transportation (DOT) has      processing. Once MIS is working, it will
Findinigs                                    implemented new procedures for              complete the identification process and
                                             obtaining such information and is using     implement additional actions to reduce
GAO fouhd that OSHA: (1) has not             it in ongoing efforts to investigate
devoted enough management attention                                                      case processing delays. Action has
                                             alleged safety violations.                  started to develop MIS, and the
to the Whistleblower Protection
Program; (2) did not fully comply with                                                   recommendation will remain open
                                             Recommendation: The Secretary of            pending MIS completion.
the statutory requirement that it            Transportation should develop, in
investigate and issue findings on            cooperation with OSHA, a procedure for
whistleblower complaints within 60 days;                                                 Recommendation: The Secretary of
                                             obtaining information from
(3) inadequately publicized the program;                                                 Transportation should develop, in
                                             whistleblower complaints alleging motor
and (4) plans to have a new management                                                   cooperation with OSHA, a procedure for
                                             carrier safety violations and use the
information system in operation by           information as a factor to consider in      obtaining information from
January 1989, which will provide direct      identifying and following up on motor       whistleblower complaints alleging motor
access to, data maintained in OSHA           carriers alleged to have violated federal   carrier safety violations and use the
regional ‘offices. GAO also found that the   laws and regulations.                       information as a factor to consider in
Department of Transportation’s Office of     Status: Action in process. Estimated        deciding what penalties to impose on
Motor Carriers (OMC) and OSHA did not        completion date: 03/90. DOT                 motor carriers who have committed
have pracedures to provide OMC with          implemented new procedures for              repeated or serious violations.
 information from complaints alleging        obtaining whistleblower complaint           Status: Action in process. Estimated
motor carrier safety violations.             information from OSHA; however,             completion date: 03/90. DOT
                                             evidence of DOT use of the information      implemented new procedures for
                                             in ongoing efforts to investigate alleged   obtaining whistleblower information
Open Recommendations               to        safety violations has not yet been          from OSHA; however, evidence of DOT
Agencies                                     documented.                                 use of the information as a factor to
Hecommendation: The Secretary of                                                         consider in deciding what penalties to
Labor should direct the Assistant            Recommendation: The Secretary of            impose on motor carriers who have
Secretary for Occupational Safety and        Labor should direct the Assistant           committed repeated or serious violations
Health to ensure that the management         Secretary for Occupational Safety and       has not yet been documented.




                                             Page 189                                                                 GAO/OP-90-l
                                             Health




Cainsumer and Occupational              Health and Safety
O/ccupational Safety & Health: Assuring Accuracy in
Ebnployer Injury and Illness Records
HiED-89-23,12/30/88
Bickground                                   inaccurate and outdated records. GAO        Census Bureau have conducted a
                                             also found that OSHA: (1) increased its     national survey of injuries that occur at
In kesponse to a congressional request,
                                             fines for recordkeeping violations and      work. The resulting injury estimates will
GAO assessed the accuracy of employers’
                                             assessed about $10 million in initial       provide benchmarks for other BLS
occupational injury and illness records
and the Occupational Safety and Health       penalties against 65 employers for          estimates and may be used to verify
                                             significant recordkeeping violations; and   workplace injury reporting. Also, BLS
Adbinistration’s  (OSHA) efforts to
ensure accurate recordkeeping.               (21 modified its records review             and OSHA are restructuring the
                                             procedures to reduce its reliance on        workplace injury and illness data
                                             employer logs. GAO believes that OSHA       collection system. BLS will test the new
F&dings                                      actions to correct inaccurate               forms and follow up after
GAO found that: (1) there was                recordkeeping problems will improve the     implementation.
significant occupational safety and          effectiveness of its inspection process.
health underreporting to the Bureau of                                                   Recommendation: The Secretary of
Labor Statistics (BLS) by employers          Open Recommendations              to        Labor should direct OSHA to use the
nationwide; (2) two studies indicated that                                               procedures developed in the
                                             Agencies                                    Recordkeeping Audit Program in
about 23 percent of work sites visited
un;derrecorded injuries and illnesses,       Recommendation: The Secretary of            selected enforcement activities.
while another etudy showed that about        Labor should require BLS to: (1) conduct    Status: Action in process. OSHA plans
or&half of 40 chemical industry              studies that assess the accuracy of         to incorporate the interview procedures
employers failed to completely record        employer injury records by comparing        developed in the Recordkeeping Audit
injuries or illness in their logs; (3)       those records with independent data         Program for use in cases of violations,
inaccurate recordkeeping occurred            sources; and (2) systematically evaluate    but not in all inspections. OSHA did not
because many employers either                how well employers understand the           adopt the program’s procedure for
deliberately underrecorded injuries in       revised guidelines for recording and        reconstructing employer logs. It plans,
response to incentives or were unaware       reporting work-related injuries and         however, to repeat the program every 5
of what they should record; and (4) many     illnesses to BLS.                           years to help evaluate improvements in
employers assigned low priority to           Status: Action in process. Estimated        employer recordkeeping and to continue
recordkeeping, which sometimes led to        completion date: 01/92. BLS and the         other efforts to secure compliance.




                                             Page 190                                                                  GAO/OP-90-l
                                              Health




Consu$er      and Occupational           Health and Safety

Medical Devices: FDA’s Implementation                                                 of the Medical
Devite Reporting Regulation
PEMD-i39-10, 02/17/89
   .._-.I_ ..._~
             _....._l-._
                     .._-.-
Backg%und                                     for MDR processing was unnecessarily         number of reports on each type of
                                              complicated; (4) system had a limited        reportable event and that the firm
In response to a congressional request,       capacity to identify trends and              received or became aware of information
GAO exa ined the Food and Drug                anomalies in the device problems; (51        concerning only these events.
Administ ation’s (FDA) implementation         volume and types of reports submitted        Status: Recommendation valid/action
of the met ical device reporting (MDR)        resulted in a constant backlog, including    not intended. According to agency
regulation to: (1) determine the level of     more than 10,000 malfunction reports         contact, since the Department of Health
informatibn the regulation generated; (21     for which FDA had not completed some         and Human Services (HHS) did not
describe and assess the principal             portion of analysis; (6) FDA did not close   concur with this recommendation, it
organizational structures and procedures      about one-third of the MDR reports with      plans no action.
that FDA/ used to process MDR reports;        one of the standard report dispositions
(3) evaluaite FDA analysis and use of         and closed about 62 percent of the           Recommendation: The Secretary of
MDR data; and (4) review FDA efforts to       reports for use as baseline data; (7) FDA    Health and Human Services should
assess the degree to which medical            tentatively identified the cause of device   ensure that FDA completes a
device firms complied with the MDR            problems in half of the reports it           methodologically sound program of MDR
requirements.                                 evaluated and found that the device was      compliance inspections that would
                                              the cause in ‘77 percent of those reports;   permit valid generalization of the results
Findings                                      (8) FDA did not use the data for             to the population of device
                                               purposes other than to record and track     manufacturers and importers.
GAO found that: (1) prior to                   device problems and had very little data    Status: Recommendation valid/action
implementation, FDA received about             on its corrective actions; and (9) one-     not intended. According to agency
2,500 problem reports annually through         third of the device firms FDA inspected
                                                                                           contact, HHS did not concur with this
voluntary reporting; (2) during the first 3    were not aware of the MDR rule and 3’7
                                                                                           recommendation and, therefore, plans no
years after MDR implementation, FDA            percent received no problem reports
                                                                                           action.
received about 18,000 problem reports          about their devices.
annually; (31 there was a significant
increase in the proportion of deaths or                                                    Recommendation: The Secretary of
                                              Open Recommendations               to        Health and Human Services should
serious injuries that were concentrated
among relatively few medical specialities
                                              Agencies                                     encourage FDA to continue to
and devices within those specialities; and    Recommendation: The Secretary of             strengthen its documentation of the use
(4) 10 medical devices accounted for          Health and Human Services should             of MDR data in taking corrective actions
 about 63 percent of all reported             require all firms that manufacture or        on device problems, especially by
 problems and cardiovascular devices          import medical devices to submit an          ensuring that such actions are recorded
 accounted for about 50 percent of all        annual statement indicating either that      in the MDR data base.
 reported problems. GAO also found that       they flied no MDR reports during the         Status: Action in process. Actions are
 the: (1) MDR system lacked procedural        calendar year because they did not           being taken to ensure MDR actions are
 guidelines for report analysts; (2) report   receive or otherwise become aware of         properly recorded in the data base. HHS
 analysts lacked automated data               information concerning MDR-reportable        indicated that completion of the task
 processing skills; (3) work+‘low pattern     events, or that they filed a specific        will require additional staff and funds.




                                               Page 191                                                                  GAO/OP-90-l
                                                Health




Cqnsumer and Occupational                 Health and Safety
Dbmestic Food Safety: FDA Could Improve Inspection
P.rogram to Make Better Use of Resources
H@D-89-125,
         ~~..-..09/27/89
. / _ _-....     -__-___ -__
Bcickground                                     of its inspection resources on low-risk         Recommendation: To more efficiently
Putsuant to a congressional request,            firms; (6) inspected less than half of          and effectively use the resources FDA
GI$O reviewed the Food and Drug                 firms with violation histories, including       devotes to domestic food sanitation
Adbinistration’s    (FDA) inspections of        those firms that its state contractors had      inspections, the Secretary of Health and
dorinestic food firms, focusing on the: (1)     previously identified; (7) did not consider     Human Services should direct the
criieria FDA used to select firms for           the extent to which state agencies              Commissioner, FDA, to develop a policy
inipections; (2) frequency with which           independently inspected certain firms           on the frequency of food inspections that
FaA inspected firms with low risks for          when scheduling its own inspections;            incorporates the use of statistical
pr$uct adulterations; and (3) results of        and (8) believes that it needs to maintain      sampling to monitor low-risk,
those inspections.                              its level of routine surveillance               nonproblem firms.
                                                inspections.                                    Status: Action not yet initiated.
Fjndings
                                                Open Recommendations                 to         Recommendation: To more efficiently
GAO found that FDA: (1) issued October
1916 guidance instructing field offices to
                                                Agencies                                        and effectively use the resources FDA
                                                                                                devotes to domestic food sanitation
cohcentrate inspection resources on food        Recommendation: To more efficiently
                                                                                                inspections, the Secretary of Health and
fitims with a history of violations; (2)        and effectively use the resources FDA
                                                devotes to domestic food sanitation             Human Services should direct the
laCked criteria for determining the
frbquency of inspections; (3) and its state     inspections, the Secretary of Health and        Commissioner, FDA, to instruct FDA
contractors inspected about 11,500              Human Services should direct the                district offices to target all firms with
domestic food firms during fiscal year          Commissioner, FDA, to review the FDA            histories of violations, including those
1987; (4) conducted 90 percent of those         inventory of food firms and reduce its          identified by state contract inspections,
inspections for routine surveillance, not       inspection of firms that the states             in its plans for future inspections.
compliance purposes, and most of the            routinely inspect as part of their own          Status: Action not yet initiated.
surveillance inspections did not reveal         programs.
any serious violations; (5) spent over half     Status: Action not yet initiated.


Clonsumer and Occupational                    Health and Safety

Postal Service Management of Work-Related                                                          Injuries
l’-GGD-89-41,
   _.. ._...      09/28/89
         ~~__......__.
                    _._..._..__-___-______-
Background                                       measures effectiveness of division             commitment to effective cost-control
GAO discussed its review of the U.S.             procedures to control lost workdays            procedures affected divisional
Postal Service’s (WSPS) administration           connected with work-related injuries; (2)      performance; (4) USPS limited-duty
of its work-related injury compensation          lost-workday rates varied greatly among        guidelines did not include criteria for
program. GAO noted that: (1) USPS                postal divisions; (3) the degree of division   how long employees could remain on




                                                 Page 192                                                                     GAO/OP-90-I
                                            Health




limited duty or on how to monitor           Status: Action not yet initiated.             accident reports and require divisions to
employees’ medical progress; (51 local                                                    establish a system of control procedures
supervisors did not always complete         Recommendation: To expand USPS                such as routine reconciliation of accident
accident reports for the USPS National      controls over lost workdays and               reports and medical treatment records
Accident iReporting System; and (61         continuation-of-pay hours, strengthen         for occupational injuries and illnesses.
USPS sa ety and compensation staffs did     the management of limited-duty                Status: Action not yet initiated.
not suffi 4iently coordinate their          assignments, and improve accident
activities: to ensure accident reporting.   reporting, the Postmaster General             Recommendation: To expand USPS
                                            should direct the Senior Assistant            controls over lost workdays and
Open kecommendations              to        Postmaster General, Human Resources,          continuation-of-pay hours, strengthen
                                            to establish guidelines requiring routine
Agencies                                    medical monitoring and scheduled
                                                                                          the management of limited-duty
                                            periodic review of limited-duty               assignments, and improve accident
Hecomm ndation: To expand USPS
controls ver lost workdays and              assignments for possible termination.         reporting, the Postmaster General
continua ion-of-pay hours, strengthen       Status: Action not yet initiated.             should direct the Senior Assistant
the man i gement of limitedduty                                                           Postmaster General, Human Resources,
assignments, and improve accident           Recommendation: To expand USPS                to issue guidelines for divisions on
reportin , the Postmaster General           controls over lost workdays and               improving coordination and
should d$rect the Senior Assistant          continuation-of-pay hours, strengthen         communication between injury
Postmaster General, Human Resources,        the management of limited-duty                compensation and safety staffs and on
to identify effective control procedures    assignments, and improve accident             establishing and implementing National
used by more successful divisions,          reporting, the Postmaster General             Accident Reporting System reporting
disseminlate that information to all        should direct the Senior Assistant            verification procedures.
divisions; and promote the greater use of   Postmaster General, Human Resources,          Status: Action not yet initiated.
those cohtrols, as appropriate for each     to remind divisions of the importance of
location.’                                  the USPS requirement to complete


Health Care Services

Medicare/Medicaid Funds Can Be Better Used To Correct
Deficiencies in Indian Health Service Facilities
HRD-83-22, 08/16/83
Background                                  Findings                                      facility that provided the services rather
GAO reviewed the Indian Health                                                            than redirecting them to the most needy
                                            In 1976, only half of IHS hospitals met
Service’s (IHS) management of funds                                                       facilities. This practice has not ensured
                                            the Medicare/Medicaid standards. IHS
collected from Medicare and Medicaid        began applying its Medicare/Medicaid          that the facilities most in need of funds
programs for services provided in its       funds toward the objective of bringing        receive them and has resulted in the
facilities to Indians eligible for those    all of its facilities into compliance with    accumulation of a large unobligated
programs. IHS is required by law to use     the standards and, by October 1981, the       balance of Medicare/Medicaid
the funds collected to make                 objective was achieved. IHS now spends        collections. GAO also found that the IHS
improvements in its facilities to enable    the funds primarily on recurring costs        Medicare/Medicaid billing and collection
them to meet and remaip in compliance       needed to maintain compliance.                system is much more costly +.han those
with Medicare/Medicaid standards.           However, IHS has established a practice       of private hospitals because: (1) IHS is
                                            that results in the allocation of available   not able to take advantage of the
                                            Medicare/Medicaid collections to the          economies afforded by volume billing;




                                            Page 193                                                                    GAO/OP-90-l
                                          Health




and (2) the involvement of multiple IHS   direct the Assistant Secretary for Health    outpatient claims and is developing an
organizational levels in the primarily    to increase the efficiency of the IHS        automated process for Medicare
manual system is cumbersome and           Medicare/Medicaid billing and collection     inpatient and outpatient claims. IHS
rear/&s in additional work through the    system by such means as eliminating          believes that it is not feasible to
maint8nance of duplicate records.         duplicative functions among the various      automate all Medicaid inpatient claims,
                                          IHS organizational levels and increasing     but is working to automate the process
Oflen Recommendations           to        automation of the system where               in certain high-volume states.
                                          justifiable by cost savings.                 Implementation of the computerized
Agjencies                                 Status: Action in process. Estimated         system will take several more years.
Reciommendation: The Secretary of         completion date: 07/90. IHS automated
Heilth and Human Services should          the processing system for Medicare



Health Care Services

P$yment Rates for Ambulatory Surgery Centers Are
Higher Than Intended by HCFA
HkD-84-67, 07/12/84
Bgckground                                services in ASC would be substantially       rates to incorporate the cost-to-charge
                                          less than the costs of the surgeries if      adjustment.
GAO examined the methodology used by
                                          performed on a hospital inpatient basis.     Status: Action in process. Estimated
th8 Health Care Financing
                                          GAO found that HCFA set standard             completion date: 12/89. HCFA intends to
Administration (HCFA) for establishing                                                 implement this recommendation at the
the standard overhead amounts to be       overhead amounts for ambulatory
                                          surgery that appear to save Medicare         same time it implements the other
paid to ambulatory surgery centers                                                     recommendation in this report.
(ASC) and compared the cost to            program dollars. However, in computing
Medicare for surgery performed in         the standard overhead amounts, HCFA
                                          did not adjust charge data by the cost-to-   Recommendation: The Administrator,
ambulatory versus inpatient settings.                                                  HCFA, should obtain more complete and
                                          charge ratio as intended. As a result, the
                                                                                       current data on ASC costs and develop
                                          standard overhead amounts are lo-
Findings                                  percent higher than intended. GAO
                                                                                       payment rates from it.
                                                                                       Status: Action in process. Estimated
The Omnibus Reconciliation Act of 1980    believes that better data should now be      completion date: 12/89. HCFA developed
authorized payments under Medicare to     available than the limited information       and distributed a data collection form to
ASC to cover their operating costs. The   HCFA had when it established ASC             gather the needed data. The Omnibus
payment amounts, called standard          payment rates. HCFA should begin the         Budget Reconciliation Act of 1986
overhead amounts, were to be based on     process of reevaluating the rates.           requires HCFA to update the payment
WCFA estimates of the costs generally                                                  rate for ASC by July 1, 1987, and
incurred by ASC in furnishing services    Open Recommendations               to        annually thereafter. HCFA intends to
in connection with ambulatory surgery.                                                 use the data to promulgate the first
Also, the standard overhead amounts
                                          Agencies                                     update under the new law in the
were to be set at a level that would      Recommendation: The Administrator,           fall/winter of 1989 with a retroactive
ensure that the Medicare costs of         HCFA, should recompute ASC payment           effective date of July 1. 1987.
                   Y




                                          Page 194                                                                  GAO/OP-90-l
                                             Health




         ,
Health Care Services
Medicare: Past Overuse of Intensive Care Services Inflates
Hospital Payments
HRD$6-25,03/0’7/86
Back@ound                                    diagnosis-related groups, an average 1.1     medical services economically and
GAO anhlyzed the changes in intensive        percent of costs of care reflected the       efficiently are overstated. As long as the
care units (ICU) since the                   extra expense of treating low-risk           data base remains inflated, Medicare’s
implemeintation of the Medicare              patients in ICU, or an increase of about     PPS rates will remain high.
prospective payment system (PPS) in          $3.2 million in the Medicare cost base.
order to:; (1) estimate the extent to        GAO noted that situations affecting          Open Recommendations               to
which, phior to PPS, Medicare patients       medical practices that contributed to
                                             avoidable ICU admission and changing
                                                                                          Agencies
receivedjICU services when less costly
routine care would have been a feasible      hospital practices and attitudes indicated   Recommendation: The Secretary of
option; (@)determine whether hospital        that PPS was meeting a major objective       Health and Human Services should
practice$ regarding the use of ICU           of encouraging hospitals to operate more     revise prospective payment rates to base
services changed after PPS                   efficiently. Hospital officials attributed   them on 1984 or later cost data, which
implemejntation; and (3) ensure that         improvements to physician awareness          reflect hospital behavior under PPS.
changes Iin such utilization are reflected   and the fact that they were responding       Status: Recommendation valid/action
in Medi&are payment rates.                   to anticipated pressures for improved        not intended. The Department of Health
                                             efficiency under PPS. Medicare requires      and Human Services (HHS) has not
                                             that PPS rates reflect the costs             rebased prospective payment rates. The
Findings                                     necessary for the efficient and effective    Prospective Payment Assessment
GAO found that 23 percent of the             delivery of medically appropriate and        Commission has recommended
Medicare ICU patients reviewed were at       necessary care of high quality; however,     reductions in rates in 1987, 1988, and
low risk of needing a treatment provided     the data used to set the rates include the   1989, based on its analysis of hospital
in an ICU and did not receive such           costs of unnecessary services. The costs,    cost data. HHS has not accepted the
treatment during their ICU stay. In 21       therefore, of providing appropriate          Commission’s recommendations either.


Health Care Services
Medicare: Issues Raised by Florida Health Maintenance
Organization Demonstrations
HRD-86-97, 07/16/86
Background                                   the reasonableness of Medicare               Findings
GAO reviewed Medicare’s health               payments to HMO; and (3) the
                                                                                          GAO determined that: (1) in network-
maintenance organizations (HMO)              effectiveness of Department of Health
                                                                                          type HMO, the beneficiary protections
program to determine: (1) the adequacy       and Human Services (HHS) oversight.
                                                                                          concerning HMO financial solvency and
of financial and quality-of-care                                                          enrollment were substantially limited,
safeguards for Medicare beneficiaries; (2)                                                since HMO delivered many services




                                             Page   196                                                                GAO/OPdO-1
                                             Health




thraugh subcontractors; (2) although the     direct the Administrator, HCFA, to         Status: Recommendation valid/action
subuontractors assumed most HMO              reduce HMO payment rates to more           not intended. In commenting on the
financial risk, legislative safeguards did   accurately account for the health status   draft report, HHS disagreed with this
not apply to them and they received          of HMO enrollees, because the              recommendation.
little federal or state oversight; and (3)   methodology used by HCFA to pay risk-
Medicare’s payments to HMO were too          based HMO currently overpays them on       Recommendation: The Secretary of
high because the program did not adjust      average.                                   Health and Human Services should
rates for enrollees’ health status. GAO      Status: Recommendation valid/action        direct the Administrator, HCFA, to
found that: (1) HMO enrollees were           not intended. HHS took exception to the    collect from HMO payments due for
healthier than the average beneficiary,      GAO methodology as the basis for           administrative costs under the option B
as measured by mortality rates; (2) HMO      disagreeing. While the GAO                 agreements because the intermediaries
enrollees generally would need less          methodology was not sufficient to
                                                                                        processed the claims.
medical care and cost HMO less overall;      decrease payment rates, it did strongly
                                             indicate rates were too high. HHS          Status: Action in process. Estimated
and! (3) the HMO program is unlikely to
achieve the intended Medicare savings.       should determine the proper level of       completion date: 06/90. The Omnibus
GAG also found that no Florida HMO           reduction.                                 Budget Reconciliation Act of 1987,
were fully complying with federal                                                       Public Law 100-203, eliminated the
requirements to inform Medicare              Recommendation: The Secretary of           option B method. HHS has collected data
enrollees of their rights to grieve and      Health and Human Services should           from the intermediaries on HMO
appbal denied claims or services.            direct the Administrator, HCFA, to         previously using option B and is in the
                                             consider the feasibility of reducing the   process of determining the amount of
   /
Ofien Recommendations               to       adjusted average per-capita-cost           payment due from each HMO.
                                             administrative cost-loading factor to
Adencies                                     account for paying agents’ continued
Redommendation: The Secretary of             involvement in processing HMO enrollee
Health and Human Services should             claims.


Hkalth Care Services

Medicare: Need To Strengthen Home Health Care
Payment Controls and Address Unmet Needs
HRD-8’7-9,12/02/86                                      _____--
Bat kground                                  Findings                                   payment claims to identify noncovered
Pursuant to a congressional request,                                                    services; (4) HHS needs to make
                                             GAO found that: (1) material weaknesses
                                                                                        intermediaries more accountable for
GAO provided information on the              in internal controls over payments for
Medicare home health program,                                                           their payment decisions and strengthen
                                             Medicare home health services resulted
specifically: (1) the status of efforts to   in improper payments of almost $600        sanctions against home health agencies
                                             million in fiscal year 1984; (2) the       that consistently abuse the program; (5)
strengthen internal controls to prevent
                                             Department of Health and Human             HHS has not evaluated available data to
payment for services Medicare does not
                                             Services (HHS) has been slow to            determine what effect stronger controls
cover; and (2) how many chronically ill
                                             implement changes to strengthen            would have on unmet needs for home
elderly persons have home care needs
that Medicare and pther providers do         management controls in response to         care assistance; and (6) in 1982, about
                                              1981 GAO recommendations; (3) HHS         168,000 of the chronically ill elderly
not meet.
                                             needs to better explain what services      lacked needed assistance with such daily
                                             Medicare covers and how to review          living activities as bathing, dressing, and




                                             Page 196                                                                 GAO/OP-90-1
                                            Health




.-.-----L
eating, Ghile about 1.1 million lacked      Open Recommendations              to      Status: Recommendation valid/action
assistance with such key day-to-day         Agencies                                  not intended, HHS stated that the
activitie ’as grocery shopping and                                                    waiver of liability makes it
transpor ation. GAO also found that, to     Recommendation: The Secretary of          inappropriate to project overpayments
meet th home care needs of the elderly      Health and Human Services should          for home health agencies. GAO
populati n: (1) HHS could expand its        direct the Administrator, HCFA, to        continues to believe that it is imperative
Medicar E , Medicaid, and private health    revise the home health postpayment        that statistically valid techniques be
insurance coverage; (2) the government      utilization review program guidance to    used to project the amount of
could provide tax incentives to             require intermediaries to use             noncovered care. Continuing problems in
encourage families and friends to           statistically valid sampling techniques   calculating denial rates will be
provide care; and (3) the government        for identifying and projecting the        addressed in a forthcoming report.
could provide additional funds under        amount of noncovered care to the
block gr&rts to encourage expansion of      universe of claims paid.
community-based services.


Health Care Services

Medicare: More Hospital Costs Should Be Paid by Other
Insdrers
HRD-67-43, 01/29/87
Back@ound                                   increase training, monitoring, and        employers a deduction for health
                                            auditing of hospitals to improve their    insurance premiums or impose a tax on
In response to a congressional request,
GAO provided information on whether         performance in identifying and billing    such premiums if the policies provided
the Department of Health and Human          other insurers; (5) some employers were   by the employers do not meet the
Services (HHS) could improve existing       enrolling Medicare beneficiaries          requirements of the Medicare secondary
policies and procedures for identifying     inappropriately in group insurance that   payer provisions for aged beneficiaries.
and billing insurers covering Medicare      treated Medicare as the primary payer;    Status: Action in process.
beneficjaries, which should pay medical     and (6) there is no federal requirement
claims before Medicare does.                for attorneys or insurers to report       Open Recommendations               to
                                            actions taken to recover accidental
                                            damages for Medicare beneficiaries.       Agencies
Findings                                                                              Recommendation: The Secretary of
GAO found that: (1) in 1985, Medicare       Open Recommendations              to      Health and Human Services should
paid $527 million in hospital costs that                                              direct the Administrator, HCFA, to: (1)
                                            Congress                                  enter into a memorandum of
other insurers should have covered; (2)
hospitals often gathered insufficient       Recommendation: Congress should           understanding with EEOC on the type of
information about other insurance           consider enacting one of two              cases to be referred; and (2) establish
resources or billed Medicare even when      alternatives, Congress could: (1)         procedures for identifying and referring
they identified other insurance; (3) the    statutorily direct the Equal Employment   potential violations of provisions of
six hospitals that GAO studied identified   Opportunity Commission (EEOC) to          ADEA to EEOC. This can be done, for
and billed primary insurance in only 17     promulgate the regulations that it        example, by establishing procedures for
percent of the cases where patients         envisioned when it enacted section 4(g)   monitoring intermediary and regional
indicated that they had primary             of the Age Discrimination in              office case follow-up and referral actions.
insurance coverage for the admission; (4)   Employment Act (ADEAl; or (2) amend       Status: Action in process. HCFA plans
intermediaries had little incentive to      the Internal Revenue Code to deny         to address the problem through Internal



                                            Page 197                                                                GAO/OPdO-1
                                          Health




Revenue Service enforcement under the     noncomplying employer group health           as part of the 1990 budget reconciliation
legislation HCFA proposed in August       plans. Legislation similar to that           bill.
198# that would enable a tax on           proposed by HCFA has passed the House


Heblth Care Services

DOD Health Care: Better Use of Malpractice                                                Data Could
Help Improve Quality of Care
HRD-87-30.06/04/87
Baickground                               inadequate care necessary to identify        Open Recommendations               to
Pursuant to a congressional request,      patterns of recurring medical problems;      Agencies
GAG reviewed how the Department of        (2) DOD did not systematically provide
                                                                                       Recommendation: The Secretary of
Defense (DOD) utilizes medical            malpractice information or educational
                                                                                       Defense should direct the Assistant
malpractice information to improve the    case studies to the services for quality
                                                                                       Secretary for Health Affairs to
quality of medical care and reduce the    assurance or risk management purposes;       participate fully in the provider tracking
risk of malpractice.                      (3) service regulations varied concerning    system required by Public Law (P.L.)99-
                                          the definition of a potential claim; (4)     660.
                                          DOD did not investigate all potential        Status: Action in process. DOD intends
Findings                                  malpractice claims; and (5) DOD needed       to participate in the system. The
GAO found that: (11 although DOD          a centralized system to collect and          Department of Health and Human
coll/ected some data on malpractice       analyze known medical care problems          Services has not yet implemented P.L.
claims, the data did not include          and focus attention on corrective and        99-660. Implementation will occur 6
information on potential claims or        preventive actions.                          months after the Office of Management
spebific providers responsible for                                                     and Budget approves the regulations.

-.
Health Care Services

Medicare and Medicaid: Stronger Enforcement                                                   of Nursing
Home Requirements Needed
HRD-87-113,07/22/87
-- ----.I --
Background                                Findings                                     deficiencies which could have precluded
In response to a congressional request,                                                continued participation in Medicare or
                                          GAO found that: (1) 3,372 of 8,298
GAO investigated the enforcement of                                                    Medicaid, while 3 were decertified; (3) 11
                                          certified skilled nursing facilities and
Medicare and Medicaid requirements for    2,005 of 5,970 certified intermediate care   of the facilities had less serious
nursing homes, focusing on the: (1)       facilities did not meet one or more of the   deficiencies and continued participation
extent and potential effect of repeated   requirements most likely to affect           in the programs without complying with
noncompliance; and (2) adequacy of        resident health and safety during three      requirements; and (4) in many cases,
enforcement actions taken by state and    consecutive inspections; (2) 12 of 26        inspection officials did not follow
federal agencies.                         studied facilities corrected serious         regulations requiring facilities to justify




                                          Page 198                                                                   GAO/OP-90-l
repeated/ noncompliance before              Open Recommendations               to        Status: Action in process. The
recertifioation. GAO believes that, while   Agencies                                     Department of Health and Human
terminayon is too severe a penalty for                                                   Services will address this
                                            Recommendation: The Secretary of
many de rciencies, such measures as civil                                                recommendation in regulations
                                            Health and Human Services should
monetar penalties and bans on new                                                        implementing the Omnibus Budget
                                            revise the repeat deficiency provisions of
admissio s may provide effective                                                         Reconciliation Act, but disagreed that it
                                            Medicare and Medicaid regulations to
motivati, k n for compliance.               limit the use of decertification to those    should require written justification for
                                            instances where a nursing home cannot        any repeat deficiency. Regulations have
                                            adequately justify repeat deficiencies       been delayed because of industry
                                            that seriously threaten patient health       concerns about other provisions.
                                            and safety.


Health Care Services
Medicaid: Improvements                            Needed in Programs To Prevent
Abube
HRD-87-75, 09/01/87
Backg)round                                 management information systems to            include in the Systems Performance
GAO reviewed Medicaid abuse in six          identify potential Medicaid abuse; (3)       Review guidelines a requirement to
states and provider abuse in four states    some states review only a small portion      document: (1) technical problems the
to: (1) determine whether the states were   of the potentially abusive recipients they   states are having using the Surveillance
effective in identifying Medicaid abuse;    identify; (4) most states have applied few   and Utilization Review Subsystem
and (2) assess the extent of states’        sanctions against abusive Medicaid           (SURS) to identify Medicaid abusers; and
actions to apply sanctions against          recipients; and (5) the Health Care          (2) successful SURS techniques
Medicaid abusers,                           Financing Administration (HCFA) has          developed by states to identify, review,
                                            adequate resources to provide technical      or sanction Medicaid abusers.
                                            assistance to states with problems in        Status: Action in process. HHS plans to
Findings                                    using their information systems.             conduct research on the best way to
GAO found that: (1) the Department of                                                    implement this recommendation. Action
Health and Human Services (HHS) has         Open Recommendations               to        has not been completed as of December
not taken effective action to strengthen                                                 1989.
management controls over states’
                                            Agencies
postpayment utilization review              Recommendation: The Secretary of
programs; (2) some states do not            Health and Human Services should
effectively use their computerized          instruct the Administrator, HCFA, to




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Heial t h Care Services
Medicare: Laboratory Fee Schedules Produced Large
Beneficiary Savings but No Program Savings
H&D-88-32,  12/22/8’7
  +. -.--.--~---.--
B+c kground                                  independent laboratories and physicians    Open Recommendations              to
Pursuant to a legislative requirement,
                                             as the reasonable charge system would      Congress
GAO reviewed the appropriateness and         have. GAO also found that: (1) the fee-
                                                                                        Recommendation: The Senate
impact of Medicare’s fee schedule            rate caps held constant or reduced all     Committee on Finance, the House
payment system for clinical diagnostic       fee rates; (2) a national fee schedule     Committee on Ways and Means, and the
laboratory services.                         could increase total Medicare payments,    House Committee on Energy and
                                             since carrier rates vary widely for the    Commerce should take action to prevent
                                             same tests; (3) computation of the fee     adoption of a national laboratory fee
Fihdings                                     schedule based on a weighted average of    schedule based on prevailing charges
GAO found that initial fee schedules,        the carrier rates, as capped by the llO-   because using that methodology would
estkblished on a geographic basis: (1)       percent-of-median limit, would retain      increase Medicare costs.
significantly reduced beneficiary out-of-    the reduction that resulted from the       Addressee: Senate Committee on
pocket costs; (2) affected neither           caps; and (4) the Health Care Financing    Finance
beneficiary access to nor quality of         Administration’s method for calculating    Status: Action not yet initiated.
laboratory services; (3) insignificantly     the national fee schedule, using area      Addressee: House Committee on Ways
reduced total payments to hospitals; (4)     prevailing rates, could increase total     and Means
increased Medicare payments to               Medicare payments.                         Status: Action not yet initiated.
hot/pitals for outpatient and referred-                                                 Addressee: House Committee on Energy
patjient laboratory services; and (5)                                                   and Commerce
all&wed about the same amount to                                                        Status: Action not yet initiated.


Health Care Services

Medicare: Refinement of Diagnosis Related Groups Needed
To Insure Payment Equity
HRD-88-41, 04/22/88
Background                                   Findings                                   and resulted in hospitals profiting or
                                                                                        losing based more on the mix of the
GAO evaluated the Health Care                GAO found that: (1) the Medicare
                                                                                        patients they treated than on the
Financing Administration’s (HCFA)            Prospective Payment System (PPS) bases
                                                                                        efficiency of their operations; (3) wide
diagnosis-related groups (DRG)               reimbursement on the average cost to
                                                                                        variations in treatment costs gave
classification system’s effectiveness as a   treat certain conditions nationally,
                                                                                        hospitals financial incentives to seek
means of grouping patients for Medicare      rather than on the resources required to
                                                                                        patients with diagnoses in the low-
payment purposes.*                           treat a specific patient; (2) wide
                                                                                        expected-treatment-cost range; (4) larger
                                             variations in treatment resource
                                                                                        urban hospitals were more likely to
                                             requirements affected payment equity



                                             Page 200                                                                 GAO/OP-90-1
... -----.c--
receive +tients with higher-than-             Open Recommendations               to        Status: Recommendation valid/action
average treatment costs; and (5)              Agencies                                     not intended. The Department of Health
although; the DRG classification system                                                    and Human Services (HHS) stated that
providedia good basis for determining         Recommendation: The Secretary of             it did not plan to take any special action
hospital payments under PPS, the              Health and Human Services should             in response to this recommendation. To
system n/ceded adjustments to reduce the      direct the Administrator, HCFA, to           the extent that HHS normal review
variations in resource requirements           review DRG that GAO identified as            activities identify problems with the
within many DRG.                              having wide variations in patient            GAO-identified wide variation DRG,
                                              resource requirements and change the         necessary adjustments will be
                                              DRG classification system to reduce the      considered. GAO believes it has
                                              variations within these DRG.                 identified a significant problem with
                                                                                           DRG and that action is necessary.


Health Care Services

Medicare: Improving                           Quality of Care Assessment and
Assljrance
PEMlj-8840, 05/02/88 -              ~...__-
Ba& k$ound- -.                                particular types of quality problems,        Open Recommendations                to
In response to a congressional request,       they had not coordinated their efforts;      Congress
GAO reviewed: (1) the Health Care             (4) because there was no information
                                              available to document how the review         Recommendation: The House
Financing Administration’s (HCFA)
                                              efforts were working, it was not known       Committee on Ways and Means, Health
medical review systems for measuring
                                              whether PRO effectively identified and       Subcommittee, may wish to consider
and monitoring Medicare quality of care;
                                              corrected quality-of-care problems; (5)      developing legislative proposals to assign
and (2) quality assessment research and
                                              HCFA had no comparative information          specific responsibilities to a new federal
evaluation within the Department of
                                              on the effectiveness of the quality review   entity or existing entities designed to: (1)
Health and Human Services (HHSI.
                                              methods used for health maintenance          develop, disseminate, and coordinate
                                              organizations (HMO) and competitive          activities intended to advance the
Findings                                      medical plans (CMP); (6) HCFA did not        development of quality assurance
GAO found that: (1) there was no              require claims processors to include         methods and good medical practice; and
legislative requirement for nationally        diagnostic information in their Medicare     (2) incorporate this knowledge into
representative information on levels of       Part B billing forms or to enter the         Medicare quality assurance efforts.
quality or problems related to quality of     information into the billing files; (‘7)     Status: Action in process.
care in covered services or on the overall    since the SuperPRO contractor did not
health care provided; (2) HCFA oversight      adequately record the reasons for its        Open Recommendations                to
of carriers’, intermediaries’, and peer       random selections of PRO case reviews,
review organizations’ (PRO) medical           the PRO data were not comparable or
                                                                                           Agencies
review activities focused only on             nationally representative; and (8) HHS       Recommendation: The Secretary of
whether they met contract                     had no clear strategy or organizational      Health and Human Services should
specifications, rather than their             structure for integrating information on     direct the Administrator, HCFA, to
effectiveness in identifying quality          the quality of health care provided to       assess the comparative effectiveness of
problems; (3) although c’arriers,             Medicare beneficiaries or for developing     carrier and intermediary screens and
intermediaries, and PRO devised               methods and knowledge to meet future         profiles as means to identify
systems for identifying and addressing        needs.                                       inappropriate and substandard quality



                                              Page 201                                                                   GAO/OP-90-1
                                            Health




car, as well as recover Medicare            Status: Action in process. Various pilot   quality of care are inaccurate. In
ovePpayments.                               studies were initiated as part of the      particular, errors in mortality (date of
StaUx Action in process. HHS has            effectiveness initiative.                  death) and discharge destination, as well
inidiated studies of carrier screens.                                                  as all diagnostic and procedure data (not
                                            Recommendation: The Secretary of           limited to diagnostic-related group
Reqommendation: The Secretary of            Health and Human Services should           assignment) should be monitored.
Health and Human Services should            direct the Administrator, HCFA, to         Tracking of errors in the source and
direct the Administrator, HCFA, to          initiate studies to assess the strengths   type of admission data fields should also
develop formal guidelines to coordinate     and weaknesses of the current              be considered.
the! systematic and timely reporting by     assignment of responsibilities among       Status: Recommendation valid/action
carjriers and intermediaries to PRO of      carriers, intermediaries and PRO with      not intended. HHS does not see the
possible problems with the quality of       respect to processing and screening        utility of documenting the extent of data
care provided in ambulatory and             Medicare claims data and performing        errors.
posthospital care settings identified in    medical reviews to identify quality-of-
medical reviews. These guidelines should    care problems and substandard providers
                                                                                       Recommendation: The Secretary of
ensure that: (1) intermediaries report      and suppliers. These studies should
                                                                                       Health and Human Services should
directly to PRO, as well as HCFA, all       specifically examine whether a
                                                                                       direct the Administrator, HCFA, to
cases where possible problems of            realignment of responsibilities could
                                                                                       modify the scope of work of the
premature or inappropriate hospital         improve the efficiency and effectiveness
                                            of Medicare quality review activities.     SuperPRO contract to provide that the
discharge may exist, including cases
                                                                                       case selection methods ensure that those
where Medicare coverage for skilled-        Status: Action not yet initiated. Plans
nursing-facility or home health services    have not been finalized.                   cases selected for random review by PRO
has been denied to patients who may                                                    are identifiable and that a nationally
nevertheless have extensive care needs;     Recommendation: The Secretary of           representative sample of cases can be
anil (2) information about possible         Health and Human Services should           constructed from the SuperPRO files for
quality-of-care problems uncovered by       direct the Administrator, HCFA, to         each review cycle.
carriers is routinely shared with PRO.      develop comparative information on the     Status: Action in process. The new
StBtus: Recommendation valid/action         effectiveness of the quality review        SuperPRO scope of work is still being
not intended. HHS considers regional        methods used by PRO reviewing quality      developed.
office oversight an adequate substitute.    of care in Medicare HMO and CMP.
                                            These studies should also produce          Recommendation: The Secretary of
Recommendation: The Secretary of            comparative information on the overall     Health and Human Services should
Health and Human Services should            levels of quality of care provided in      direct the Administrator, HCFA, to
direct the Administrator, HCFA, to fund     participating HMO and CMP. This            assign a high priority to completing the
additional studies to analyze the           would require the collection of standard   development of a central long-term care
comparative effectiveness of particular     information on the use of services and     data system, including nationally
PRO review methods, and the utility of      health care outcomes across plans.         representative data on the health care
current methods for establishing PRO        Status: Action in process. Plans have      status, care needs, and health care
quality objectives. These analyses should   not been finalized.                        outcomes of nursing home residents. In
include assessments of whether different                                               addition, these efforts should be
written review criteria or protocols        Recommendation: The Secretary of           coordinated with developing a similar
generate significantly different rates of   Health and Human Services should           data resource, drawing on survey and
problems identified, and whether the        direct the Administrator, HCFA, to         certification data for other subacute care
identification of problems using these      require PRO, intermediaries, and           facilities, especially home health
methods leads to significant changes in     carriers to routinely document and         agencies.
the incidence of quality problems over      report incidents in which key data         Status: Action in process. Several
time.                                       elements required for monitoring the       studies are underway.




                                            Page 202                                                                GAO/OP-90-I
                                             Health




Health! Care Services
Medicare: Improved Patient Outcome Analyses Could
Enh&nce Quality Assessment
PEMD,88-23,06/27/88
     ~I
Backgiound                                   favorable or adverse outcomes; (31 lacked   Status: Action in process. The HHS
                                             adequate validation regarding their         effectiveness initiative will analyze
Pursuant to a congressional request,
                                             effectiveness in targeting cases for        selected diagnoses/procedures.
GAO exabined the Health Care
Financing Administration’s (HCFA)            quality review; (41 lacked capability to    Demographic analyses are still
analysis and use of existing                 analyze any data other than mortality;      uncertain.
administrative data to monitor the           and (5) did not adequately address the
outcome bf care received by Medicare         potential deviation or problems caused      Recommendation: The Secretary of
patients.                                    by random variation, particularly in        Health and Human Services should
                                             instances involving only small numbers      direct the Administrator, HCFA, to
                                             of cases.                                   assess periodically the relative strengths
FindiQgs                                                                                 and limitations of available approaches
GAO for&d that HCFA: (11 basically                                                       for analyzing Medicare patient outcomes
                                             Open Recommendations              to        data in terms of their substantive focus,
used three analytical approaches for its
1987 Me&care patient outcome analyses,
                                             Agencies                                    technical adequacy, and degree of
involving 1986 and 1987 data and patient     Recommendation: The Secretary of            validation (i.e., their overall effectiveness
subgroup monitoring over time; (2)           Health and Human Services should            in identifying patterns of patient care
strengthened its 1987 analyses regarding     direct the Administrator, HCFA, to          with quality problems). These
patient-level data, clinically coherent      strengthen HCFA analyses of mortality       assessments should guide the selection of
diagnostic groups, comorbidity               data by testing and incorporating more      analytical approaches used in future
information, and more appropriate                                                        HCFA reviews of Medicare patient
                                             sophisticated adjustments that exploit
illness severity adjustments; and (31                                                    outcomes. HCFA should ensure that
                                             more fully the available diagnostic
primarily used its outcome analyses to                                                   analyses of Medicare patient outcomes
                                             information.
require peer review organizations to                                                     from administrative files employ
                                             Status: Action taken not fully              approaches that have been validated to
examine the hospitals the analyses           responsive. HCFA currently does not
identified as having potential problems.                                                 some degree through independent data
                                             plan to use the full range of available     sources, and any results publicly
GAO also found that: (11 HCFA
                                             diagnostic data.                            released should describe the extent of
contractors used analytical approaches,
involving nonintrusive outcomes, a risk-                                                 that validation.
                                             Recommendation: The Secretary of            Status: Action taken not fully
adjusted mortality index, disease
staging, and hospital rate-setting, which    Health and Human Services should            responsive. Limited validation studies
could enhance data analysis; and (21         direct the Administrator, HCFA, to          have been conducted, but not released.
other analytical approaches, involving       expand HCFA analysis of comparative         Further validation studies have not yet
risk-adjusted monitoring and                 outcomes among patient subgroups, such      been initiated.
computerized identification of               as those defined by diagnostic and
complications, could also enhance data       demographic characteristics. If             Recommendation: The Secretary of
analysis. In addition, GAO found that        substantial differences in outcomes         Health and Human Services should
some of the various approaches: (1) used     among such groups are found after           direct the Administrator, HCFA, to
current Medicare administrative data to      adjusting for differences in patient        evaluate periodically through medical
better advantage than did others; (2)        severity, HCFA should experiment with       record reviews of a nationally
demonstrated the great potential for         strategies for targeting quality-of-care    representative sample of Medicare
 identifying types of cases with unusually   reviews based on these analyses.            patients the percentage of cases with



                                             Page 203                                                                   GAO/OP-90.1
--
                                               Health




-/   k

miasing and inaccurate data in the             crucial for reliable outcome analyses.       Status: Action in process. No systematic
Medicare Statistical System for each of        Meanwhile, all analyses of Medicare          assessment of data inaccuracies has yet
the/ individual data elements used by          mortality rates and other outcomes           begun; however, the Uniform Clinical
HCFA to analyze Medicare outcomes.             should include an explanation that their     Data Set, now being developed, may
The results of such assessments should         findings could be in error by an             provide some relevant information.
be ublicly reported, and corrective            unknown amount due to potential data
act Pon taken for those data elements          inaccuracies.


Hgalth Care Services

Medical ADP Systems: Analysis of Technical Aspects of
DOD’s Composite Health Care System
IJ$TEC-88-27,07/11/88
_..L....._
        --_
B&kground                                      Open Recommendations              to         parameters for maintenance response
                                               Agencies                                     times and on-line data retention.
Puirsuant to a legislative requirement,                                                     Status: Action in process. Estimated
GAO evaluated the system-level                 Recommendation: To ensure that CHCS          completion date: 12/89. DOD concurs
specifications and medical facility work-      meets the needs of the military medical      with the recommendation and plans to
load data for the Department of                community in a cost-effective manner,        collect data at the 10 operational test
De$ense’s (DOD) Composite Health Care          the Secretary of Defense should direct       and evaluation sites to determine the
System (CHCS) acquisition.                     the program office, during the               appropriate parameters for maintenance
                                               operational test and evaluation phase, to    response times and on-line data
 Findings                                      determine potential savings from using       retention.
                                               government personnel instead of
 GAO found that DOD needed to perform          contractor-supplied computer operators       Recommendation: To ensure that CHCS
 additional cost-effectiveness analysis on     by acquiring and analyzing data on the       meets the needs of the military medical
 four system-level specifications relating     circumstances where this substitution        community in a cost-effective manner,
 to: (1) costing all computer operators as     should occur.                                the Secretary of Defense should direct
 contractor-provided, although DOD                                                          the program office, during the
                                                Status: Action in process. Estimated
 intended to use its own personnel under                                                    operational test and evaluation phase, to
                                                completion date: 12/89. DOD concurs
 certain circumstances; (2) 2-hour