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Testimony :

Before the Senate Committee on Governmental Affairs:

For Release on Delivery Expected at 9:30 a.m. EDT Tuesday, September 
16, 2003:

GAO:

Transformation, Challenges, and Opportunities:

Statement of David M. Walker Comptroller General of the United States:

GAO-03-1167T:

GAO Highlights:

Highlights of GAO-03-1167T, a testimony before the Senate Committee on 
Governmental Affairs

Why GAO Did This Study:

The Committee sought GAO’s views on GAO’s accomplishments, challenges, 
and opportunities for its oversight hearing. The Committee also sought 
GAO’s views on its latest human capital proposal, which has been 
introduced in the Senate as S. 1522.

What GAO Found:

As an arm of the legislative branch, GAO exists to support the 
Congress in meeting its constitutional responsibilities to improve the 
performance and ensure the accountability of the federal government 
for the American people. Established in 1921 by the Budget and 
Accounting Act to follow the federal dollar and ensure that it is 
spent in an economical, efficient, and effective manner, GAO has 
evolved over its 82-year history to meet the changing needs of the 
Congress and the nation.  Faced with a budgetary reduction in the mid-
1990s that had to be implemented over a 2-year period, GAO undertook 
measures that, while necessary, also increased the risk that the 
agency would not be positioned well to serve the Congress in the 
future.  

To effectively position itself for the future, GAO has been undergoing 
a major transformation effort over the past 4 years that even in the 
best of organizations takes 7 or more years to implement. Based on its 
strategic plan developed in consultation with the Congress, GAO’s 
effort is focused on three specific areas: achieving results, serving 
the client, and investing in people. GAO has realigned the agency to 
eliminate a management layer, consolidate 35 issue areas into 13 
teams, and reduce its field offices from 16 to 11. Today, GAO is a 
significantly smaller organization—40 percent smaller than in 1992—
with slightly over 3,250 staff on board.  GAO has worked with its 
appropriations committees to obtain targeted funding for such 
particularly acute risk areas as human capital and information 
technology.  GAO also launched a range of internal and external 
initiatives that have helped it become more strategic, results-
oriented, partnerial, integrated, flexible, responsive, employee-
oriented, and externally focused.  Since 1998, GAO’s work has produced 
a steady increase in financial benefits and nonfinancial benefits 
including many improvements in government operations. For example, in 
fiscal year 2002, GAO’s work helped achieve $37.7 billion in financial 
benefits—a $88 return for every dollar invested in GAO. In addition, 
GAO’s work informed the debate and the resulting legislation relating 
to such areas as our nation’s national security, homeland security, 
economic security, and the financial security of Americans. 

GAO faces a number of challenges. Issues that GAO is either watching 
closely and/or believes require congressional attention include supply 
and demand imbalances, unfunded mandates, access to records, the 
Deputy Comptroller General selection process, performance and 
accountability community coordination, and additional bid protest 
volume. S. 1522, the GAO Human Capital Reform Act of 2003, which 
mirrors H.R. 2751, which has been marked-up and reported to the full 
House Government Reform Committee, is urgently needed to help address 
GAO’s challenges.  Some specific initiatives that the Comptroller 
General plans to focus on for the future include helping the Congress 
address challenges relating to the long-term fiscal outlook, 
transforming government and how government does business, and making 
GAO the federal employer of choice and the gold standard for a world 
class professional services organization. 

What GAO Recommends:

GAO recommends that the Committee act on S. 1522 promptly and that the 
Congress enact the GAO Human Capital Reform Act of 2003 before it 
adjourns this year. 

GAO believes that its latest human capital proposal is both well 
reasoned and reasonable. There are compelling reasons why GAO ought to 
be given this additional human capital authority. These include the 
fact that GAO already has a hybrid pay system established by the 
authority that the Congress granted it over two decades ago, the 
proposal is modest if viewed in light of authorities granted and 
requested by other agencies, and GAO already has a number of key 
systems and safeguards in place and has plans to build in additional 
safeguards.

GAO has conducted extensive external and internal outreach efforts on 
this proposal. GAO respectfully requests the Committee’s support and 
prompt passage by the Congress. 

www.gao.gov/cgi-bin/getrpt?GAO-03-1167T.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact Gene Dodaro at (202) 
512-5600 or dodarog@gao.gov.

[End of section]

Madam Chair and Members of the Committee:

I am pleased to appear before you today--almost 5 years after becoming 
the seventh Comptroller General of the United States--to discuss what 
GAO has accomplished during my tenure thus far, the challenges we face 
at GAO, including why passage of S. 1522, the GAO Human Capital Reform 
Act, is an integral part of helping GAO prepare for those challenges, 
and what we are contemplating for the future. Before I begin, I would 
like to commend you for holding this oversight hearing, the first 
oversight hearing this Committee has held on GAO since 1995. In 
addition, Madam Chair, I would like to thank both you and Sen. 
Voinovich for sponsoring S. 1522, the GAO Human Capital Reform Act, and 
for introducing the bill before the August recess.

When I became Comptroller General in November 1998, I found an 
organization, with a long-standing reputation for doing good work and a 
talented workforce, that was doing many things right. However, the 
agency was in need of revitalization because it had not had a confirmed 
agency head for more than 2 years and had undergone many years of 
downsizing and severe budgetary reductions. I also found an 
organization that, in my opinion, was still too hierarchical, process-
oriented, "siloed," internally focused, and somewhat risk adverse. My 
consultations with congressional members and staff, external entities 
in both the public and private sectors, and GAO staff led me to the 
belief that GAO must do things differently as we move forward in order 
to continue to maximize our value to the Congress and the country, 
especially in view of the strong likelihood of constrained resources 
and client demands. Specifically, we needed to take steps to transform 
GAO to make it more results-oriented, more client focused, more 
partnerial, more externally aware, more transparent, more strategic, 
more employee oriented, and more constructive in dealing with those who 
are the subject of our work. Over the past 5 years, we believe that we 
have accomplished much. Nevertheless, we recognize that we still have 
much to do and welcome and value the comments of every Member of this 
Committee in helping us become and stay a model federal agency that 
supports the Congress' important responsibilities under the U. S. 
Constitution.

GAO's Evolving Role:

Established in 1921 by the Budget and Accounting Act to follow the 
federal dollar and ensure that it is spent in an economical, efficient, 
and effective manner, GAO has evolved over its 82-year history to meet 
the changing needs of the Congress and the nation. Today's GAO is 
profoundly different in organization than the one established in 1921. 
For example, over the years, GAO has changed from an entity that once:

* operated as an independent entity (the law did not state that GAO was 
to be part of the legislative branch) to one that is recognized as an 
independent agency within the legislative branch whose primary client 
is the institution of the Congress;

* audited the government's vouchers to one that evaluates the 
efficiency and effectiveness of a wide range of federal policies and 
programs;

* performed work mostly of a self-initiated basis to one where 89 
percent of its work in fiscal year 2002 was either mandated or 
requested by the Congress;

* conducted work primarily in the area of oversight to one that now 
performs work in the areas of oversight, insight, foresight, and legal/
adjudicatory activities.

* employed principally voucher examiners to an organization that 
employs a highly educated, skilled, and diverse professional staff with 
degrees in a variety of academic disciplines, such as accounting, law, 
engineering, public administration, business administration, computer 
science, economics, medicine, and social and physical sciences.

Although today's GAO is different from that of 1921, it has remained 
faithful throughout its history to its original mandate of assuring the 
government's accountability to the American people. In addition, GAO 
has historically defended its ability to conduct and report its work in 
an independent, objective, professional, and nonpartisan manner in 
order to maintain the credibility that an "honest broker" must have in 
order to have its information, analyses, and judgments trusted by 
lawmakers, policymakers, and the American people.

GAO has benefited from the past leadership of several of my 
predecessors. In particular, I would like to commend my most recent 
predecessors, Elmer B. Staats, who served from 1966 to1981 and, Charles 
A. Bowsher, who served from 1981 to 1996, both of whom accomplished a 
great deal during their 15 year tenures. Mr. Staats strengthened GAO's 
emphasis on program evaluation and policy analysis so that GAO would be 
better equipped to review the expanded social programs of the Great 
Society. He also promoted progress in federal financial and program 
accountability both domestically and internationally. In addition, Mr. 
Staats was responsible for the United States' joining the International 
Organization of Supreme Audit Institutions (INTOSAI), an organization 
composed of national audit offices of 184 nations who share knowledge 
and expertise on an ongoing basis. Mr. Bowsher championed federal 
financial management reform, in general, and the Chief Financial 
Officers (CFO) Act, in particular. He also initiated GAO's high-risk 
series. In the human capital arena, it was Mr. Staats who in 1980 
successfully gained GAO's legislative authority to establish a broad-
banding and pay for performance system that Mr. Bowsher subsequently 
was able to implement in 1989. It is because of their leadership 
efforts that GAO had certain initial human capital tools and 
flexibilities for over two decades that many executive branch agencies 
are either just requesting or recently received and was able to 
exercise them.

Today, GAO is an agency uniquely poised to serve the Congress with the 
information it needs to address the full range of important issues and 
challenges our nation faces in a complex, rapidly changing, and 
increasingly interdependent world. We examine a broad range of federal 
activities and programs, publish thousands of reports and other 
documents annually, and provide a number of other services to the 
Congress. We also look at national and international trends and 
challenges to anticipate their implications for the Congress and our 
country. By making recommendations to improve the practices and 
operations of government agencies, we contribute not only to the 
increased effectiveness of federal spending, but also to the 
enhancement of the taxpayers' trust and confidence in their federal 
government.

For us, achieving our goals and objectives rests on providing 
professional, objective, fact-based, nonpartisan, nonideological, 
fair, and balanced information to the Congress and the public at large. 
We develop and present this information in a number of ways to support 
the Congress, including the following:

* evaluations of federal policies and the performance of agencies;

* oversight of government operations through financial and other 
management audits to determine whether public funds are spent 
efficiently, effectively, and in accordance with applicable laws;

* insight related work that involves determining which programs work 
and which do not;

* foresight related work that is future oriented and involves 
identifying key trends and emerging challenges before they reach crisis 
proportions;

* reviews and analyses of agencies' budgets in support of the 
appropriations process;

* investigations to assess whether illegal or improper activities are 
occurring;

* analyses of the financing for government activities;

* legal/adjudicatory activities, including legal opinions to determine 
whether agencies are in compliance with applicable laws and regulations 
and resolution of bid protests by disappointed bidders seeking to 
obtain federal contracts;

* policy analyses to assess needed actions, develop options, and note 
the implications of possible actions;

* "constructive engagements" whereby we help agencies make progress in 
key areas by "helping them to help themselves" through the issuance of 
self-help guides, benchmarking and best practice studies, etc.; and:

* additional assistance to the Congress in support of its oversight and 
decision-making involving legislative branch entities, activities, and 
functions.

See appendix I for graphics describing GAO past and present.

GAO'S Downsizing:

The 1990s was a difficult period for the GAO. Beginning in 1992, GAO 
began an over 5-year period of significant staff downsizing. During the 
mid-1990s, GAO underwent a 25 percent budgetary reduction that had to 
be implemented over a 2-year period. In order to absorb such a large 
budgetary reduction within such a short period of time, GAO undertook a 
number of measures such as closing 5 field offices (including our 
European and Far East field offices) and 4 sublocations in 1995. GAO 
also reduced its workforce, using authority granted by the Congress, by 
granting voluntary early retirements and buyouts and by conducting a 
reduction in force or "layoffs" of staff in select field offices and in 
Washington, D.C. While the measures taken allowed the agency to address 
the immediate budgetary challenge, they also increased the risk that 
GAO would not be positioned well to serve the Congress in the future. 
For example, GAO's hiring freeze at the entry level produced an over 5-
year gap in the workforce pipeline that affected a smooth succession 
and resulted in a top heavy workforce. GAO also significantly reduced 
its investments in technology by curtailing upgrades of hardware and 
software, which adversely affected its ability to apply technology to 
perform work better, faster, and more efficiently. GAO also eliminated 
bonuses and reduced other investments in its people.

Today, we have a significantly smaller staff--40 percent smaller than 
in 1992--with slightly over 3,250 staff on board. About 75 percent of 
our staff are located in our headquarters in Washington, D. C. and 25 
percent in 11 field offices around the country. While maintaining 
approximately the same number of staff, we have been able to accomplish 
much in support of the Congress. How was this made possible? First, we 
conducted a comprehensive outreach and risk assessment shortly after I 
became the Comptroller General. We identified risks that could 
undermine our ability to support the Congress in future years, such as 
in the areas of human capital and information technology and worked 
with our appropriations committees to obtain targeted funding for those 
areas. We also determined that the agency needed to undertake a 
transformation that even in the best of organizations typically takes 7 
or more years to accomplish. Critical to that transformation was the 
development of a strategic plan that would provide the agency a clear 
set of strategic goals and objectives.

Becoming More Strategic, Partnerial, and Externally Aware:

Fortunately, before my becoming Comptroller General, GAO had recognized 
the need to prepare a strategic plan. We made this a top priority after 
my appointment as Comptroller General. GAO's strategic plan, which is 
developed in consultation with the Congress, is forward looking and 
built on several key themes or trends that relate to the United States 
and our position in the world community. GAO's strategic plan continues 
to be a model for others, a framework for aligning our organization and 
resources, and a basis to help inform client requests and identify work 
initiated on the Comptroller General's authority (also termed research 
and development work). Our strategic planning process provides for 
updates every 2 years, including an ongoing analysis of emerging 
conditions and trends, extensive consultation with congressional 
clients and outside experts, and assessments of internal capacities and 
needs.

Our first strategic plan, issued in the spring of 2000, set forth the 
issues around which we needed to focus and develop our resources to 
effectively serve the Congress in covering the period 2000-2005. We 
updated the plan in fiscal 2002, carrying forward the following four 
strategic goals, and will retain these goals for our latest update 
scheduled to be issued in early 2004 (see appendix I of this statement 
for our strategic plan framework):

* Goal 1: Address current and emerging challenges to the well-being and 
financial security of the American people.

* Goal 2: Respond to changing security threats and the challenges of 
global interdependence.

* Goal 3: Help transform the government's role and how it does business 
to meet 21ST century challenges.

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

Because achieving our strategic goals and objectives also requires 
strategies for coordinating with other organizations with similar or 
complementary missions, we use (1) advisory panels and other bodies 
(e.g., the Comptroller General Advisory Board, the Educators' Advisory 
Panel, the Accountability Advisory Board) to inform GAO's strategic and 
annual work planning and (2) initiate and support collaborative 
national and international audit, technical assistance, and other 
knowledge-sharing efforts. In order to leverage our resources and tap 
certain expertise not resident in GAO, we have entered into a 
partnership agreement with the National Academy of Sciences. Also, we 
have worked to foster partnerships with other "good government" 
organizations, such as the National Academy for Public Administration, 
the Private Sector Council, the Council for Excellence in Government, 
the Partnership for Public Service, and the Association of Government 
Accountants. These types of strategic working relationships allow us to 
extend our institutional knowledge and experience and, in turn, to 
improve our service to the Congress, the country, and the American 
people.

As previously mentioned, since 1970 GAO has been part of an 
international network, INTOSAI, which is composed of 184 accountability 
organizations. We have benefited from this network directly as an 
organization doing work in support of the Congress in that the 
relationships fostered by INTOSAI have facilitated our access to 
people, information, and knowledge sharing needed to maximize the value 
and ensure the expeditious completion of our international engagements. 
It is my opinion that our country has also benefited from our 
participation in this network because our efforts have served to 
promote democratic institutions and fight corruption through 
strengthening accountability organizations around the world. I serve on 
the Board of INTOSAI and head of the Accounting Standards Committee and 
the Board's Strategic Planning Task Force. In this regard, during 
fiscal 2002, GAO was asked to lead a 10-nation task force to develop a 
strategic planning framework for INTOSAI. INTOSAI's draft strategic 
planning framework, which was based on GAO's approach to strategic 
planning, was approved by INTOSAI's Board in October 2002. During 
fiscal 2003, the task force has been working to expand that framework 
into a comprehensive strategic plan. GAO also is an active member of 
the auditing standards, internal control standards, and public debt 
committees. I am a founder of the Global Working Group (GWG), in which 
the heads of GAO's counterparts from 17 countries and I meet annually 
to discuss mutual challenges and share best practices. These 18 members 
represent over 75 percent of global gross domestic product (GDP), and 
the efforts of this group have helped all member countries as well as 
INTOSAI as a whole.

Domestically, I chair the National Intergovernmental Audit Forum, and 
through 10 regional intergovernmental audit forums, GAO consults 
regularly with federal inspectors general as well as state and local 
auditors on issues of mutual interest and concern. In addition, through 
the Domestic Working Group (DWG), the Comptroller General and the heads 
of 18 federal, state, and local audit organizations exchange 
information and seek opportunities to collaborate in a manner similar 
to the GWG. As Comptroller General, I also serve as one of the four 
principals of the Joint Financial Management Improvement Program 
(JFMIP), who are actively fostering financial management reform. The 
JFMIP principals have met five times during the past 2 years with 
significant progress being made during this period of time.

GAO'S Transformation Efforts:

In a testimony on executive reorganization authority that I delivered 
in April this year, I stated that creating high performing 
organizations requires a cultural transformation within agencies. 
Hierarchical management approaches will need to yield to participative 
approaches. Process-oriented ways of doing business will need to yield 
to results-oriented ones. Siloed organizations--burdened with 
overlapping functions, inefficiencies, and turf battles--will need to 
become more horizontal and integrated organizations if they expect to 
make the most of the knowledge, skills, and abilities of their people. 
Internally focused agencies will need to focus externally in order to 
meet the needs and expectations of their ultimate clients--the American 
people.

Consistent with our strategic plan's fourth goal, I believe that GAO 
should "lead by example" and be a model federal agency and world-class 
professional services organization. As the leading performance and 
accountability organization in the United States and possibly the 
world, GAO should be the federal government's model for best practices 
in every major operational area, from strategic planning and 
organizational alignment to performance and accountability reporting, 
client service, human capital practices, financial management, 
information technology, change management, and knowledge management. To 
achieve this, we have undertaken a comprehensive transformation effort 
over the past few years. Leading this transformation team is an 
Executive Committee that I established to provide strategic leadership. 
The members of the Committee include myself as Chief Executive Officer; 
Gene Dodaro, Chief Operating Officer; Sallyanne Harper, Chief Mission 
Support Officer and Chief Financial Officer; and Anthony Gamboa as our 
General Counsel. Together, we have focused GAO's transformation efforts 
on three primary areas: results, clients, and people.

Our efforts to transform GAO into a high performing organization have 
included a range of internal and external initiatives that has helped 
us become more strategic, results-oriented, partnerial, integrated, 
responsive, flexible, employee oriented, externally focused and 
constructive with those who we audit. Our strategic and annual planning 
processes, as discussed earlier, have helped us look forward and 
allowed us to proactively engage our clients in planning work that is 
focused on a more balanced time horizon and results orientation. Our 
organizational restructuring efforts have resulted in a significant 
streamlining and consolidation. We have expanded and revised our 
products to better meet client needs. In addition, we have redefined 
success in results-oriented terms and have linked our goals both to 
institutional and individual performance measures. We have strengthened 
our client relations and employed a constructive engagement approach to 
those we review. The impact of these and other efforts has been 
dramatic.

Over the past 4 years, we have worked on continuously improving GAO's 
performance measures, including most recently the development of a 
balanced scorecard that would allow us to better monitor, track, and 
report the achievement of results. Measuring the right things is 
vitally important because you manage what you measure and measurements 
ultimately drive basic organizational and individual behaviors. The 
performance measures that I found upon arriving at GAO were similar to 
other traditional performance measures in that, among other things, 
some of them focused on items that can be easily counted (e.g., numbers 
of reports); were numerous and of undifferentiated significance; and 
were process-oriented rather than results oriented. Our balanced 
scorecard is based on the three key areas that I mentioned earlier: 
results, clients, and people. For results, we measure such items as: 
financial benefits, other (nonfinancial) benefits, progress towards 
meeting the strategic plan's goals and objectives, number of 
recommendations made, the percentage of reports with recommendations; 
and the percentage of our recommendations adopted. For clients, we 
measure such items as: direct client feedback on individual products 
and testimonies, number of testimonies, and timeliness. For people, we 
measure: attracting and retaining quality talent; developing, 
supporting, and using staff; and leading, recognizing, and listening to 
staff.

Realigning the Organization:

After our strategic plan was developed in 2000, we used it to 
restructure our organization in that same year to align with the goals 
and objectives of our strategic plan. Restructuring can be an important 
tool, but in order to be effective, it must be focused on clear goals 
and specific desired outcomes. GAO's restructuring resulted in the 
elimination of a layer of management and the consolidation of 35 issue 
areas into 13 teams. These teams perform the bulk of our research, 
analysis, and audit work for the Congress.

Of the agencies in the legislative branch, GAO is the only one with a 
field office presence that has allowed it to be Congress' "eyes and 
ears" beyond the nation's capital. However, with changes in air 
transportation, computer technology, demographics, and federal 
presence, our field office structure needed to be reexamined. After 
extensive study, we continued a process that began in 1986 and, as a 
result of the organizational realignment effort referenced above, 
further reduced our field offices from 16 to 11. Subsequently, we 
further restructured our field offices by eliminating the position of 
regional manager--a Senior Executive Service level position--in the 
individual field offices and consolidating the remaining field offices 
into three regions--the eastern region, the central region, and the 
western region, each headed by a single senior executive.

Achieving Results:

GAO's contributions to the Congress and our country are significant and 
varied. While our contributions to financial benefits are quantifiable, 
what is more difficult to quantify and yet very valuable, are 
contributions to help inform the national debate on a broad spectrum of 
issues; providing the Congress with assistance such as reviews of 
agency budgets that help identify areas of potential savings; 
preventing major problems from occurring through constructive 
engagement efforts, when appropriate, with agencies to "help them help 
themselves" make progress in key areas; leading by example to 
demonstrate to agencies what can be done to advance management reform; 
and advancing the accountability community, both domestically and 
internationally, through the sharing of best practices and 
methodologies in areas where GAO is a recognized leader, such as 
performance auditing, financial auditing and reporting, standards 
setting, and governance.

To move towards a results orientation, we have reexamined our desired 
outcomes and are working to simplify and improve our performance 
measures to capture those contributions that are most significant. 
Beginning with the issuance of our strategic plan, we monitor our 
progress. Fortunately, by any reasonable benchmark, we are making 
excellent progress towards achieving most of our performance goals. We 
also modified our performance measures and eliminated specific goals, 
such as the number of products issued, which, while easy to count, was 
not results-oriented and did not have a strong enough correlation to 
positive results.

GAO delivers by any benchmark, an excellent return on investment to the 
Congress and the American people. I would like to briefly summarize 
some of our achievements over the past 5 years. Our financial and 
nonfinancial accomplishments have increased steadily over the past 5 
years, and some have almost doubled. See table 1 for a summary of GAO's 
financial and nonfinancial benefits.

Table 1: Annual Measures and Targets:

Performance measure: Financial benefits (billions); 1998: Actual: 
$19.7; 1999: Actual: $20.1; 2000: Actual: $23.2; 2001: Actual: $26.4; 
2002: Target: $30.0; 2002: Actual: $37.7[A]; 5-year Avg. Actual: $25.4; 
2003: Target: $32.5[B].

Performance measure: Other benefits; 1998: Actual: 537; 1999: Actual: 
607; 2000: Actual: 788; 2001: Actual: 799; 2002: Target: 770; 2002: 
Actual: 906; 5-year Avg. Actual: 727; 2003: Target: 800[B].

Performance measure: Past recommendations implemented; 1998: Actual: 
69%; 1999: Actual: 70%; 2000: Actual: 78%; 2001: Actual: 79%; 2002: 
Target: 75%; 2002: Actual: 79%; 5-year Avg. Actual: N/A; 2003: Target: 
77%.

Performance measure: New recommendations made; 1998: Actual: 987; 1999: 
Actual: 940; 2000: Actual: 1,224; 2001: Actual: 1,563; 2002: Target: 
1,200; 2002: Actual: 1,950; 5-year Avg. Actual: 1,333; 2003: Target: 
1,250[B].

Performance measure: New products with recommendations; 1998: Actual: 
33%; 1999: Actual: 33%; 2000: Actual: 39%; 2001: Actual: 44%; 2002: 
Target: 45%; 2002: Actual: 53%; 5-year Avg. Actual: 40%; 2003: Target: 
50%.

Performance measure: Testimonies; 1998: Actual: 256; 1999: Actual: 229; 
2000: Actual: 263; 2001: Actual: 151; 2002: Target: 200; 2002: Actual: 
216; 5-year Avg. Actual: 223; 2003: Target: 180[B].

Performance measure: Timeliness; 1998: Actual: 93%; 1999: Actual: 96%; 
2000: Actual: 96%; 2001: Actual: 95%; 2002: Target: 98%; 2002: Actual: 
96%; 5-year Avg. Actual: 95%; 2003: Target: 98%.

Source: GAO.

[A] Changes GAO made to its methodology for tabulating financial 
benefits caused the fiscal 2002 results to increase about 11 percent.

[B] Four targets published in GAO's performance plan for fiscal 2003 
were subsequently revised based on more current information. Two were 
raised; two were lowered. The original targets were financial benefits, 
$35 billion; other benefits, 785; recommendations made, 1,200; and 
testimonies, 210.

[End of table]

As depicted in table 1, in fiscal year 1998, for every dollar invested 
in GAO, we helped the Congress and the agencies produce about $58 in 
financial benefits or $19.7 billion in total. In fiscal year 2002, for 
every dollar invested in GAO, we helped the Congress and the agencies 
produce about $88 in financial benefits or $37.7 billion in total. The 
5-year average for financial benefits was $25.4 billion for fiscal 
years 1998 through 2002. These financial benefits were achieved through 
actions taken by the Congress and federal departments and agencies that 
led to budget reductions, avoided costs, deferred appropriations, or 
resulting in additional revenue collections. Several recent examples of 
where our work resulted in significant financial benefits include our 
work in preventing inappropriate Medicare payments (financial benefits 
of $8.1 billion) and our work on the Department of Defense's (DOD) 
consolidation initiatives at its computer centers (financial benefits 
of $859 million). Based on our results to date, we fully expect our 
fiscal year 2003 financial benefits to significantly exceed the 5-year 
average.

GAO's work has helped inform congressional deliberations and debate on 
a broad spectrum of issues. During the 107TH Congress, we made 
substantive contributions through our products, testimonies, 
briefings, and technical assistance in areas vital to helping 
legislators address challenges to our nation's national security, 
homeland security, economic security, as well as the financial security 
of Americans. For example, during the 107TH Congress, GAO's work 
supported legislative deliberations and policy decisions involving the 
Homeland Security Act of 2002, Public Law 107-296; the Aviation 
Security and Transportation Act, Public Law 107-71; the Sarbanes-Oxley 
Act of 2002, Public Law 107-204; Help America Vote Act of 2002, Public 
Law 107-252; Best Pharmaceuticals for Children Act, Public Law 107-
1092; Terrorism Insurance Act of 2002, Public Law 107-297; and the E-
Government Act of 2002, Public Law 107-347. Our work has also helped 
facilitate the transformation of the federal government in general. 
More specifically, our efforts have helped identify the attributes of 
high performing organization, challenges in the human capital arena, 
competitive sourcing, and reforms needed for specific entities like the 
U. S. Postal Service and the Pension Benefit Guaranty Corporation.

In addition to financial benefits, GAO's work has led to improvements 
in a wide range of government operations and activities. GAO's work was 
instrumental in bringing 906 needed improvements in the effectiveness 
and efficiency of government operations and services in fiscal year 
2002. Since most of the results of our work take the form of action 
initiated in response to our recommendations, we use the number of 
recommendations made during the year as a performance measure. In 
fiscal year 2002, we made 1,950 recommendations for improvements in the 
economy, efficiency, and effectiveness of federal operations. An 
example of recommendations that led to such improvements is our work on 
improper payments, where we made recommendations on actions agencies 
should take to reduce improper payments. These recommendations not only 
led to the enactment of the Improper Payments Information Act of 2002, 
Public Law 107-300, but also resulted in action by the Office of 
Management and Budget (OMB) through the President's Management Agenda 
which required selected agencies to report improper payment rates and 
the causes of those payments. Because our recommendations take time to 
implement, we track recommendations made in past years. Specifically, 
in fiscal year 2002, we noted that 79 percent of the recommendations we 
had made in fiscal 1998 had been implemented, a significant percentage 
when the work we have done for the Congress becomes a catalyst for 
creating tangible benefits for the American people.

GAO continued its long-standing tradition of providing the Congress a 
framework for oversight through the issuance of our Performance and 
Accountability Series and High-Risk Update. Our 2001Update identified 
close to 100 major management challenges and program risks at 21 
federal agencies and highlighted actions to address these serious 
problems. In preparing the 2001 update, we established a new framework 
with respect to the High Risk list that provided greater consistency in 
determining which areas should be designated high risk and which areas 
would be eligible for getting off the high risk list. Our 2003Update 
added the new high risk issues Implementing and Transforming the New 
Department of Homeland Security, Modernizing Federal Disability 
Programs, Federal Real Property, and the Medicaid Program; 
subsequently, we added the Pension Benefit Guaranty Corporation's 
Single-Employer Insurer Program. We are currently examining ways of 
improving on our Performance and Accountability Series and High-Risk 
Update with an eye towards making it even more strategic and foresight 
oriented.

Serving the Client:

From the beginning of my tenure, I have sought to strengthen relations 
and improve communications with our congressional clients. Addressing 
client needs is critical to any organization's success, and while GAO 
is unique in that it must provide the Congress its best professional 
opinion in a political, and sometimes contentious, environment, it must 
be perceived by its client as meeting its needs. Both prior to and 
subsequent to my appointment as Comptroller General, I consulted 
broadly with key Members and staff in both houses and on both sides of 
the aisle as well as with a variety of other parties. Based on this 
outreach, some believed or perceived that GAO may have strayed from 
important values related to its mission, may have become closer to one 
political party, and, may not have effectively managed its staff 
details to certain congressional committees. Another concern that I 
heard was that GAO's basis for decision making on requests was not very 
transparent, well known, or understood.

To address these issues, upon becoming the Comptroller General, I 
immediately worked with GAO's top management to establish and 
communicate to all GAO staff our mission and core values, to guide what 
we do and how we do our work. Our mission statement states: "GAO exists 
to support the Congress in meeting its constitutional responsibilities 
and to help improve the performance and ensure the accountability of 
the federal government for the benefit of the American people." After a 
lot of discussion and debate, we agreed on an express set of core 
values to guide our work. GAO's core values are accountability, 
integrity, and reliability. The values are further defined as follows:

* Accountability: We help the Congress oversee federal programs and 
operations to ensure accountability to the American people. GAO's 
analysts, lawyers, auditors, economists, information technology 
specialists, investigators, and other multidisciplinary professionals 
seek to enhance the economy, efficiency, effectiveness, and credibility 
of the federal government both in fact and in the eyes of the American 
people.

* Integrity: We set high standards for ourselves in the conduct of 
GAO's work. Our agency takes a professional, objective, fact-based 
nonpartisan, nonideological, fair and balanced approach to all 
activities. Integrity is the foundation of reputation and the GAO 
approach to work ensures both.

* Reliability: We at GAO want our work to be viewed by the Congress and 
the American public as reliable. We produce high-quality reports, 
testimony, briefings, legal opinions, and other products and services 
that are timely, accurate, useful, clear and candid.

These are values that represent our institutional beliefs and 
boundaries. I use them every day in my internal and external decision 
making. Both our mission and core values are communicated externally 
and internally through many venues.

In addition, we also developed and implemented a set of Congressional 
Protocols--policies and procedures--to guide our interactions with and 
ensure our accountability to the Congress. These protocols, which 
underwent a 9-month pilot test, set out clear, transparent, 
consistently applied policies and practices for GAO's relations with 
the Congress. They are designed to help reduce miscommunications and 
ensure that our congressional requesters are treated both consistently 
and equitably. The final protocols were issued in November 2000 and 
have been well received. We are in the process of updating our 
Congressional Protocols now and will be vetting them with your 
Committee and others before finalizing the revisions.

To respond more effectively to the Congress, we changed our process for 
accepting congressional requests (if accepted, these requests are 
termed engagements) and our approach to identifying related risk. We 
have become increasingly sophisticated in meeting our clients' needs 
within available resources. We believe that our engagement acceptance 
process has provided more structure; a broader institutional 
perspective; greater internal collaboration; and additional awareness 
of the external environment, including potential partnerships in 
connection with GAO engagements. Annually, in addition to mandates 
established in law, we receive over a thousand requests from the 
Congress, with most coming from congressional committees and lesser 
numbers from individual members of Congress and the senior leaders. To 
address these requests in a timely basis and allow for prompt 
communication back to the requesters, the requests are reviewed and 
discussed in a weekly meeting chaired by Gene Dodaro, our Chief 
Operating Officer. During that meeting, members of the Executive 
Committee and GAO's managing directors discuss congressional requests 
received during the previous week. As part of that discussion, we 
determine whether to accept the request based on consideration of 
factors such as our ability to carry out the work in terms of both 
authority and resources available, work that may already be ongoing, 
and the priority assigned to the requester based on those set forth in 
our Congressional Protocols. Also, during that meeting, a risk factor 
is assigned to the engagement that will, among other things, determine 
the level of product review required before issuance. To facilitate the 
timeliness of our response to our clients, I have delegated to our team 
managing directors the authority to sign off on products with lower 
risk designations.

In the interest of leading by example and promoting transparency and 
accountability in government, we provide annual Performance and 
Accountability reports to the Congress and the public. We have also 
improved congressional access to GAO information on our active 
assignments and our products. GAO's first Accountability Report to the 
Congress, which discusses our performance and accountability in serving 
the Congress and the American people, was issued for fiscal year 1999. 
For fiscal year 2001, we issued a performance plan that contained the 
performance measures and annual performance targets we planned to use 
to gauge progress towards accomplishing our strategic goals and 
objectives. For 2002, we combined an assessment of our accomplishments 
in fiscal year 2001 with our plans for continued progress through 
fiscal year 2003 into one performance and accountability report and 
issued a new and condensed "highlights report." George Mason 
University's Mercatus Center evaluated our fiscal year 2002 Performance 
and Accountability report at our request and ranked GAO's report number 
one in the federal government. The report earned a Certificate of 
Excellence in Accountability Reporting from the Association of 
Government Accountants (AGA). It also earned honors for graphics design 
in the annual American Graphics Design Award competition of 2003. The 
annual competition attracts about 10,000 entries from advertising 
agencies, graphic design firms, corporate creative departments, and 
publishers in a wide range of categories, and fewer than 10 percent 
were selected for awards.

In the past, GAO has made several attempts to devise systems for 
measuring how well it was meeting the needs of our congressional 
clients, yet none of these attempts proved to be particularly 
successful. We now seek direct client feedback through our continuous 
congressional outreach effort and a Web-based client feedback survey on 
certain individual products and testimonies. These initiatives are set 
forth as follows.

* Continuous congressional outreach. Since the mid-1990s, we have 
conducted a structured outreach to our key congressional clients--the 
Senate and House senior leaders and the congressional committees--in 
order to obtain feedback on our performance, discuss the legislative 
agenda for the coming year and how GAO can best support the Congress, 
and obtain information needed to update our strategic plan.

* Feedback on individual products. In fiscal year 2001, we developed a 
Web-based process to more effectively collect feedback from 
congressional clients on our reports and products. This new system, 
which we piloted for 7 months with our oversight committees and 
implemented in fiscal year 2002, used E-mail and a Web site to obtain 
client feedback on (1) product timeliness and (2) communications and 
professional conduct during the engagement for a sample of recently 
issued products. For example, of those who responded, we received a 91 
percent favorable response rate for our testimonies and a 93 percent 
favorable response rate for our written products for the period 
covering March through November 2002. Indications are that the 
favorable response rate for our products and testimonies is holding for 
this fiscal year as well.

* Congressional testimonies. Since the early 1980s, GAO's testimonies 
at congressional hearings have increased. At one time, only the 
Comptroller General and a few others could testify. My predecessor, Mr. 
Bowsher, expanded the pool of potential GAO witnesses to our senior 
executive corps. During fiscal 2002, members of our senior executive 
service or I testified 216 times in fiscal year 2002 across a broad 
spectrum of congressional committees, sometimes on as little as 24 
hours notice.

* Timeliness. Given the time sensitive nature of the legislative 
process and the fact that information delivered after decisions have 
been made is not useful, we have worked hard to make sure that 
information is provided in a timely manner. In fiscal year 2002, our 
on-time delivery rate was 96 percent. Of our seven agencywide annual 
performance targets, timeliness was the only measure that we did not 
fully meet.

Recognizing that members and key staff are inundated with information 
and pressed for time, we sought better ways of communicating 
information to them. We initiated efforts in fiscal year 2001 to revamp 
our communications strategy. We piloted and have now implemented for 
most of our products and testimonies a new reporting product line 
entitled Highlights--a one-page summary that provides the key findings 
and recommendations from a GAO engagement. This summary has been 
extremely well-received by our congressional audience as well as the 
press and the general public. In addition, we continue seeking better 
ways to communicate, including presenting information in a visual 
manner to quickly convey the message.

We have applied technology and used our Website to issue and publicize 
our products not only to the Congress, but also to the general public. 
Our external website now logs about 130,000 hits each day and more than 
1 million GAO products are downloaded every month by our congressional 
clients, the public, and the press. Further, to better inform the 
client about the work we have in progress, we have implemented a Web-
accessible active assignment list for congressional clients and to 
facilitate key contacts, enhanced the search capability for GAO 
products on our external Web site.

In yet another example of serving the Congress, GAO opened our doors to 
Members of the House of Representatives and their staffs on October 23, 
2001, in response to the anthrax incident on Capitol Hill. As an 
outgrowth of that experience, the House of Representatives has 
designated GAO one of its contingency sites in the event of an 
emergency in order to maintain legislative continuity of operations.

Fostering Constructive Agency Relations:

To better maximize our value to the Congress and work smarter, we have 
increased our constructive engagement efforts with other agencies. 
Rather than deal with problems after the fact, piecemeal, or when 
they've reached crisis proportions, we are working to prevent problems 
by pointing out what is right, recognizing the progress made, and 
guiding agencies to positive results by publishing self-assessment 
guides that provide tools with which agencies can help themselves. One 
area in particular where this has made a big difference is information 
technology. As we have reported repeatedly, the federal government does 
not have the systems in place that can provide accurate and real-time 
information for legislators and policymakers to evaluate program 
effectiveness and efficiency. However, our benchmarking and best 
practices studies are recognized industrywide for their excellence. 
Other examples of our assisting agencies include GAO's work in 
strategic planning, human capital, and financial management.

To this end, we have worked hard to cultivate good working relations 
with the Office of Management and Budget (OMB) and Cabinet-level 
officials. These relations have proven mutually beneficial. Because 
Congress' need for information is time sensitive, having good working 
relations with the executive branch agencies has helped us overcome 
bureaucratic inertia or resistance in their providing information in a 
timely manner. As part of our constructive engagement efforts, we have 
assisted in the congressional and presidential transitions and provided 
new legislators and officials with information about the challenges 
facing them. These and other constructive engagement efforts are 
helping focus increased attention on major management challenges and 
high-risk issues, thus contributing to good government. Our Performance 
and Accountability Series and High Risk Update has proven useful in 
carrying out our responsibility under the Presidential Transition Act 
in that it helped serve as a key source of information for the incoming 
administration and Members of the 107TH Congress. In addition, the 
President's Management Agenda (PMA) for reforming the federal 
government mirrors many of the management challenges and program risks 
that GAO reported on in its 2001 Performance and Accountability Series 
and High-Risk Update, including a governmentwide initiative to focus on 
strategic management of human capital.

To minimize misunderstanding and miscommunication between us and the 
agencies relating to how we do our work and report the results, we 
piloted a first-ever set of agency protocols for a 6-month period from 
December 2002 through June 2003, to guide our interactions with federal 
agencies and provide clearly defined, consistently applied, well-
documented, and transparent policies for conducting our work with these 
federal agencies. In developing the protocols, we sought comments from 
28 federal departments, agencies, and entities and are in the process 
of considering their comments. After analyzing the comments from the 
pilot, we plan to implement the agency protocols in fiscal year 2004.

Investing in People: Human Capital Initiatives:

Given GAO's role as a key provider of information and analyses to the 
Congress, maintaining the right mix of technical knowledge and 
expertise as well as general analytical skills is vital to achieving 
our mission. We spend about 80 percent of our resources on our people. 
I think it is fair to say that while our people account for 80 percent 
of our costs, they constitute 100 percent of our real assets. Without 
excellent human capital management, we could still run the risk of 
being unable to deliver what the Congress and the nation expects of us. 
For this and other reasons, we seek the additional human capital 
flexibilities contained in S. 1522.

At the beginning of my term in fiscal year 1999, we completed a self-
assessment that profiled our human capital workforce and identified a 
number of serious challenges facing our workforce, including 
significant issues involving succession planning and imbalances in the 
structure, shape, and skills of our workforce. As presented below, 
through a number of strategically planned human capital initiatives 
over the past few years, we have made significant progress in 
addressing these issues. The flexibilities provided GAO in the GAO 
Personnel Flexibilities Act of 2001, Public Law 106-303, enacted on 
October 26, 2000, was a contributing factor in helping us reshape the 
organization. In fiscal years 2002 and 2003, because of the authority 
granted us under the law, we granted voluntary early retirement to 52 
employees in fiscal year 2002 and 37 employees in fiscal year 2003. As 
a result of our various human capital initiatives, as illustrated in 
figure 1, by the end of fiscal year 2002, we had almost a 60 percent 
increase in the percentage of staff at the entry-level (Band I) as 
compared with fiscal year 1998. Also, the proportion of our workforce 
at the mid-level (Band II) decreased by 8 percent.

Figure 1: GAO's Human Capital Profile:

[See PDF for image]

[A] Attorneys and criminal investigators.

[B] Mission support includes both mission and mission support offices.

[End of figure]

One of my top priorities when I became Comptroller General was to 
enhance internal communications as a means of empowering staff and 
facilitating our agency transformation and our change management 
efforts. This has been accomplished through various means. For example, 
any GAO staff member can e-mail me with comments and concerns, and 
believe me, I do respond. Since becoming Comptroller General, I have 
provided employees throughout GAO the opportunity to provide me their 
views through a periodic, now annual, confidential employee survey. An 
independent contractor collects the survey results and aggregates them. 
They then are provided to GAO's managing directors and me. Employees 
are also given the opportunity to provide written narrative comments 
that I, and I alone, receive for review. I recently received the 
results of the 3RD employee survey in which 89 percent of GAO's 
workforce responded and 2,101 provided me with written narrative 
comments, which I personally read. Highlights of this most recent 
employee survey are as follows.

* The results of the 2003 Employee Survey were by and large very 
positive. Of those questions with a basis for year-to-year comparisons, 
employee satisfaction (as measured by the number of strongly agree/
agree responses) was up in 72 of the 83 areas, with one area remaining 
unchanged.

* Critical "People Measures Scores," which are used in our balanced 
scorecard and reported externally, went up in all four areas (i.e., 
organizational climate, staff utilization, leadership, and staff 
development) in 2003 versus 2002. The increases in people measures were 
attributable to both new and experienced staff responses to the 2002 
survey.

* In comparing our results to OPM's 2002 survey of executive branch 
agencies for 11 benchmark questions, our 2003 survey results were 
higher than the governmentwide benchmark numbers for 9 of 11 comparable 
questions. GAO's overall average positive score for these 11 benchmark 
questions was about 10 percent higher than the OPM benchmark questions' 
average. Similarly, for the four benchmark questions also applicable to 
the private sector, GAO's scores were higher than both the private 
sector and government averages in all four areas, significantly so in 
three of the four questions.

* Some areas, such as encouraging innovation and creativity and 
soliciting and considering employee views, went up dramatically, which 
are big steps in the right direction with respect to our overall 
transformation effort.

* There was only one area where the positives went down and the 
negatives went up, and that was in the area of requiring our employees 
to prepare Individual Development Plans (IDP). As a result, we are 
reassessing and reconsidering our approach to IDPs.

I have also used periodic CG "Chats," which are closed-circuit 
telecasts to all agency staff. Through the years, I have used these 
telecasts on numerous occasions to discuss critically important issues, 
such as GAO's strategic plan and congressional protocols, client 
service, employee survey results, work processes, organizational 
alignment, information technology--including our most recent human 
capital initiative, which your committee is considering today. In 
addition, we established an employee suggestion program in October 1999 
as a means of tapping the ideas and ingenuity of GAO staff members to 
improve the agency's processes, products, and services. Since the start 
of the program, 2,348 suggestions have been submitted, of which 345 
have been accepted, with most of the remaining either rejected or 
closed because they didn't meet the program's criteria or had 
duplicated earlier suggestions.

One of the areas of which I am most proud is the establishment of our 
now fully democratically elected Employee Advisory Council (EAC). This 
23-member Council represents virtually every group of GAO employees. 
The members of the Executive Committee and I use this Council to 
discuss current and emerging issues of mutual interest and concern and 
to continuously improve GAO. While the EAC opted not to testify today, 
I understand that they have submitted a statement for the record on 
GAO's human capital proposal.

Other major human capital initiatives include the following:

* Recruiting talented staff. Because of the budget reductions of the 
mid-1990s, GAO froze hiring, which created an over 5-year gap in its 
workforce pipeline. In fiscal year 1998, we resumed hiring, and in 
fiscal year 2002, we hired nearly 430 permanent staff and 140 interns. 
We also developed and implemented a strategy to place more emphasis on 
diversity in campus recruiting. A recent article in the Washington Post 
lauded GAO's recruitment innovations and efforts as an example of a 
federal agency that is approaching recruiting right.

* Identifying and assessing skills. A modern professional services 
organization needs to know what skills its workforce possesses and be 
able to readily assess those skills in support of its clients. GAO has 
conducted an agencywide assessment and inventory of our workforce's 
knowledge and skills that is updated periodically.

* Retaining staff with critical skills. A challenge facing the federal 
government is the retention of critical skills, particularly in the 
technical areas. Using the authority granted us by Public Law 106-303, 
we established a corps of senior level executives who have the pay and 
benefits of the Senior Executive Service but need not be generalist 
managers. To retain staff with critical skills and staff with less than 
3 years of GAO experience, we implemented legislation authorizing 
federal agencies to offer student loan repayments in exchange for 
certain federal service commitments. GAO ranks as one of the top 
agencies in providing student loan repayments. GAO also periodically 
administers an employee preference survey that is being used along with 
the results of the knowledge and skills inventory to meet our 
institutional work needs while accommodating staff preferences for 
types of work to the extent possible. In addition, we have recently 
instituted a new knowledge transfer and succession planning program 
that would allow select retirees to become reemployed annuitants for up 
to 2 years following retirement in order to facilitate the transfer of 
knowledge in critical areas and allow for a smooth transfer of 
responsibilities.

* Modernizing the performance assessment system. In fiscal year 2002, 
GAO completed an overhaul of its performance assessment system and 
implemented a new, modern, effective, and credible performance 
appraisal system for analysts and specialists; adapted the system for 
attorneys; and began modifying the system for administrative 
professional and support staff. Our performance standards were revised 
to incorporate our core values and strategic goals. We also updated 
descriptions of performance to better reflect the current nature of our 
work and implemented other key concepts, such as leadership-by-example, 
client service, measurable results, matrix management, open and 
constructive communications, and balancing people and product 
considerations.

* Investing in training. One of the down sides of the budget reductions 
of the mid-1990s was that GAO reduced its training investment in 
employees. World-class professional service organizations with staffs 
similar to GAO's multidisciplinary workforce invest nearly 6 percent of 
their budgets in training staff. GAO's investment in training its staff 
in fiscal year 1998 was less than that. We have resumed our training 
investment, but with an eye towards maximizing the efficiency and 
effectiveness of our investment. To this end, we have hired a Chief 
Learning Officer and established a new Learning Board to guide our 
Center for Performance and Learning in formulating its training 
priorities. We have also begun developing a new core training 
curriculum for managers and staff to provide additional training on the 
key competencies required to perform GAO's work.

* Creating incentives and improving recognition. One of the areas that 
I have championed since coming into office has been establishing the 
allocation of pay on a more performance-oriented basis. We have been 
fortunate to be the beneficiaries of excellent recruits, due in part to 
the economic downturn, a renewed interest in public service following 
the events of September 11, 2001, and our innovative human capital 
strategies. Retaining these recruits, however, will require a range of 
efforts including providing a continuous learning environment, adequate 
technological support, and reasonably competitive compensation. Also, 
for those who have made GAO their careers, there should be rewards for 
outstanding performance. For example, during fiscal year 2003, we began 
providing performance bonuses to top performers who are "pay capped"--
those who, because they have reached the pay ceiling, are ineligible 
for any permanent pay increases.

S. 1522 would help us continue to invest in our people and attract, 
recruit, and retain staff with the critical skills we need.

Building an Integrated and Reliable Information Technology 
Infrastructure:

Information technology is critical to our productivity, success, and 
viability. As such, we have been working on a number of initiatives to 
enhance and protect our investments in information technology. 
Specifically, we have:

* completed a comprehensive review of our information technology;

* rechartered and reestablished our Information Technology Investment 
Committee to provide high-level vision, review, and approval of program 
initiatives to transition from the current technological environment to 
the target one.

* developed, as required by the Clinger-Cohen Act, an enterprise 
architecture program--a blueprint for operational and technological 
change;

* expanded information systems security efforts and disaster recovery 
systems that allow for continuity of operations;

* made progress to implement a risk-based, agencywide security program, 
provide security training and awareness, and develop and implement an 
enterprise disaster recovery solution; and:

* begun implementing an information security program consistent with 
the requirements in the Government Information Security Reform 
provisions (commonly referred to as "GISRA") enacted in the Floyd D. 
Spence National Defense Authority Act for fiscal year 2001.

During 2002 and 2003, we acquired new hardware and software and 
developed user-friendly systems that enhanced our productivity and 
responsiveness to the Congress. Specifically, we replaced aging desktop 
workstations with notebook computers that provided greater computing 
power, speed, and mobility; developed new, integrated, user-friendly 
Web-based systems that eliminate duplicate data entry while ensuring 
the reusability of existing data; expanded the availability of cellular 
phones and personal digital assistants to GAO's senior management; and 
added video broadcast capability to the desktop. In addition, we 
upgraded remote access capability, improving the speed and reliability 
of dial-up connections to GAO's information technology facilities; 
completed communications upgrades to the field to provide high-speed, 
reliable connectivity to the GAO network; replaced aging 
videoconferencing equipment with current technology; and began planning 
communications upgrades to support evolving video technologies.

Recently, the CIO Magazine's August 15, 2003, issue named GAO as a "CIO 
100" organization, thereby recognizing GAO's excellence in managing 
information technology resources. Of the over 400 applicants from both 
the public and private sectors, GAO was one of just three federal 
agencies named a "CIO 100". Specifically, GAO was recognized for asset 
management (i.e., getting the most out of it existing systems), 
staffing and sourcing (i.e., flexible and creative approaches to 
meeting personnel needs), and partnerships (i.e., building internal and 
external relationships to deliver new products and services). In 
addition, GAO was specifically cited for a best practice--staffing new 
projects through internal "help wanted" ads.

Reengineering Business Processes:

As part of the organizational realignment implemented in calendar year 
2000, we established an internal group whose mandate was to focus on 
business process reengineering as a tool for increased productivity and 
knowledge management. One of the accomplishments of this group was the 
launching of the Electronic Assistance Guide for Leading Engagements--
the EAGLE, which is the prototype of a comprehensive Web-based guide to 
conducting GAO engagements. Recently, we have established a Continuous 
Improvement Board to guide the activities of the group that has been 
integrated into our Quality and Continuous Improvement office.

Along with our realignment, we also implemented two new management 
strategies: risk management and matrix management. GAO's risk 
management approach allows management to identify key stakeholders 
throughout an engagement, to transcend traditional organizational 
boundaries, to maximize value, and manage risks in connection with 
GAO's engagements and other activities. GAO's matrix management 
approach maximizes our value to the Congress by leveraging the 
knowledge, skills, and experience of all employees to ensure the 
highest quality products and services and to help the Congress address 
the challenging, complex, rapidly changing, and multidimensional 
problems facing the nation.

Being Good Stewards of Our Financial Resources:

As the leading performance and accountability organization in the 
public sector, it is vital that GAO set the example in the area of 
financial management as well. GAO's financial statements for fiscal 
years 2002, like those for fiscal years past, received an unqualified 
opinion from an independent auditor. No material weaknesses in internal 
control were identified, and the auditor reported substantial 
compliance with the requirements in the Federal Financial Management 
Improvement Act of 1996 (the Improvement Act) for financial systems. In 
addition, the auditor did not find any instances of noncompliance with 
the laws or regulations for which they tested.

Challenges:

As with any organization, we face a range of internal and external 
challenges that could affect our ability to effectively support the 
Congress in the future. Some of these challenges are those that require 
ongoing management vigilance and attention (e.g., assuring product 
quality and adherence to core values, human capital, physical security, 
and information security) while others are special challenges that 
warrant monitoring and/or congressional attention.

While we have put in place a good risk management system for our 
engagements, whereby all the engagements are reviewed weekly and 
categorized by a variety of factors including risk, we nevertheless 
must always be vigilant that GAO does not stray from its values and 
therefore, lose its reputation for being an "honest broker" on 
important government operations and policy issues. Given that about 25 
percent of our staff have been with GAO for 3 years or less, it is 
vitally important that we inculcate these values in our staff and train 
them in the proper conduct of our work. Also, we need to make sure the 
staff who have been here for more than 3 years remain true to our 
values and our quality assurance standards and practices. To ensure 
that we have an independent quality check in place, GAO has had, 
beginning with its financial audits issued in 1995 and continuing for 
every 3 years thereafter, an external group--an independent CPA firm--
performs a peer review of our work. We are currently in the process of 
extending this practice to our non-financial work and expect our 
products issued in 2004 to be peer reviewed by a team headed by the 
Auditor General's office of Canada who will conduct their work between 
2004 and 2005. To prepare for this, we have invested much effort in 
revamping our quality assurance framework.

We named in our fiscal year 2002 Performance and Accountability report 
three risk areas--human capital, physical security, and information 
security--as areas that could affect our ability to perform work for 
the Congress. We have made progress in addressing each of these 
challenges, but still have work to do.

In the human capital area, we are faced with a challenge because a 
significant percentage of our workforce is nearing retirement age, 
while marketplace, demographic, economic, and technological changes 
indicate that competition for skilled workers will be greater in the 
future. We are recruiting diverse, high-caliber staff with the skills 
and abilities we need to achieve our strategic goals and objectives. 
Whether we will be able to retain them when the economy improves 
remains to be seen, but I can assure you that we are doing our best to 
do so. Given GAO's role as a key provider of information and analyses 
to the Congress, maintaining the right mix of technical knowledge and 
expertise as well as general analytical skills is vital to achieving 
our mission. Over the next several years, we need to continue to 
address skill gaps, maximize staff productivity and effectiveness, and 
reengineer our human capital policies, programs, and processes to make 
them more user-friendly. We plan to address skill gaps by further 
refining our recruitment and hiring strategies to target gaps 
identified through our workforce planning efforts, while taking into 
account the significant percentage of our workforce eligible for 
retirement.

In the aftermath of the September 11 terrorist attacks and subsequent 
anthrax incidents, the ability to provide a safe and secure workplace 
emerged as a challenge for our agency. Protecting our people and our 
assets is critical to our ability to carry out our mission to serve the 
Congress and the American people. Also in light of these incidents, we 
need to ensure information systems security and disaster recovery 
systems that allow for the continuity of operations. We have made 
progress through our efforts to, among other things, implement a risk-
based, agencywide security program; provide security training and 
awareness; and develop and implement an enterprise disaster recovery 
solution.

Special Challenges:

The following are some special challenges that we are carefully 
monitoring and may need to work with the Congress on to address:

* Unfunded mandates. Since becoming the Comptroller General, I have not 
asked for any increase in our staffing levels and have requested 
targeted investments in human capital, information technology and 
security, and physical security initiatives based on specific business 
cases. Last year, the Congress passed a 4.1 pay increase but did not 
provide funding for all of the increase. While we were able to 
reallocate our budget to cover these increases, we are concerned that 
if this becomes a regular practice, we will be unable to effective 
discharge our responsibilities in view of the fact that our employees' 
salaries and related benefits comprise 80 percent of our budget. We 
have worked hard with available resources to cover mandatory expenses, 
including inflation and compensation costs. In addition, there has been 
recent interest in having GAO expand the scope of its activities in 
such areas as evaluating regulatory costs and benefits as well as 
conducting technology assessments. While I obviously want to be sure 
that we meet the changing needs of the Congress, I believe strongly 
that any significant expansion of the scope of our work should be 
coupled with appropriate funding. Doing otherwise would ultimately 
undermine our ability to carry out our core activities. Looking longer-
term, we are concerned about the future fiscal outlook and its 
potential impact on our organization. We hope that the Congress will 
resist the tendency, in responding to budgetary constraints, to 
institute across the board budget reductions or reward the "basket 
cases" with additional flexibilities and appropriations, instead of 
rewarding organizations such as ours that generate positive results, do 
many things right, and are trying to do the right things.

* Supply and demand imbalances. While the overall number of 
congressional requests has decreased, the quality of these requests has 
improved which is reflected in the results we are achieving. Also, more 
requests are of a bipartisan nature. However, we are monitoring closely 
the number of engagements that we have accepted but not yet staffed, 
which has increased during the past 4 years. These engagements, 
totaling over a hundred, are spread among our 13 teams. The backlog is 
particularly acute in certain teams and areas (e.g., health care) 
because of increasing congressional demands. While we are working to 
achieve more flexibility in the way we staff and are reexamining our 
inventory, there is a limit to our ability to address these challenges 
by shifting resources from one area to another because of the 
specialized skills and knowledge required. We are concerned that we may 
not be able to respond to engagements we accept in a timely manner if 
the backlog builds. Also, if this supply and demand imbalance continues 
to grow, we will need to work with this Committee, the House Government 
Reform Committee, our appropriations committees, and senior leaders in 
making some tough choices, such as possibly reconsidering and 
reprioritizing any pending requests and not being able to accept 
requests from individual Members. Further, we may have to limit the 
small percentage of resources dedicated to research and development 
work (work that by law the Comptroller General is able to initiate on 
his own authority), which would hamper our ability to respond to urgent 
issues as we were able to do in the areas like national preparedness, 
homeland security, human capital, and Postal Service reform. I believe 
that it is important for GAO to be able to dedicate roughly 10 - 15 
percent of its total resources to research and development work, which 
ultimately improves our ability to respond to longer-range issues. In 
this regard, the percentage of resources devoted to research and 
development work was 13 percent in FY 01, 11 percent in FY 02, and 9 
percent year to date in FY 03.

* Access to records. Not surprisingly, GAO has faced access to record 
problems periodically in its history. Most of the time, we have been 
able to work with the executive branch. In my opinion, it was very 
unfortunate that we could not work out our information request relating 
to the National Energy Policy Development Group with the Vice 
President, who chaired the Group. We felt that we had no choice but to 
seek redress through the courts because the request was backed by four 
Senate committee or subcommittee chairmen, and as you know, we are 
required by law to perform work for committees. In addition, the 
administration did not exercise its option to withhold the information 
based on executive privilege or under the certification provision in 
GAO's statute. The federal district court ruled in its decision that 
GAO did not have the standing to sue, but did not render an opinion on 
the merits of the case. We decided not to proceed with an appeal for a 
variety of reasons. Since then, we have monitored our access-to-record 
issues closely and have not experienced thus far a proliferation of 
access to records problems. In light of certain records access 
challenges during the past few years, and with concerns about national 
and homeland security unusually high at home and abroad, it may become 
more difficult for us to obtain information from the executive branch 
and report on certain issues. If this were to occur, it would hamper 
our ability to complete congressional requests in a timely manner. We 
are updating GAO's engagement acceptance and review policies and 
practices to address this issue. However, we do not require legislative 
changes in this area at the present time.

* Selection process for the Deputy Comptroller General. GAO has only 
two political appointee positions--the Comptroller General and the 
Deputy Comptroller General. GAO has not had an official Deputy 
Comptroller General since the appointment process was changed by law in 
1980. Under the law, the Deputy Comptroller General is nominated by the 
same 10 member board that nominates the Comptroller General (i.e., 
Senate and House leaders and the Chairmen and Ranking Minority Members 
of the Senate Committee on Governmental Affairs and the House Committee 
on Government Reform) working with the Comptroller General. Under the 
current scheme, the Deputy Comptroller General is supposed to serve in 
the Comptroller General's absence or after his 15-year term is 
completed. I believe the time has come to consider having the 
Comptroller General, in consultation with the aforementioned board, be 
able to pick the Deputy, which is how it works in most of our 
international counterpart organizations.

* Performance and accountability community coordination. Related to 
trying to do more with the resources we have in the performance and 
accountability area is determining how GAO and the Inspectors General 
should best complement each other and coordinate. The Inspectors 
General Act of 1978 as amended, Public Law 95-452, which established 
the Inspectors General, has been in existence for almost 25 years and 
merits a review. Given the challenges facing the federal government, I 
believe that the past should not be prologue in this arena. The law 
currently requires that the Inspectors General coordinate with GAO to 
ensure that they are not duplicating efforts. The traditional division 
of responsibilities has been that GAO looks horizontally at programs 
and functions across government, while the Inspectors General have been 
the "local cop" on the beat focusing on combating fraud, waste, abuse 
and mismanagement within their respective agencies. With OMB's efforts 
to make performance and financial reports more relevant to management 
decision-making, our collaborative efforts in improving governmentwide 
financial management will merit review. Over the next few years, GAO 
will need to invest more resources, (through use of GAO's own staff 
and/or through contractors) in assuring the work of the Inspectors 
General and external auditors in the financial statements area. This 
resource investment is necessary if we are to be able to render an 
opinion on the consolidated financial statements of the U.S. 
government.

* Additional bid protest volume. Over the past year, GAO has seen the 
number of bid protests filed increase by close to ten percent, and that 
upward trend is continuing. In addition to its other roles, GAO also 
serves as a quasi-judicial forum, hearing bid protests from 
disappointed bidders seeking to obtain federal contracts. GAO provides 
an objective, independent, and impartial forum for resolving protests, 
and GAO's decisions, which are published on our website, are relied on 
by the courts, the contracting agencies, and the public. This means of 
resolving disputes saves both time and money in that the parties need 
not go through the federal court system. Two particularly significant 
areas in which GAO has issued, and expects to continue issuing, 
decision on bid protests are public/private competitions under OMB 
Circular A-76 and procurements involving purchases under GSA's Federal 
Supply Schedules.

* Work involving other legislative branch entities. GAO is increasingly 
being requested to provide assistance on work involving other 
legislative branch entities such as the Architect of the Capitol, 
including its Capitol Visitors Center project, the Capitol Police, the 
Government Printing Office, and the Library of Congress. This 
assistance can take different forms (e.g., direct assistance, contract 
procurement and monitoring, or management and technical assistance) and 
can be of a sensitive and high risk nature.

Need for S. 1522:

I believe that it is vitally important to GAO's future to continue 
modernizing and updating its human capital policies and practices in 
light of the changing environment and anticipated challenges ahead. 
GAO's proposal represents a logical incremental advancement in 
modernizing our human capital policies. Given GAO's human capital 
infrastructure and unique role in leading by example in major 
management areas, the rest of the federal government can also benefit 
from GAO's pay system experience. We respectfully request the 
Committee's support of our request. We also respectfully request prompt 
passage of S. 1522 by the Congress, since some of our existing 
authorities are set to expire at the end of this calendar year.

GAO has used the narrowly tailored flexibilities granted by the 
Congress previously in Public Law 106-303, the GAO Personnel 
Flexibilities Act, responsibly, prudently, and strategically. GAO's 
latest proposal combines diverse initiatives that, collectively, should 
further GAO's ability to enhance its performance; assure its 
accountability; and help ensure that we can attract, retain, motivate, 
and reward a top-quality and high-performing workforce both now and in 
future years. Specifically, GAO is requesting that the Congress (1) 
make permanent GAO's 3-year authority to offer early outs and buyouts, 
(2) allow GAO to set its own annual pay adjustment system separate from 
the executive branch, (3) permit GAO to set the pay of an employee 
demoted as a result of workforce restructuring or reclassification to 
keep his/her basic pay but to set future increases consistent with the 
new position's pay parameters, (4) provide authority to reimburse 
employees for some relocation expenses when that transfer has some 
benefit to GAO but does not meet the legal requirements for 
reimbursement, (5) provide authority to place upper-level hires with 
fewer than 3 years of federal experience in the 6-hour leave category, 
(6) authorize an executive exchange program with the private sector, 
and (7) change GAO's legal name from the "General Accounting Office" to 
the "Government Accountability Office.":

We believe that our proposal is both well reasoned and reasonable. 
Although GAO's request for authority to adjust its annual pay system 
separate from the executive branch may appear to be dramatic to some, 
there are compelling reasons why GAO ought to be given this authority. 
These include the fact that GAO already has a hybrid pay system 
established by the authority the Congress granted it over two decades 
ago. In addition, the proposal is modest if viewed in the light of 
authorities already granted and requested by other agencies (e.g., DHS, 
DOD). Further, GAO already has a number of key systems and safeguards 
in place (e.g., a validated performance measurement system for its 
analysts and attorneys; a grievance process which allows employees to 
appeal to an independent Personnel Appeals Board; and opportunity 
periods for employee improvement) and has plans to build in additional 
safeguards if the additional authorities that we are seeking are 
granted.

Since submitting the proposal, I testified on July 16, 2003, before the 
House Government Reform Subcommittee on Civil Service and Agency 
Organization, along with Chris Keisling, the Employee Advisory 
Council's representative, Paul Light of Brookings Institution, and Pete 
Smith of the Private Sector Council. See Appendix II for a copy of the 
statement that I presented before the House. GAO's proposal was 
introduced that same day as H. 2751, the GAO Human Capital Reform Act 
of 2003, and was subsequently marked up and reported out of the 
Subcommittee on July 23, 2003, with an amendment that added a 
requirement that we periodically report on the status of certain 
provisions; modified the target group for the increased annual leave 
benefit from upper-level hires to key officers and employees; and 
limited our exchange program to no more than 30 people coming to GAO 
from the private sector and no more than 30 people leaving GAO for a 
detail to the private sector. We concurred with these amendments. The 
bill that Senator Voinovich introduced on July 31, 2003, S. 1522, which 
you co sponsored, Madam Chair, mirrors the bill that was marked up in 
the House.

Based on employee feedback, there is little concern relating to most of 
our legislative proposal. Although some elements of GAO's initial straw 
proposal were very controversial (e.g., GAO's pay adjustment 
provision), I have made a number of changes, clarifications, and 
commitments to address employee concerns. While I believe that some 
employees remain concerned about the pay adjustment provision, I also 
believe that employee concerns have been reduced considerably due to 
the clarifications, changes, and commitments I have made. This view has 
been underscored by the results of the recent employee staff survey. Of 
the 2,101 GAO employees who provided narrative comments, only a small 
percentage commented on our legislative proposal.

Opportunities:

Over the balance of my tenure, I will seek to continue the 
transformation of GAO into a world class professional services firm 
able to provide the Congress the best information and analyses possible 
delivered in a manner timely for appropriations, oversight, 
authorization, and legislative policy decision-making. While many think 
that this is a difficult goal to achieve, I believe that we are well on 
the way there. We will continue seeking to lead by example in all the 
aforementioned areas, including strategic planning, human capital 
management, process reengineering, information technology, and 
financial management. We will continue to examine what we do and how we 
do it focusing on achieving results. Some specific initiatives 
contemplated include the following:

* Helping the Congress in addressing challenges relating to the long-
term fiscal outlook. GAO's mission of assuring accountability has been 
and will remain closely linked to supporting congressional oversight 
and improving government efficiency and effectiveness. However, we 
believe in the years ahead, this support will prove even more critical 
because of the pressures that will be created by our country's fiscal 
outlook. These pressures will require the Congress to make tough 
choices on what the government does, including how the government does 
business and who does the government's business in the future. I 
believe that GAO can be of invaluable assistance in helping the 
Congress review and reprioritize existing mandatory and discretionary 
spending programs and tax policies.

* Transforming government and how government does business. While 
supporting congressional oversight will remain a major part of our 
mission, we believe that the work GAO performs in the areas of insight 
(e.g., determining which programs and policies work and which don't and 
sharing best practices and benchmarking information, both horizontally 
across government and vertically through different levels of 
government) and foresight (e.g., identifying key trends and emerging 
challenges before they reach crisis proportions and developing proposed 
frameworks for moving forward, including various options with related 
pros and cons) will be increasingly important and that our work in 
these areas needs to be further increased. I believe that GAO can do 
much to promote and facilitate government transformation, including how 
government does business. GAO's work in the government transformation 
area (e.g., DOD business practices, information technology, human 
capital, Postal Service, and Social Security) has helped the Congress 
reexamine what the federal government does, what it should do, and how 
it does it best. An additional focus on foresight activities will be 
crucial in developing information for congressional decision makers 
facing the challenges and opportunities of the 21ST century so that 
they can fully assess the long-term consequences of today's policy 
choices.

* Making GAO the federal employer of choice and the gold standard for a 
world class professional services organization. Creating high-
performing organizations often requires a cultural transformation that 
can take years to accomplish. GAO is no exception. GAO needs to 
continue its transformation process. We have made great progress in the 
past 3 years, but much remains to be done. For example, we have 
established task teams to examine how we staff our assignments and how 
we can best facilitate additional matrix management and knowledge 
sharing. As part of this cultural transformation, we are also hard at 
work in transforming GAO into a continuous learning organization. 
Opinion surveys of employees, such as our entry-level staff, indicate 
that one of the critical elements in their staying with an organization 
is the ability to continuously learn. Therefore, we must continue to 
strive to create such an environment through our training programs and 
employee development efforts. We must also continue, while addressing 
any skills imbalances and succession planning needs, to invest in our 
staff.

Concluding Observations:

Since its creation, GAO has demonstrated that it has been able to adapt 
to the changing needs of the nation, the Congress, and the American 
people. Today, we live in a different world than even that of 2 years 
ago. The increasing interconnectedness of today's world is demonstrated 
in the issues we care most about--our national security, our economic 
security, our financial security, our personal security, and our 
personal health. As evidenced by the testimony that I've delivered 
today, I have done my best, working closely with our congressional 
clients and all of GAO's employees, to provide the best professional 
products and services to the Congress today and to position ourselves 
to continue to be able to do so in the future. We've also demonstrated 
that being "world class" doesn't mean a substantial appropriation 
increase, but rather that an effective, efficient, and creative use of 
resources, aided by selected additional legislative authorities and 
flexibilities, can translate into significant pay-offs in the form of 
real and measurable positive results. However, we believe that GAO, 
similar to most public and private sector organizations, is only as 
good as our people. S. 1522 will help us address many of the challenges 
we face, particularly in the human capital arena, and we urge that this 
Committee mark up the legislation and, working with the House, enact it 
before the Congress adjourns for the year.

Madam Chair Collins and Members of the Committee, this concludes my 
prepared statement. I would be happy to respond to any questions that 
you may have.

Contacts:

For further information regarding the testimony, please contact David 
M. Walker, the Comptroller General of the United States, on (202) 512-
5500 or at [Hyperlink, walkerd@gao.gov] walkerd@gao.gov, Gene L. 
Dodaro, Chief Operating Officer (202) 512-5600 or at [Hyperlink, 
dodarog@gao.gov] dodarog@gao.gov, or Helen H. Hsing, Director of 
Special Strategic Projects (202) 512-5500 or at [Hyperlink, 
hsingh@gao.gov] hsingh@gao.gov:

[End of section]

Appendix I: GAO's Strategic Plan 2002-2007:

[See PDF for image] 

[End of figure] 

[End of section]

Appendix II: Comptroller General's Testimony of July 16, 2003:

Testimony:

Before the Subcommittee on Civil Service and Agency Organization, 
Committee on Government Reform, House of Representatives:

For Release on Delivery Expected at 2:00 p.m. EDT Wednesday, July 16, 
2003:

GAO:

Additional Human Capital Flexibilities Are Needed:

Statement of David M. Walker 
Comptroller General of the United States:

GAO-03-1024T:

GAO Highlights: 

Highlights of GAO-03-1024T, a testimony before the Subcommittee on 
Civil Service and Agency Organization, Committee on Government Reform, 
House of Representatives

Why GAO Did This Study:

The Subcommittee seeks GAO’s views on its latest human capital 
proposal that is slated to be introduced as a bill entitled the GAO 
Human Capital Reform Act of 2003. 

What GAO Found:

As an arm of the legislative branch, GAO exists to support the 
Congress in meeting its constitutional responsibilities and to help 
improve the performance and ensure the accountability of the federal 
government for the American people. Unlike many executive branch 
agencies, which have either recently received or are just requesting 
new broad-based human capital tools and flexibilities, GAO has had 
certain human capital tools and flexibilities for over two decades. 
GAO’s latest proposal combines diverse initiatives that, collectively, 
should further GAO’s ability to enhance its performance, assure its 
accountability, and help ensure that it can attract, retain, motivate, 
and reward a top-quality and high-performing workforce currently and 
in future years. 

Specifically, GAO is requesting that the Congress (1) make permanent 
GAO’s 3-year authority to offer early outs and buyouts, (2) allow GAO 
to set its own annual pay adjustment system separate from the 
executive branch, (3) permit GAO to set the pay of an employee demoted 
as a result of workforce restructuring or reclassification to keep 
his/her basic pay but to set future increases consistent with the new 
position’s pay parameters, (4) provide authority to reimburse 
employees for some relocation expenses when that transfer has some 
benefit to GAO but does not meet the legal requirements for 
reimbursement, (5) provide authority to place upper-level hires with 
fewer than 3 years of federal experience in the 6-hour leave category, 
(6) authorize an executive exchange program with the private sector, 
and (7) change GAO’s legal name from the “General Accounting Office” 
to the “Government Accountability Office.”

GAO has used the narrowly tailored flexibilities granted by the 
Congress previously in Public Law 106-303, the GAO Personnel 
Flexibilities Act, responsibly, prudently, and strategically. GAO 
believes that it is vitally important to its future to continue 
modernizing and updating its human capital policies and system in 
light of the changing environment and anticipated challenges ahead. 
GAO’s proposal represents a logical incremental advancement in 
modernizing GAO’s human capital policies. Based on employee feedback, 
there is little or no concern relating to most of the proposal’s 
provisions. Although some elements of GAO’s initial straw proposal 
were controversial (e.g., GAO’s pay adjustment provision), the 
Comptroller General has made a number of changes, clarifications, and 
commitments to address employee concerns. While GAO believes that some 
employees remain concerned about the pay adjustment provision, GAO 
also believes that employee concerns have been reduced considerably 
due to the clarifications, changes, and commitments the Comptroller 
General has made. Given GAO’s human capital infrastructure and unique 
role in leading by example in major management areas, the rest of the 
federal government can benefit from GAO’s pay system experience. 

What GAO Recommends: 

GAO believes that its proposal is well reasoned and reasonable. 
Although GAO’s request for authority to adjust its annual pay system 
separate from the executive branch appears broad based, there are 
compelling reasons why GAO ought to be given this authority. These 
include the fact that GAO already has a hybrid pay system established 
by the authority the Congress granted it over two decades ago, the 
proposed authority is not radical if viewed in the light of 
authorities already granted and requested by other agencies, and GAO 
already has a number of key systems and safeguards in place and has 
plans to build in additional safeguards if granted the authority. 

GAO has conducted extensive external and internal outreach efforts on 
its latest human capital proposal. GAO respectfully requests the 
Subcommittee’s support and prompt passage by the Congress.

www.gao.gov/cgi-bin/getrpt?GAO-03-1024T.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact Sallyanne Harper at 
(202) 512-5800 or harpers@gao.gov.

[End of section]

Madam Chairwoman and Members of the Subcommittee:

I am pleased to be here today to discuss GAO's latest human capital 
proposal. Chairwoman Davis, we at GAO appreciate your support of our 
proposal and your leadership in seeking additional sponsors for the 
bill you plan to introduce, the GAO Human Capital Reform Act of 2003.

As I have testified on many occasions, strategic human capital 
management must be the centerpiece of any serious government 
transformation effort. A key component of this is modern, effective, 
and credible human capital policies, which are critical to the 
successful functioning of any enterprise, both public and private. As 
the Chief Executive Officer and primary steward of GAO, I am not just 
responsible for GAO's current economy, efficiency, and effectiveness, I 
am also responsible for ensuring that we are well positioned to serve 
our congressional clients, maximize our performance, and assure our 
accountability in the future.

With this important responsibility in mind, I asked this committee and 
others over 3 years ago to grant GAO certain additional narrowly 
tailored human capital authorities. In enacting Public Law 106-303, 
known as the GAO Personnel Flexibilities Act, the Congress granted GAO 
certain flexibilities, which we have used responsibly to help 
strategically reshape the organization in order to better support the 
Congress and the American people. After reviewing the range and limits 
of our existing administrative and legal authorities, I have concluded 
that we now need to seek from the Congress additional human capital 
flexibilities in order for GAO to: ensure quality service to the 
Congress; continue leading by example in the government transformation, 
in general, and human capital reform areas in particular; and continue 
to attract, retain, motivate, and reward a quality and high-performing 
workforce, both currently and in future years. We believe that our 
proposal is well reasoned and reasonable, especially if viewed in the 
light of authorities already granted and requested by other agencies 
and the extensive external and internal outreach efforts we have 
conducted. We also respectfully request your support and prompt passage 
by the Congress.

GAO: A Unique Agency with a Hybrid System:

As an arm of the legislative branch, GAO exists to support the Congress 
in meeting its constitutional responsibilities and to help improve the 
performance and ensure the accountability of the federal government for 
the benefit of the American people. Today, GAO is a multidisciplinary 
professional services organization, comprised of about 3,250 employees, 
that conducts a wide range of financial and performance audits, program 
evaluations, management reviews, investigations, and legal services 
spanning a broad range of government programs and functions. GAO's work 
covers everything from the challenges of securing our homeland, to the 
demands of an information age, to emerging national security threats, 
and the complexities of globalization. We are committed to transforming 
how the federal government does business and to helping government 
agencies become organizations that are more results oriented and 
accountable to the public. We are also committed to leading by example 
in all major management areas.

Given GAO's role as a key provider of information and analyses to the 
Congress, maintaining the right mix of technical knowledge and subject 
matter expertise as well as general analytical skills is vital to 
achieving the agency's mission. Carrying out GAO's mission today is a 
multidisciplinary staff reflecting the diversity of knowledge and 
competencies needed to deliver a wide array of products and services to 
support the Congress. Our mission staff--at least 67 percent of whom 
have graduate degrees--hold degrees in a variety of academic 
disciplines, such as accounting, law, engineering, public 
administration, economics, and social and physical sciences. I am 
extremely proud of our GAO employees and the difference that they make 
for the Congress and the nation. They make GAO the world-class 
organization that it is, and I think it is fair to say that while they 
account for about 80 percent of our costs, they constitute 100 percent 
of our real assets.

Because of our unique role as an independent overseer of federal 
expenditures, fact finder, and honest broker, GAO has evolved into an 
agency with hybrid systems. This is particularly evident in GAO's 
personnel and performance management systems. Unlike many executive 
branch agencies, which have either recently received or are just 
requesting new broad-based human capital tools and flexibilities, GAO 
has had certain human capital tools and flexibilities for over two 
decades. As a result, we have been able to some extent to operate our 
personnel system with a degree of independence that most agencies in 
the executive branch do not have. For example, we are excepted from 
certain provisions of Title 5, which governs the competitive service, 
and we are not subject to Office of Personnel Management (OPM) 
oversight.

Until 1980, our personnel system was indistinguishable from those of 
executive branch agencies--that is, GAO was subject to the same laws, 
regulations, and policies as they were. However, with the expansion of 
GAO's role in congressional oversight of federal agencies and programs, 
concerns grew about the potential for conflicts of interest. Could GAO 
conduct independent and objective reviews of executive branch agencies, 
such as OPM, when these agencies had the authority to review GAO's 
internal personnel activities? As a result, GAO worked with the 
Congress to pass the GAO Personnel Act of 1980, the principal goal of 
which was to avoid potential conflicts by making GAO's personnel system 
more independent of the executive branch.

Along with this independence, the act gave GAO greater flexibility in 
hiring and managing its workforce. Among other things, it granted the 
Comptroller General authority to:

* appoint, promote, and assign employees without regard to Title 5 
requirements in these areas;

* set employees' pay without regard to the federal government's General 
Schedule (GS) pay system's classification standards and requirements; 
and:

* establish a merit pay system for appropriate officers and employees.

By excepting our agency from the above requirements, the GAO Personnel 
Act of 1980 allowed us to pursue some significant innovations in 
managing our people. One key innovation was the establishment of a 
"broad banding," or "pay banding," approach for classifying and paying 
our Analyst and Attorney workforce in 1989. This was coupled with the 
adoption of a pay for performance system for this portion of our 
workforce. Therefore, while other agencies are only now requesting the 
authority to establish broad banding and pay for performance systems, 
GAO has had almost 15 years of experience with such systems.

Although GAO's personnel and pay systems are not similar to those of 
many executive branch agencies, I must emphasize that in important 
ways, our human capital policies and programs are very much and will 
continue to remain similar to those of the larger federal community. 
GAO's current human capital proposal will not change our continued 
support for certain national goals (e.g., commitment to federal merit 
principles, protection from prohibited personnel practices, employee 
due process through a specially created entity--the Personnel Appeals 
Board (PAB), and application of veterans' preference consistent with 
its application in the executive branch for appointments and all 
appropriate reductions-in-force). Furthermore, our pay system is and 
will continue to be consistent with the statutory principle of equal 
pay for equal work while making pay distinctions on the basis of an 
individual's responsibilities and performance. In addition, we are 
covered and will remain covered by Title VII of the Civil Rights Act, 
which forbids employment discrimination. At GAO, we also emphasize 
opportunity and inclusiveness for a diverse workforce and have zero 
tolerance for discrimination of any kind. We have taken and will 
continue to take disciplinary action when it "will promote the 
efficiency of the service"--which for us includes such things as GAO's 
ability to do its work and accomplish its mission.

Although we are not subject to OPM oversight, we are nevertheless 
subject to the oversight of the Congress including our appropriations 
committees--the Senate Committee on Appropriations' Subcommittee on the 
Legislative Branch and the House Committee on Appropriations' 
Subcommittee on Legislative--and our oversight committees--the Senate 
Committee on Governmental Affairs and the House Committee on Government 
Reform. In addition, GAO's management actions are subject to the review 
of an independent five member board, the Personnel Appeals Board, which 
performs functions similar to those provided by the Merit Systems 
Protection Board for federal executive branch employees' personnel 
grievances. The Congress authorized the establishment of the PAB 
specifically for GAO in order to protect GAO's independence as an 
agency. As with other federal executive branch employees, our employees 
have the right to appeal certain kinds of management actions including 
removal, suspension for more than 14 days, reductions in pay or grade, 
furloughs of not more than 30 days, a prohibited personnel practice, an 
action involving prohibited discrimination, a prohibited political 
activity, a within-grade denial, unfair labor practices or other labor 
relations issue. However, they do so to the PAB rather than the MSPB.

While we currently do not have any bargaining units at GAO, our 
employees are free to join employee organizations, including unions. In 
addition, we engage in a range of ongoing communication and 
coordination efforts to empower our employees while tapping their 
ideas. For example, we regularly discuss a range of issues of mutual 
interest and concern with our democratically elected Employee Advisory 
Council (EAC). Chris Keisling, who is a Band III field office 
representative of the EAC, is testifying with me today. In addition, I 
consult regularly with our managing directors on issues of mutual 
interest and concern. In that spirit, I will consult with the managing 
directors and the EAC before implementing the provisions related to our 
human capital proposal. As we did with the flexibilities granted it 
under Public Law 106-303, the GAO Personnel Flexibilities Act, we will 
implement the authorities granted under this provision of our proposal 
only after issuing draft regulations and providing all employees notice 
and an opportunity for comment. Specifically, for the authorities 
granted to us under Public Law 106-303, we posted the draft regulations 
on our internal Web site and sent a notice to all GAO staff advising 
them of the draft regulations and seeking their comments.

Key Elements of GAO's Proposal:

GAO's proposal combines diverse initiatives that, collectively, should 
further GAO's ability to enhance our performance, assure our 
accountability, and help ensure that we can attract, retain, motivate, 
and reward a top quality and high-performing workforce currently and in 
future years. These initiatives should also have the benefit of helping 
guide other agencies in their human capital transformation efforts. 
Specifically, we are requesting that the Congress provide us the 
following additional human capital tools and flexibilities:

* make permanent GAO's 3-year authority to offer voluntary early 
retirement and voluntary separation payments;

* allow the Comptroller General to adjust the rates of basic pay of GAO 
on a separate basis than the annual adjustments authorized for 
employees of the executive branch;

* permit GAO to set the pay of an employee demoted as a result of 
workforce restructuring or reclassification at his or her current rate 
with no automatic annual increase to basic pay until his or her salary 
is less than the maximum rate of their new position;

* provide authority in appropriate circumstances to reimburse employees 
for some relocation expenses when that transfer does not meet current 
legal requirements for entitlement to reimbursement but still benefits 
GAO;

* provide authority to put upper-level hires with less than 3 years of 
federal experience in the 6-hour leave category;

* authorize an executive exchange program with private sector 
organizations working in areas of mutual concern and involving areas in 
which GAO has a supply-demand imbalance; and:

* change GAO's legal name from the "General Accounting Office" to the 
"Government Accountability Office.":

I will go into more detail later in my testimony on the details and 
rationale for each of these proposals.

Process for Developing the Proposal:

In developing our proposal, we used a phased approach that involved (1) 
developing a straw proposal, (2) vetting the straw proposal broadly 
both externally and internally, and (3) making appropriate adjustments 
based on comments and concerns raised during the vetting process. As we 
have previously testified, many of the management tools and 
flexibilities we needed to pursue modern human capital management 
approaches are already available to us and we have used them. We have 
chosen to come to the Congress for legislation only where the tools and 
flexibilities we have were inadequate for addressing the challenges we 
faced. For example, the Congress enacted Public Law 106-303 to provide 
us with certain narrowly tailored flexibilities we needed to reshape 
our workforce and establish senior-level technical positions in 
critical areas. These flexibilities were needed to help GAO address the 
past decade's dramatic downsizing (approximately 40 percent from 1992 
through 1997) combined with a significant increase in the retirement-
eligible workforce that jeopardized our ability to perform our mission 
in the years ahead.

In developing our preliminary proposal, we gathered suggestions for 
addressing GAO's human capital challenges as well as challenges faced 
by the rest of the federal government, discussed and debated them 
internally, and compiled a preliminary list of proposals. We received a 
number of viable proposals that we separated into two groups: (1) 
proposals that would be more applicable government-wide and (2) 
proposals GAO should undertake. I had our Office of General Counsel 
review the proposals GAO should undertake to determine whether we 
needed to seek legislative authority to implement them or whether I 
could implement them under the Comptroller General's existing 
authority.

Mindful of the need to keep the Congress appropriately informed, my 
staff and I began our outreach to GAO's appropriations and oversight 
committees on the need for additional human capital flexibilities 
beginning late last year. In early spring of this year, we shared with 
these committees a confidential draft of a preliminary draft proposal. 
We also advised them that we planned to conduct a broad range of 
outreach and consultation on the proposal with our employees and other 
interested parties and that we would send them our revised legislative 
proposal at a later date. We conducted an extensive outreach and 
consultation effort with members of the Congress, including chairmen 
and ranking minority members of our appropriations and oversight 
committees and a number of local delegation members; congressional 
staff; the Director of OPM; the Deputy Director for Management of the 
Office of Management and Budget; public sector employee associations 
and unions; and various "good government" organizations.

Within GAO, members of the Executive Committee (EC), which includes our 
Chief Operating Officer, our General Counsel, our Chief Mission Support 
Officer and me, engaged in an extensive and unprecedented range of 
outreach and consultation with GAO employees. This outreach included 
numerous discussions with our managing directors, who manage most of 
GAO's workforce, and members of the EAC.

The EAC is an important source of input and a key communications link 
between executive management and the constituent groups its members 
represent. Comprising employees who represent a cross-section of the 
agency, the EAC meets at least quarterly with me and members of our 
senior executive team. The EAC's participation is an important source 
of front-end input and feedback on our human capital and other major 
management initiatives. Specifically, EAC members convey the views and 
concerns of the groups they represent, while remaining sensitive to the 
collective best interest of all GAO employees; propose solutions to 
concerns raised by employees; provide input to and comment on GAO 
policies, procedures, plans, and practices; and help to communicate 
management's issues and concerns to employees.

I have also used my periodic "CG chats," closed circuit televised 
broadcasts to all GAO employees, as a means of explaining our proposal 
and responding to staff concerns and questions. Specifically, I have 
held two televised chats to inform GAO staff about the proposal. One of 
these chats was conducted in the form of a general listening session, 
open to all headquarters and field office staff, featuring questions 
from members of the EAC and field office employees. I have also 
discussed the proposal with the Band IIs (GS-13-14 equivalents) in 
sessions held in April 2003, and with our Senior Executive Service 
(SES) and Senior Level members at our May off-site meeting. In addition 
to my CG chats, I have personally held a number of listening sessions, 
including a session with members of our Office of General Counsel, two 
sessions with our administrative support staff, and sessions with staff 
in several field offices. Furthermore, the Chief Operating Officer 
represented me in a listening session with Band I field office 
personnel. Finally, I have also personally received and considered a 
number of E-mails, notes, and verbal comments on the human capital 
proposal.

I would like to point out to others seeking human capital flexibilities 
that the outreach process, while necessary, is indeed time-consuming 
and requires real and persistent commitment on the part of an agency's 
top management team. In order for the process to work effectively, it 
also requires an ongoing education and dialogue process that will, at 
times, involve candid, yet constructive, discussion between management 
and employees. This is, however, both necessary and appropriate as part 
of the overall change management process. To facilitate the education 
process on the proposal, we posted materials on GAO's internal website, 
including Questions and Answers developed in response to employees' 
questions and concerns, for all employees to review. Unfortunately, 
others who have sought and are seeking additional human capital 
flexibilities have not employed such an extensive outreach process.

Nature of GAO Employee Concerns:

Based on feedback from GAO employees, there is little or no concern 
relating to most of the provisions in our proposal. There has been 
significant concern expressed over GAO's proposal to decouple GAO's pay 
system from that of the executive branch. Some concerns have also been 
expressed regarding the pay retention provision and the proposed name 
change. As addressed below, we do believe, however, that these employee 
concerns, have been reduced considerably due to the clarifications, 
changes, and commitments resulting from our extensive outreach and 
consultation effort.

On the basis of various forms of GAO employee feedback, it is not 
surprising, since pay is important to all employees, that the provision 
that has caused the most stir within GAO has been the pay adjustment 
provision. Fundamentally, some of our employees would prefer to remain 
with the executive branch's GS system for various types of pay 
increases. There are others close to retirement who are concerned with 
their "high three" and how the modified pay system, when fully 
implemented, might affect permanent base pay, which is the key 
component of their retirement annuity computation. Overall, there is a 
great desire on the part of GAO employees to know specifically how this 
authority would be implemented.

It is important to note that, even in the best of circumstances, it is 
difficult to garner a broad-based consensus of employee support for any 
major pay system changes. While it is my impression, based on employee 
feedback, that we have made significant strides in allaying the 
significant initial concerns expressed by employees regarding the pay 
adjustment provision, I believe that some of these concerns will remain 
throughout implementation. In addition, some can never be resolved 
because they involve philosophical differences or personal interest 
considerations on behalf of individual GAO employees.

GAO's history with pay banding certainly is illustrative of how 
difficult it is for an organization to allay employee fears even in the 
face of obvious benefits. While history has proven that an overwhelming 
majority of GAO employees have benefited from GAO's decision to migrate 
our Analysts and Attorneys into pay banding and pay for performance 
systems, there was significant opposition by GAO employees regarding 
the decision to move into these systems. The experience of the 
executive branch's pay demonstration projects involving federal science 
and technology laboratories shows that employee support at the 
beginning of the pay demonstration projects ranged from 34 percent to 
63 percent. In fact, OPM reports that it takes about 5 years to get 
support from two-thirds of employees with managers generally supporting 
demonstrations at a higher rate than employees.

Following the pay adjustment provision but a distant second in terms of 
employee concern, has been the pay reclassification provision, which 
would allow GAO employees demoted as a result of workforce 
restructuring or reclassification to keep their basic pay rates; 
however, future pay increases would be set consistent with the new 
positions' pay parameters. Currently, employees subject to a reduction-
in-force or reclassification can be paid at a rate that exceeds the 
value of their duties for an extended period.

A distant third in terms of employee concern is the proposed name 
change from the "General Accounting Office' to the "Government 
Accountability Office," which would allow the agency's title to more 
accurately reflect its mission, core values, and work. My sense is that 
some GAO employees who have been with GAO for many years have grown 
comfortable with the name and may prefer to keep it. At the same time, 
I believe that a significant majority of our employees support the 
proposed name change. Importantly, all of our external advisory groups, 
including the Comptroller General's Advisory Council, consisting of 
distinguished individuals from the public and private sectors, and the 
Comptroller General's Educators Advisory Council, consisting of 
distinguished individuals from the academic community, and a variety of 
"good government" groups strongly support the proposed name change.

Changes Made in Response to Employee Feedback:

The members of the EC and I took our employees' feedback seriously and 
have seriously considered their concerns. Key considerations in our 
decision making were our institutional responsibility as leaders and 
stewards of GAO and the overwhelming support expressed through 
anonymous balloting by our senior executives, who also serve as leaders 
and stewards for GAO, for proceeding with all of the provisions of our 
human capital proposal, including the pay adjustment provision. 
Specifically, in a recent confidential electronic balloting of our 
senior executives, support for each element of our proposal ranged from 
over 2 to 1 to unanimous, depending on the provision. Support for the 
proposed pay adjustment provision was over 3 to 1, and support for the 
proposed pay protection provision was over 4 to 1. Given this and other 
considerations, ultimately, we decided to proceed with the proposal but 
adopted a number of the suggestions made by employees in these 
sessions, including several relating to the proposal to decouple GAO 
annual pay adjustments from those applicable to many executive branch 
agencies.

A key suggestion adopted include a minimum 2-year transition period for 
ensuring the smooth implementation of the pay provisions which would 
also allow time for developing appropriate methodologies and issuing 
regulations for notice and comment by all employees. Another key 
suggestion adopted was the commitment to guarantee annual across the 
board purchase power protection and to address locality pay 
considerations to all employees rated as performing at a satisfactory 
level or above (i.e., meeting expectations or above) absent 
extraordinary economic circumstances or severe budgetary constraints. 
We have chosen to implement this guarantee through a future GAO Order 
rather than through legislative language because prior "pay protection" 
guarantees relating to pay banding made by my predecessor, Comptroller 
General Charles A. Bowsher, used this means effectively to document and 
operationalize that guarantee. I have committed to our employees that I 
would include this guarantee in my statement here today so that it 
could be included as part of the legislative record. Additional 
safeguards relating to our pay proposal are set forth below.

The following represents additional information regarding our specific 
proposal.

Voluntary Early Retirement and Separation Incentive Payment 
Authorities:

Section 2 of our proposal would make permanent the authority of GAO 
under section 1 and 2 of Public Law 106-303, the GAO Personnel 
Flexibilities Act of 2000, to offer voluntary early retirements 
(commonly termed "early outs") and voluntary separation payments 
(commonly termed "buyouts") to certain GAO employees when necessary to 
realign GAO's workforce in order to meet budgetary or mission needs, 
correct skill imbalances, or reduce high-grade positions. We believe 
that we have behaved responsibly in exercising the flexibilities that 
the Congress granted us and deserve a permanent continuation of these 
authorities. In addition, the two flexibilities which we would like to 
be made permanent are narrowly drawn and voluntary in nature, since the 
employees have the right to decide if they are interested in being 
considered for the benefits. Further, the provisions also have built in 
limits: no more than 10 percent of the workforce in any one year can be 
given early outs and no more than 5 percent can be given buyouts.

GAO's transformation effort is a work in progress, and for that reason, 
the agency is seeking legislation to make the voluntary early 
retirement provision in section 1 of the law permanent. While the 
overall number of employees electing early retirement has been 
relatively small, GAO believes that careful use of voluntary early 
retirement has been an important tool in incrementally improving the 
agency's overall human capital profile. Each separation has freed 
resources for other uses, enabling GAO to fill an entry-level position 
or to fill a position that will reduce a skill gap or address other 
succession concerns. Similarly, we are seeking legislation to make 
section 2--authorizing the payment of voluntary separation incentives-
-permanent. Although GAO has not yet used its buyout authority and has 
no plans to do so in the foreseeable future, we are seeking to retain 
this flexibility. The continuation of this provision maximizes the 
options available to the agency to deal with future circumstances, 
which cannot be reasonably anticipated at this time. Importantly, this 
provision seems fully appropriate since the Homeland Security Act of 
2002 provides most federal agencies with permanent early out and buyout 
authority.

Public Law 106-303 required that GAO perform an assessment of the 
exercise of the authorities provided under that law, which included the 
authority for the Comptroller General to provide voluntary early 
retirement and voluntary separation incentive payments. With your 
permission, I would like to submit the assessment entitled Assessment 
of Public Law 106-303: The Role of Personnel Flexibilities in 
Strengthening GAO's Human Capital, issued on June 27, 2003, for the 
record. I will now highlight for you our observations from that 
assessment on voluntary early retirement and buyouts.

Voluntary Early Retirement:

Public Law 106-303 also allows the Comptroller General to offer 
voluntary early retirement to up to 10 percent of the workforce when 
necessary or appropriate to realign the workforce to address budgetary 
or mission constraints; correct skill imbalances; or reduce high-grade, 
supervisory, or managerial positions. This flexibility represents a 
proactive use of early retirement to shape the workforce to prevent or 
ameliorate future problems. GAO Order 2931.1, Voluntary Early 
Retirement, containing the agency's final regulations, was issued in 
April 2001. Under the regulations, each time the Comptroller General 
approves a voluntary early retirement opportunity, he establishes the 
categories of employees who are eligible to apply. These categories are 
based on the need to ensure that those employees who are eligible to 
request voluntary early retirement are those whose separations are 
consistent with one or more of the three reasons for which the 
Comptroller General may authorize early retirements. Pursuant to GAO's 
regulations, these categories are defined in terms of one or more of 
the following criteria:

* organizational unit or subunits,

* occupational series,

* grade or band level,

* skill or knowledge requirements,

* performance appraisal average,

* geographic location, or:

* other similar factors that the Comptroller General deems necessary 
and appropriate.

Since it is essential that GAO retain employees with critical skills as 
well as its highest performers, certain categories of employees have 
been ineligible under the criteria. Some examples of ineligible 
categories are employees receiving retention allowances because of 
their unusually high or unique qualifications; economists, because of 
the difficulty that the agency has experienced in recruiting them; and 
staff in the information technology area. In addition, employees with 
performance appraisal averages above a specified level have not been 
eligible under the criteria.

To give the fullest consideration to all interested employees, however, 
any employee may apply for consideration when an early retirement 
opportunity is announced, even if he or she does not meet the stated 
criteria. Furthermore, under our order, the Comptroller General may 
authorize early retirements for these applicants on the basis of the 
facts and circumstances of each case. The Comptroller General or his EC 
designee considers each applicant and makes final decisions based on 
GAO's institutional needs. Only employees whose release is consistent 
with the law and GAO's objective in allowing early retirement are 
authorized to retire early. In some cases, this has meant that an 
employee's request must be denied.

GAO held its first voluntary early retirement opportunity in July 2001. 
Employees who were approved for early retirement were required to 
separate in the first quarter of fiscal 2002. As required by the act, 
information on the fiscal 2002 early retirements was reported in an 
appendix to our 2002 Performance and Accountability Report. Another 
voluntary early retirement opportunity was authorized in fiscal 2003, 
and employees were required to separate by March 14, 2003. In 
anticipation of the 3-year sunset on our authority to provide voluntary 
early retirements, I have recently announced a final voluntary early 
retirement opportunity under our current authority. Table 1 provides 
the data on the number of employees separated by voluntary early 
retirement as of May 30, 2003.

Table 1: Summary Data on Voluntary Early Retirements:

Applications/Status: of applications: Total applications submitted; 
Fiscal 2002: Number: 78; Fiscal 2002: Percentage of total: 100.0; 
Fiscal 2003: Number: 39; Fiscal 2003: Percentage of total: 
100.0; Totals: Number: 117; Totals: Percentage of total: 
100.0.

Applications/Status: of applications: Approved applications; Fiscal 
2002: Number: 72; Fiscal 2002: Percentage of total: 92.3; 
Fiscal 2003: Number: 37; Fiscal 2003: Percentage of total: 94.8; 
Totals: Number: 109; Totals: Percentage of total: 93.1.

Applications/Status: of applications: Disapproved applications; Fiscal 
2002: Number: 6; Fiscal 2002: Percentage of total: 7.7; Fiscal 
2003: Number: 2; Fiscal 2003: Percentage of total: 5.1; 
Totals: Number: 8; Totals: Percentage of total: 6.8.

Applications/Status: of applications: Approved applications withdrawn 
by employees; Fiscal 2002: Number: 18; Fiscal 2002: Percentage of 
total: 23.0; Fiscal 2003: Number: 12; Fiscal 2003: Percentage 
of total: 30.7; Totals: Number: 30; Totals: Percentage of 
total: 25.6.

Applications/Status: of applications: Applicants separated by 
voluntary early retirement; Fiscal 2002: Number: 54; Fiscal 2002: 
Percentage of total: 69.3; Fiscal 2003: Number: 25; Fiscal 
2003: Percentage of total: 64.1; Totals: Number: 79; Totals: 
Percentage of total: 67.5.

Source: GAO.

[End of table]

As you can see from the table, of the 79 employees who separated from 
GAO through voluntary early retirement, 66, or 83.5 percent, were high-
grade, supervisory, or managerial employees. High-grade, supervisory, 
or managerial employees are those who are GS-13s or above, if covered 
by GAO's GS system; Band IIs or above, if covered by GAO's banded 
systems for Analysts and Attorneys; or in any position in GAO's SES or 
Senior-Level system.

In recommending that GAO's voluntary early out authority be made 
permanent, I would like to point to our progress in changing the 
overall shape of the organization. The 1990s were a difficult period 
for ensuring that GAO's workforce would remain appropriately sized, 
shaped, and skilled to meet client demands and agency needs. Severe 
downsizing of the workforce, including a suspension of most hiring from 
1992 through 1997, and constrained investments in such areas as 
training, performance incentives, rewards, and enabling technology left 
GAO with a range of human capital and operational challenges to 
address. Over 3 years ago, when GAO sought additional human capital 
flexibilities, our workforce was sparse at the entry level and 
plentiful at the midlevel. We were concerned about our ability to 
support the Congress with experienced and knowledgeable staff over 
time, given the significant percentage of the agency's senior managers 
and analysts reaching retirement eligibility and the small number of 
entry-level employees who were training to replace more senior staff.

As illustrated in figure 1, by the end of fiscal year 2002, GAO had 
almost a 74 percent increase in the proportion of staff at the entry 
level (Band I) compared with fiscal year 1998. Also, the proportion of 
the agency's workforce at the midlevel (Band II) decreased by 16 
percent.

Figure 1: GAO's Human Capital Profile:

[See PDF for image]

[End of figure]

Voluntary Separation Payments:

In addition to authorizing voluntary early retirement for GAO 
employees, Public Law 106-303 permits the Comptroller General to offer 
voluntary separation incentive payments--buyouts--when necessary or 
appropriate to realign the workforce to meet budgetary constraints or 
mission needs; correct skill imbalances; or reduce high-grade, 
supervisory, or managerial positions. Under the act, up to 5 percent of 
employees could be offered such an incentive, subject to criteria 
established by the Comptroller General.

The act requires GAO to deposit into the U.S. Treasury an amount 
equivalent to 45 percent of the final annual basic salary of each 
employee to whom a buyout is paid. The deposit is in addition to the 
actual buyout amount, which can be up to $25,000 for an approved 
individual. Given the many demands on agency resources, these costs 
present a strong financial disincentive to use the provision if at all. 
GAO anticipates little, if any, use of this authority because of the 
associated costs. For this reason, as well as to avoid creating 
unrealistic employee expectations, GAO has not developed and issued 
agency regulations to implement this section of the act. Nevertheless, 
as stated earlier, it is prudent for us to seek the continuation of 
this provision because it maximizes the options available to the agency 
to deal with future circumstances. Since GAO is also eligible to 
request buyouts under the provisions of the Homeland Security Act, the 
agency will consider its options under this provision as well. However, 
under the Homeland Security Act, GAO would have to seek OPM approval of 
any buyouts, which raises serious independence concerns.

Annual Pay Setting Policy and Adjustments:

Section 3 and 4 of our proposal would provide GAO greater discretion in 
determining the annual across the board and locality pay increases for 
our employees. Under our proposal, GAO would have the discretion to set 
annual pay increases by taking into account alternative methodologies 
from those used by the executive branch and various other factors, such 
as extraordinary economic conditions or serious budgetary constraints. 
While the authority requested may initially appear to be broad based, 
there are compelling reasons why GAO ought to be given such authority. 
First, as I discussed at the beginning of my testimony, GAO is an 
agency within the legislative branch and already has a hybrid pay 
system established under the authority the Congress granted over two 
decades ago. Therefore, our proposal represents a natural evolution in 
GAO's pay for performance system. Second, GAO's proposal is not radical 
if viewed from the vantage point of the broad-based authority that has 
been granted the Department of Homeland Security (DHS) under the 
Homeland Security Act of 2002; agencies that the Congress has already 
granted the authority to develop their own pay systems; the authorities 
granted to various demonstration projects over the past two decades; 
and the authority Congress is currently contemplating providing the 
Department of Defense (DOD). Third, GAO already has a number of key 
safeguards and has plans to build additional safeguards into our 
modified pay system if granted this authority.

Our proposal seeks to take a constructive step in addressing what has 
been widely recognized as fundamental flaws in the federal government's 
approach to white-collar pay. These flaws and the need for reform have 
been addressed in more detail in OPM's April 2002 White Paper, A Fresh 
Start For Federal Pay: A Case for Modernization, and more recently the 
National Commission on the Public Service's January 2003 report on 
revitalizing the public service. The current federal pay and 
classification system was established over 60 years ago for a federal 
workforce that was made up largely of clerks performing routine tasks 
which were relatively simple to assess and measure. Today's federal 
workforce is composed of much higher graded and knowledge-based 
workers.

Although there have been attempts over the years to refine the system 
by enacting such legislation as the Federal Employees Pay Comparability 
Act (FEPCA) which sought to address, among other things, the issue of 
pay comparability with the nonfederal sector, the system still contains 
certain fundamental flaws. The current system emphasizes placing 
employees in a relative hierarchy of positions based on grade; is a 
"one size fits all approach" since it does not recognize changes in 
local market rates for different occupations; and is performance 
insensitive in that all employees are eligible for the automatic across 
the board pay increases regardless of their performance. Specifically, 
the annual across the board base pay increase, also commonly referred 
to as the cost of living adjustment (COLA) or the January Pay Increase 
which the President recommends and the Congress approves, provides a 
time driven annual raise keyed to the Employment Cost Index (ECI) to 
all employees regardless of performance. In certain geographic areas, 
employees receive a locality adjustment tied to the local labor 
markets. However, in calculating the locality adjustment, for example, 
it is my understanding that FEPCA requires the calculation of a single 
average, based on the dominant federal employer in an area, which does 
not sufficiently recognize the differences in pay rates for different 
occupations and skills. In view of the fact that today we are in a 
knowledge-based economy competing for the best knowledge workers in the 
job market, I believe that new approaches and methodologies are 
warranted. This is especially appropriate for GAO's highly educated and 
skilled workforce.

Our proposed pay adjustment provision along with the other provisions 
of GAO's human capital proposal are collectively designed to help GAO 
maintain a competitive advantage in attracting, motivating, retaining, 
and rewarding a high performing and top-quality workforce both 
currently and in future years. First, under our proposal, GAO would no 
longer be required to provide automatic pay increases to employees who 
are rated as performing at a below satisfactory level. Second, when the 
proposal is fully implemented, GAO would be able to allocate more of 
the funding--currently allocated for automatic across-the-board pay 
adjustments to all employees--to permanent base pay adjustments that 
would vary based on performance. In addition, our proposal would affect 
all GAO, non-wage grade employees, including the SES and Senior Level 
staff.

Ultimately, if GAO is granted this authority, all GAO employees who 
perform at a satisfactory level will receive an annual base pay 
adjustment composed of purchase power protection and locality based pay 
increases absent extraordinary economic circumstances or severe 
budgetary constraints. GAO will be able to develop and apply its own 
methodology for annual cost-of-living and locality pay adjustments. The 
locality pay increase would be based on compensation surveys conducted 
by GAO and which would be tailored to the nature, skills, and 
composition of GAO's workforce. The performance part of an employee's 
annual raise would depend on the level of the employee's performance 
and that employee's pay band. We estimate that at least 95 percent of 
the workforce will qualify for an additional performance-based 
increase. However, under this provision, employees who perform below a 
satisfactory level will not receive an annual increase of either type.

How GAO Plans to Use This Authority:

GAO's major non-SES pay groups include (1) Analysts and Attorneys which 
comprises the majority of our workforce and is our mission group, (2) 
the Professional Development Program staff (PDP) which is our entry 
level mission group, (3) the Administrative Professional Support Staff 
(APSS), which is our mission support group for the most part, and (4) 
Wage Grade employees who primarily operate our print plant. Each of 
these groups currently operate in a different pay system. Generally, 
our mission staff are all in pay bands whereby they currently receive 
the annual across-the-board base pay increase and locality pay increase 
similar to the GS pay system, along with performance-based annual 
increases that are based on merit. Generally, our mission support 
staff, with some exceptions, remain in a system similar to the GS pay 
system with its annual across-the-board pay increases, locality pay, 
quality step increases, and within grade increases. We are currently in 
the process of migrating the mission support staff into pay bands and a 
pay for performance system. Our Wage Grade staff will continue to be 
covered by the federal compensation system for trade, craft, and 
laboring employees. Because of the small number of employees and the 
nature of their work, we have no plans to apply the pay adjustment 
provision authority to this group.

I would like to point out the tables in appendices I through IV, which 
succinctly describe how GAO plans to operationalize our authority under 
our proposed annual pay adjustment provision over time.

GAO's Proposed Pay Authority Is Reasonable:

GAO's proposal for additional pay flexibility is reasonable in view of 
the authority the Congress has already granted DHS through the Homeland 
Security Act of 2002; the other agencies for whom the Congress has 
granted the authority to develop their own pay systems; the 
demonstration projects that OPM has authorized; and the authorities 
that other agencies in the executive branch are currently seeking 
(e.g., DOD).

While we are aware that the passage of the Homeland Security Act of 
2002 was not without its difficult moments, particularly with respect 
to the broad-based authorities granted the department, we are also 
aware that the process employed by DOD and certain of its human capital 
proposals are highly controversial. It is important to point out that 
GAO's proposal and proposed pay flexibilities pale in respect to those 
granted to the DHS and to those requested by the DOD in the Defense 
Transformation for the 21ST Century Act of 2003. Collectively, these 
two agencies represent almost 45 percent of the non-postal federal 
civilian workforce. Specifically, in November 2002, the Congress passed 
the Homeland Security Act of 2002, which created DHS and provided the 
department with significant flexibilities to design a modern human 
capital management system, which could have the potential, if properly 
developed, for application governmentwide. DOD's proposed National 
Security Personnel System (NSPS) would provide wide-ranging changes to 
its civilian personnel pay and performance management systems, 
collective bargaining, rightsizing, and a variety of other human 
capital areas. NSPS would enable DOD to develop and implement a 
consistent, DOD-wide civilian personnel system.

In addition to DHS, there are a number of federal agencies with 
authority for their own pay systems. Some of these agencies are, for 
example, the Congressional Budget Office, which is one of our sister 
agencies in the legislative branch; the Federal Aviation Administration 
(FAA); the Securities and Exchange Commission (SEC) ; and the Office of 
the Comptroller of the Currency (OCC) within the Department of the 
Treasury. When the Congress created the CBO in 1974, it granted that 
legislative branch agency significant flexibilities in the human 
capital area. For example, CBO has "at will" employment. In addition, 
CBO is not subject to the annual executive branch pay adjustments. 
Further, CBO has extensive flexibility regarding its pay system subject 
only to certain statutory annual compensation limits.

Furthermore, there are twelve executive branch demonstration projects 
involving pay for performance. These projects have taken different 
approaches to the sources of funding for salary increases that are tied 
to performance and not provided as entitlements. Many of the 
demonstration projects reduce or deny the annual across the board base 
pay increase for employees with unacceptable ratings (e.g., the 
Department of Navy's China Lake demonstration, DOD's Civil Acquisition 
Workforce demonstration, the Department of Air Force's Research 
Laboratory demonstration, and the Department of Navy's Research 
Laboratory demonstration, among others.) Others, including the National 
Institute of Standards and Technology and the Department of Commerce 
demonstration projects, deny both the annual across the board base pay 
increase and the locality pay adjustment for employees with 
unacceptable ratings.

Currently, this Congress is considering a NASA human capital proposal. 
This proposal would provide NASA with further flexibilities and 
authorities for attracting, retaining, developing, and reshaping a 
skilled workforce. These include a scholarship-for-service program; a 
streamlined hiring authority for certain scientific positions; larger 
and more flexible recruitment, relocation, and retention bonuses; 
noncompetitive conversions of term employees to permanent status; a 
more flexible critical pay authority; a more flexible limited-term 
appointment authority for the SES; and greater flexibility in 
determining annual leave accrual rate for new hires.

Safeguards Provided:

As we have testified, agencies should have modern, effective, credible, 
and as appropriate, validated performance management systems in place 
with adequate safeguards, including reasonable transparency and 
appropriate accountability mechanisms, to ensure fairness and prevent 
politicization and abuse. While GAO's transformation is a work in 
progress, we believe that we are in the lead compared to executive 
branch agencies in having the human capital infrastructure in place to 
provide such safeguards and implement a modified pay system that is 
more performance oriented. Specifically, for our Analyst pay group, we 
have gone through the first cycle of a validated performance management 
system that has adequate safeguards, including reasonable transparency 
and appropriate accountability mechanisms. We have learned from what 
has worked and what improvements can and should be made with respect to 
the first cycle. In fact, we have adopted many of the recommendations 
and suggestions of our managing directors and EAC and are now in the 
process of implementing these suggestions.

The following is an initial list of possible safeguards, developed at 
the request of Congressman Danny Davis, for Congress to consider to 
help ensure that any pay for performance systems in the government are 
fair, effective, and credible. GAO's current human capital 
infrastructure has most of these safeguards built in, and the others 
are in the process of being incorporated.

* Assure that the agency's performance management systems (1) link to 
the agency's strategic plan, related goals, and desired outcomes and 
(2) result in meaningful distinctions in individual employee 
performance. This should include consideration of critical competencies 
and achievement of concrete results.

* Involve employees, their representatives, and other stakeholders in 
the design of the system, including having employees directly involved 
in validating any related competencies, as appropriate.

* Ensure that certain predecisional internal safeguards exist to help 
achieve the consistency, equity, nondiscrimination, and 
nonpoliticization of the performance management process (e.g., 
independent reasonableness reviews by the human capital offices and/or 
the offices of opportunity and inclusiveness or its equivalent in 
establishing and implementing a performance appraisal system, as well 
as reviews of performance rating decisions, pay determinations, and 
promotion actions before they are finalized to ensure that they are 
merit-based; internal grievance processes to address employee 
complaints; and pay panels predominately made up of career officials 
who would consider the results of the performance appraisal process and 
other information in making final pay decisions).

* Assure reasonable transparency and appropriate accountability 
mechanisms in connection with the results of the performance management 
process (e.g., publish overall results of performance management and 
pay decisions while protecting individual confidentiality, and report 
periodically on internal assessments and employee survey results).

Transition Period:

We have provided a statutory period minimum to allow for a smooth 
implementation of the law as it applies to both our mission and mission 
support staff. Specifically, for our Analyst and Attorney communities, 
we plan to allow for at least a two-year period, during which they will 
continue to receive their annual across the board pay raise and their 
locality pay, if applicable, based on the amount set by the GS system. 
Once the proposal is fully implemented, the new across-the-board 
increase, which provides for inflation protection and locality pay 
where applicable, would be computed based on GAO compensation studies, 
and the performance-based merit pay would be provided based on an 
employee's performance.

For our APSS employees, the transition period of at least 2 years would 
allow for a smooth migration to the pay bands and the implementation of 
at least one performance cycle of a newly validated competency based 
performance appraisal system for that component of GAO's workforce. Our 
APSS employees are currently still in the GS system, but we are in the 
process of moving them into pay bands. We will allow time for the group 
to migrate to broad bands and to have at least one performance cycle 
under pay bands before moving it into the new pay system. Therefore, as 
with the analysts and attorneys, the administrative support staff will 
move into a hybrid pay system once they migrate to pay bands. Also, as 
with the analysts and attorneys, I have committed to providing them 
"pay protection." This guarantee would continue even after GAO's 
authority to adjust pay is fully implemented.

We have a small Wage Grade community of under 20 employees. As 
mentioned earlier, we do not contemplate having the pay adjustment 
provision apply to them.

"Pay Protection" Guarantee:

My predecessor, Comptroller General Charles A. Bowsher, provided the 
analysts and attorneys a "pay protection" guarantee at the time of 
their conversion to broad bands. This guarantee, later spelled out in a 
GAO order, provided that the analyst and attorneys rated as meeting 
expectations in all categories would fare at least as well under pay 
bands as under the GS system. This guarantee would not apply to 
employees who are promoted after conversion or demoted, and to new 
employees hired after the conversion. It is my understanding that this 
guarantee provided by my predecessor is unique to GAO and has generally 
not been applied by other agencies that have migrated their employees 
to pay bands.

Currently, 535 GAO employees are still covered by this "pay protection" 
guarantee, while less than 10 employees annually have their pay 
readjusted after the merit pay process. I have committed to GAO 
employees that even if we receive the new pay adjustment authority, I 
would still honor my predecessor's pay protection guarantee. In 
addition, our mission support staff will also receive this guarantee 
upon conversion to pay bands. This guarantee will continue through the 
implementation period for our new human capital authority.

Pay Retention:

Section 5 of our proposal would allow GAO not to provide any automatic 
increase in basic pay to an employee demoted as a result of workforce 
restructuring or reclassification at his or her current rate until his 
or her salary is less than the maximum rate of the new position. Under 
current law, the grade and pay retention provisions allow employees to 
continue to be paid at a rate that exceeds the value of the duties they 
are performing for an extended period. Specifically, employees who are 
demoted (e.g., incur a loss of grade or band) due to, among other 
things, reduction-in-force procedures or reclassification receive full 
statutory pay increases for 2 years and then receive 50 percent of the 
statutory pay increases until the pay of their new positions falls 
within the range of pay for those positions. We believe that this 
antiquated system is inconsistent with the merit principle that there 
should be equal pay for work of equal value.

In granting GAO this authority, we would be able to immediately place 
employees in the band or grade commensurate with their roles and 
responsibilities. It is important to note that we have a key safeguard-
-employees whose basic pay exceeds the maximum rate of the grade or 
band in which the employee is placed will not have their basic pay 
reduced. These employees, who would still be eligible to increase their 
overall pay through certain types of performance-based awards (e.g., 
incentive awards), would retain this rate until their basic pay is less 
than the maximum for their grade or band. As with all the provisions in 
our proposal, we will not implement this pay retention provision until 
we have consulted with the EAC and managing directors and have provided 
all GAO employees an opportunity for notice and comment on any 
regulations.

Relocation Expenses:

Section 6 would provide GAO the authority, in appropriate 
circumstances, to reimburse employees for some relocation expenses when 
transfers do not meet current legal requirements for entitlement to 
reimbursement but still benefit GAO. Under current law, employees who 
qualify for relocation benefits are entitled to full benefits; however, 
employees whose transfer may be of some benefit or value to the agency 
would not be eligible to receive any reimbursement. This provision 
would provide these employees some relief from the high cost of 
relocating while at the same time allowing GAO the flexibility to 
promulgate regulations in order to provide such relief. This authority 
has been previously granted to other agencies, including the FAA.

Leave for Upper Level Hires:

Section 7 of the proposal provides GAO the authority to provide 160 
hours (20 days) of annual leave to appropriate employees in high-grade, 
managerial or supervisory positions who have less than 3 years of 
federal service. This is narrowly tailored authority that would apply 
only to GAO and not to executive branch agencies. While it is been a 
long-standing tenet that all federal employees earn annual leave based 
on years of federal service, we believe that there is substantial merit 
in revisiting this in view of today's human capital environment and 
challenges. We have found that, in recruiting experienced mid-and 
upper-level hires, the loss of leave they would incur upon moving from 
the private to the federal sector is a major disincentive. For example, 
an individual, regardless of the level at which he enters first enters 
the federal workforce, is eligible to earn 4 hours of annual leave for 
each pay period and, therefore, could accrue a total of 104 hours (13 
days) annually so long as they do not use any of that leave during the 
year. This amount increases to 6 hours of annual leave after 3 years of 
federal service. By increasing the annual leave that certain newly 
hired officers and employees may earn, this provision is designed to 
help attract and retain highly skilled employees needed to best serve 
the Congress and the country.

Executive Exchange Program:

Section 8 would authorize GAO to establish an executive exchange 
program between GAO and private sector entities. Currently, GAO has the 
authority to conduct such an exchange with public entities and non 
profit organizations under the Intergovernmental Personnel Act; there 
is no such authority for private sector exchanges. Under this program, 
high-grade, managerial or supervisory employees from GAO may work in 
the private sector, and private sector employees may work at GAO. While 
GAO will establish the details of this program in duly promulgated 
regulations, we have generally fashioned, with exceptions where 
appropriate, the legal framework for this program on the Information 
Technology Exchange Program authorized by Public Law 107-347, the E-
Government Act of 2002, which the Congress enacted to address human 
capital challenges within the executive branch in the information 
technology area.

While the Information Technology Exchange Program only involves 
technology exchanges, GAO's exchange program will cover not only those 
who work in information technology fields, but also accountants, 
economists, lawyers, actuaries, and other highly skilled professionals. 
This program will help us address certain skills imbalances in such 
areas as well as a range of succession planning challenges. 
Specifically, by fiscal year 2007, 52 percent of our senior executives, 
37 percent of our management-level analysts, and 29 percent of our 
analysts and related staff will be eligible for retirement. Moreover, 
at a time when a significant percentage of our workforce is nearing 
retirement age, marketplace, demographic, economic, and technological 
changes indicate that competition for skilled employees will be greater 
in the future, making the challenge of attracting and retaining talent 
even more complex.

One of the key concerns raised in the past regarding private sector 
exchange programs has been the issue of conflict of interest. We 
believe that in this regard GAO differs from executive branch agencies 
in that, as reviewers, we are not as subject to potential conflicts of 
interest. Nevertheless, it is important to note in requesting this 
authority that we have made clear that the private sector participants 
would be subject to the same laws and regulations regarding conflict of 
interest, financial disclosure, and standards of conduct applicable to 
all employees of GAO. Under the program, private sector participants 
would receive their salaries and benefits from their employers and GAO 
need not contribute to these costs. We also believe that this will also 
encourage private sector individuals to devote a portion of their 
careers to the public sector without incurring substantial financial 
sacrifice.

Changing GAO's Name to the "Government Accountability Office":

Section 9 would change the name of our agency from the "General 
Accounting Office" to the "Government Accountability Office." At the 
same time, the well-known acronym "GAO," which has over 80 years of 
history behind it, will be maintained. We believe that the new name 
will better reflect the current mission of GAO as incorporated into its 
strategic plan, which was developed in consultation with the Congress. 
As stated in GAO's strategic plan, our activities are designed to 
ensure the executive branch's accountability to the American people. 
Indeed, the word accountability is one of GAO's core values along with 
integrity and reliability. These core values are also incorporated in 
GAO's strategic plan for serving the Congress.

The GAO of today is a far cry from the GAO of 1921, the year that the 
Congress established it through the enactment of the Budget and 
Accounting Act. In 1921, GAO pre-audited agency vouchers for the 
legality, propriety, and accuracy of expenditures. In the 1950s, GAO's 
statutory work shifted to the comprehensive auditing of government 
agencies. Later, beginning during the tenure of Comptroller General 
Elmer B. Staats, GAO's work expanded to include program evaluation and 
policy analysis. Whereas GAO's workforce consisted primarily of 
accounting clerks during the first three decades of its existence, 
today it is a multidisciplinary professional services organization with 
staff reflecting the diversity of knowledge and skills needed to 
deliver a wide range of services to the Congress.

Although currently less than 15 percent of agency resources are devoted 
to traditional auditing and accounting activities, members of the 
public, the press, as well as the Congress often incorrectly assume 
that GAO is still solely a financial auditing organization. In 
addition, our name clearly confuses many potential applicants, who 
assume that GAO is only interested in hiring accountants. We believe 
that the new name will help attract applicants and address certain 
"expectation gaps" that exist outside of GAO.

Concluding Observations:

In conclusion, I believe that GAO's human capital proposal merits 
prompt passage by this committee and, ultimately, the Congress. We have 
used the narrowly tailored flexibilities the Congress provided us 
previously in Public Law 106-303 responsibly, prudently, and 
strategically to help posture GAO to ensure the accountability of the 
federal government for the benefit of the Congress and the American 
people. Although some elements of our initial straw proposal were 
controversial, we have made a number of changes, clarifications, and 
commitments to address various comments and concerns raised by GAO 
employees. We recognize that the pay adjustment provision of this 
proposal remains of concern to some of our staff. However, we believe 
that it is vitally important to GAO's future that we continue 
modernizing and updating our human capital policies and system in light 
of the changing environment and anticipated challenges ahead. We 
believe that the proposal as presented and envisioned is well reasoned 
and reasonable with adequate safeguards for GAO employees. Given our 
human capital infrastructure and our unique role in leading by example 
in major management areas, including human capital management, the 
federal government could benefit from GAO's experience with pay for 
performance systems. Overall, we believe that this proposal represents 
a logical incremental advancement in modernizing GAO's human capital 
policies, and with your support, we believe that it will make a big 
difference for the GAO of the future.

Chairwoman Jo Ann Davis, Mr. Davis, and Members of the Committee, this 
concludes my prepared statement. I would be pleased to respond to any 
questions you may have.

Contacts:

For further information regarding this testimony, please contact 
Sallyanne Harper, Chief Mission Support Officer, on (202) 512-5800 or 
at harpers@gao.gov or Jesse Hoskins, Chief Human Capital Officer, on 
(202) 512-5553 or at hoskinsj@gao.gov.

[End of section]

Appendix I: Analysts and Attorneys: Pay Increases under GAO's Current 
System and Human Capital Proposal:

[See PDF for image]

[A] The percentage allocated to each type of pay increase varies 
annually.

[B] Under our current pay system, GAO is linked to the executive branch 
for annual base and locality pay adjustments; however, since the 
implementation of broad banding, has not been linked to the executive 
branch for performance-based merit pay increases, performance bonuses/
dividends, and other incentive award pay increases. The Executive 
Committee determines on an annual basis which pay categories, if any, 
are eligible for bonuses and dividends. For example, individuals in pay 
categories one and two received dividends for their FY 02 performance.

[C] During the transition period, GAO staff rated as performing at a 
satisfactory level (i.e., meeting expectations or higher) will be 
guaranteed, at a minimum, barring extraordinary economic circumstances 
or serious budgetary constraints, base pay and locality pay according 
to the same adjustment provided to executive branch employees. All such 
GAO staff will also be eligible for additional performance-based merit 
pay increases, performance bonuses (if pay capped)/dividends, and 
incentive awards. During the transition period, GAO will continue to 
raise the pay cap for its pay bands commensurate with executive branch 
pay cap increases absent extraordinary economic circumstances or 
serious budgetary constraints. The Executive Committee will determine 
on an annual basis which categories, if any, are eligible for bonuses 
and dividends.

[D] Under its human capital proposal, GAO proposes to decouple itself 
from the executive branch for base and locality pay adjustments after a 
2 plus year transition period. After the transition period, GAO will 
fully implement a modified pay system in which absent extraordinary 
economic conditions or serious budgetary constraints, all GAO staff 
rated as performing at a satisfactory level (i.e., meeting expectations 
or higher) can expect to receive at a minimum an annual adjustment 
designed to protect purchasing power (e.g., the Consumer Price Index) 
and address differences in compensation ranges by localities. In 
addition, all such staff will continue to be eligible for performance-
based merit pay increases, performance bonuses (if pay capped)/
dividends, and incentive awards. Before finalizing and implementing a 
modified pay system, GAO will seek the advice of the managing directors 
and GAO's Employee Advisory Council. We will also draft revised pay 
regulations and publish them for review and comment by all employees.

[End of figure]

[End of section]

Appendix II: Professional Development Program (PDP) Staff: Pay 
Increases under GAO's Current System and Human Capital Proposal:

[See PDF for image]

Note: PDP Staff who are Band IF (full performance) are covered by the 
merit pay system. See chart for Analysts & Attorneys.

[A] The percentage allocated to each type of pay increase varies 
annually.

[B] Under our current pay system, GAO is linked to the executive branch 
for base and locality pay. Band I staff in the PDP are eligible for 
periodic performance based PDP pay increases that are not available in 
the executive branch. PDP staff are not eligible for performance based 
merit increases and dividends.

[C] During the transition period, PDP staff rated as performing at a 
satisfactory level (i.e., meeting expectations or higher) will be 
guaranteed, at a minimum, barring extraordinary economic circumstances 
or serious budgetary constraints, base pay and locality pay according 
to the same adjustment provided to the executive branch employees. PDP 
staff rated as performing at the satisfactory level (i.e., meeting 
expectations or higher) will be eligible for performance-based PDP pay 
increases. During and after the transition period, PDP staff will not 
be eligible for dividends because PDP staff are evaluated every 6 
months for performance based PDP increases. During the transition 
period, GAO will raise the pay cap for its Band I pay band commensurate 
with executive branch pay cap increases absent extraordinary economic 
circumstances or serious budgetary constraints. The Executive Committee 
will determine on an annual basis which pay categories, if any, are 
eligible for PDP bonuses.

[D] Under its human capital proposal, GAO proposes to decouple itself 
from the executive branch for base and locality pay after a 2 plus year 
transition period. After the transition period, GAO will fully 
implement a modified pay system in which absent extraordinary economic 
conditions or serious budgetary constraints, all PDP staff rated as 
performing at a satisfactory level (i.e., meeting expectations or 
higher) can expect to receive at a minimum, an annual adjustment 
designed to protect purchasing power (e.g., the Consumer Price Index) 
and address differences in compensation ranges by localities. In 
addition, PDP staff rated as performing at a satisfactory level (i.e., 
meeting expectations or higher) will continue to be eligible for 
additional performance-based compensation, including performance-based 
PDP pay increases and incentive awards. Before finalizing and 
implementing a modified pay system, GAO will seek the advice of the 
managing directors and GAO's Employee Advisory Council. We will also 
draft revised pay regulations and publish them for review and comment 
by all employees.


[End of figure]

[End of section]

Appendix III: Administrative Professional Support Staff (APSS): Pay 
Increases under GAO's Current System and Human Capital Proposal:

[See PDF for image]

[A] The percentage allocated to each type of pay increase varies 
annually. This chart applies only to APSS employees who are under the 
General Schedule (GS) system. APSS employees who are already in broad 
bands should see the chart for Analysts and Attorneys.

[B] Under our current pay system, GAO is linked to the executive branch 
for annual base, locality, QSI, and WIG pay adjustments. APSS staff are 
eligible for performance incentive award pay increases; however, they 
are not eligible for performance bonuses (if pay capped) or dividends.

[C] During the transition period, GAO will implement broad banding for 
the APSS community between April - June 2004 and allow at least one 
full cycle of a new competency-based performance appraisal system 
before implementing any additional performance-based pay adjustments 
envisioned under HC II. Upon conversion to broad bands, GAO, as it did 
with its Analyst and Attorney communities, will replace QSIs and WIGs 
with performance pay increases that are not linked to the executive 
branch. Also, as it did with its Analyst and Attorney communities when 
they were converted to bands, GAO will provide a pay protection 
guarantee. Specifically, APSS staff who perform at the meets 
expectations level on any performance rating will earn a salary at 
least as high as they would have received had they remained under the 
General Schedule at their grade at the time of conversion. However, 
this guarantee will not apply to staff who are promoted after 
conversion or demoted and to new employees hired after the conversion. 
APSS staff will be eligible for performance-based merit increases, 
performance bonuses (if pay capped) /dividends, and incentive awards. 
During the transition period, GAO will continue to raise the pay cap 
for its pay bands commensurate with executive branch pay cap increases. 
The Executive Committee will determine on an annual basis which pay 
categories, if any, are eligible for bonuses and dividends.

[D] Under its human capital proposal, GAO proposes to decouple itself 
from the executive branch for base and locality pay after a two plus 
year transition for the broad band conversion. After the transition 
period, GAO will fully implement a modified pay system in which absent 
extraordinary economic conditions or serious budgetary constraints, all 
GAO staff rated as performing at a satisfactory level (i.e., meeting 
expectations or higher) can expect to receive at a minimum, an annual 
adjustment designed to protect purchasing power (e.g., the Consumer 
Price Index) and address differences in compensation ranges by 
localities. In addition, all APSS staff will continue to be eligible 
for performance-based merit pay increases, performance bonuses (if pay 
capped)/dividends, and incentive awards. Before finalizing and 
implementing a modified pay system, GAO will seek the advice of the 
managing directors and GAO's Employee Advisory Council. We will also 
draft revised pay regulations and publish them for review and comment 
by all employees. In addition, APSS staff receiving the pay protection 
guarantee from their conversion into pay bands will continue to be 
eligible for pay protection during the implementation period.

[End of figure]

[End of section]

Appendix IV: Wage Grade (WG) Staff: Pay Increases under GAO's Current 
System and Human Capital Proposal:

[See PDF for image]

Note: HC II refers to GAO's human capital proposal.

[A] The percentage allocated to each type of pay increase varies 
annually.

[B] Under its current wage grade pay system, GAO is linked to the 
executive branch for base, locality, and WIG pay increases. Wage grade 
employees are not eligible for QSIs and locality pay increases in GAO 
or anywhere in the federal government. Because its wage grade community 
is so small, GAO does not plan to include the wage grade community in 
the modified pay system under its human capital proposal.

[C] Wage grade staff are not eligible for bonuses and dividends.

[End of figure]

(996000):